Carney, who was elected in April, stressed that his government’s maiden budget will be about both austerity and big investments as he seeks to protect the Canadian economy from what he has called a crisis brought on by a newly protectionist US.
“The decades-long process of an ever-closer economic relationship between the Canadian and US economies is over,” Carney said in a televised address to a group of university students.
“Many of our former strengths – based on close ties to America – have become our vulnerabilities,” he said.
As US tariffs batter Canada’s steel, aluminum and auto sectors, Carney pledged to double the country’s non-US exports over the next decade. The diversification will bring in an additional C$300 billion, he claimed.
Carney, under pressure to spur growth and assert Canada’s sovereignty, has promised a massive scale-up in defense spending and housing infrastructure.
But he has also lost revenue due to tax cuts, scrapped retaliatory tariffsto try to strike a deal with US President Donald Trump, and spent on relief measures for tariff-hit industries, straining government coffers.
His government has asked all ministries to cut spending.
In his address, he said the budget will present a strategy to cut wasteful expenditures and drive efficiency.
“When we have to make difficult choices, we will be thoughtful, transparent, and fair,” he said.
Economists forecast the government’s fiscal deficit for the year 2025/26 will be between C$70 billion and C$100 billion, one of the largest in decades and a massive jump from the projected C$43 billion for the fiscal year that ended March 2025.
The budget, which will be presented on Nov 4, will help to catalyse “unprecedented” investments in Canada over the next five years, Carney said. He plans to balance the operating budget in three years and said he will include a climate strategy.
But the budget, a major test for Carney, cannot be passed unless his minority government gathers support from some opposition members.
In an outreach effort, Carney met with leaders from other political parties on Wednesday including the main opposition leader Pierre Poilievre, who has urged restraint on the deficit.
“We won’t play games. We won’t waste time. And we won’t hold back. We will do what it takes,” Carney said in his remarks.