Last week was Christmas come early for anyone who geeks out on public finance. The federal Liberal government finally tabled its long-delayed budget, the first under Mark Carney’s leadership and the first since April 2024. Ontario’s Progressive Conservative government followed with its mid-year fall economic statement, delivered within the timelines required by the province’s transparency legislation. Both governments refreshed their economic and fiscal projections; after months of rolling announcements, these documents mostly sharpened the edges on plans we already knew about, with only a few ideas new enough to still have that new policy smell.
While Ottawa and Queen’s Park are at different points in their political and budgetary cycles, they’re staring at many of the same challenges. Both are navigating heightened geopolitical stress, trade uncertainty, and mounting fiscal red ink. Against the backdrop of Trump-era tariffs and broader instability, they’re managing an economy that probably isn’t in recession but is undeniably sluggish, like someone insisting they’re “totally fine” while sitting on the curb after a long run. The areas of strain are clear: unemployment, especially among younger workers, remains elevated, and many households continue to feel the squeeze of recent increases in the cost of living.
Despite the shared context, the two governments leaned into very different fiscal narratives.
Federally, Ottawa reported a worsening fiscal picture compared to last year’s budget and fall statement. (Remember the December 2024 update where the finance minister resigned that very morning?) The federal deficit path has slipped, and the debt-to-GDP ratio is edging up.
That said, the deterioration in federal finances was smaller than many forecasters expected, and Canada today still looks relatively favourable when compared with peer jurisdictions or the Trudeau-the-elder and Mulroney eras. The update also clarified Ottawa’s plan to rein in program spending through public-service reductions and tighter departmental operating budgets. The government has signalled clear willingness to restrain expenditure, even if the path will be difficult. In an odd way, Ottawa reclaimed a measure of fiscal credibility simply by avoiding the worst-case scenarios that had been circulating. Sometimes not driving into the ditch counts as a win.
Ontario’s numbers, at first glance, look better than the federal situation. Revenues have strengthened modestly, this year’s deficit has narrowed slightly, and the medium-term projections remain in place. There is likely more revenue upside than the government chose to book at this stage, a prudent choice but also one that raises questions about whether the province is holding back fiscal room for Budget 2026 or for managing known pressures such as health-care spending.
But the province’s return-to-balance plan leans on spending assumptions that don’t so much stretch credibility as wave politely to it from across the street. The Financial Accountability Office identified a $9 billion shortfall in planned health spending for 2027–28.These numbers imply some ambitious expenditure growth curve-bending that would be far more convincing if supported by clear plans to achieve the needed restraint.
A notable development in the federal budget is the new capital-budgeting framework. Carney’s government separates spending into two categories: capital investment and operating expenses. Contrary to some of the pre-budget criticism, it isn’t an accounting sleight of hand; it’s an illustrative way of distinguishing long-term investment from day-to-day spending. Still, balancing the budget “excluding capital” is a bit like saying you’re in great shape if you ignore leg day.
Ontario, by contrast, is sticking to its established approach on fiscal reporting, with one notable exception: buried deep in the omnibus bill tabled alongside the update is the elimination of the Auditor General’s pre-election review of the province’s books. Some amendment was necessary due to the government removing fixed election dates, but the change also wipes out a useful accountability guardrail.
From a policy perspective, both governments leaned heavily on measures they had already announced earlier this year, with only a few new ideas sprinkled in.
The federal budget makes explicit what has been building for months: a meaningful reorientation of federal policy since April 2024, centred on productivity, housing, infrastructure, and military spending. Ottawa is now pursuing a big, government-led transition plan for an economy that will be operating with less access to the U.S. market. It leans on large public investments, targeted industrial-policy tools, and an expansive view of the federal role in steering long-term economic change.
Ontario has stuck with its mix of lower-intervention options: red-tape reduction, business-cost relief, and big infrastructure spending. Around that core, the Ford government is layering on a growing set of sensible, proactive sector strategies involving skilled trades, energy, critical minerals, EVs, and the Ring of Fire. It’s also leaning back into parts of its pandemic-era playbook as a way to help businesses respond to rapidly shifting U.S. trade policies, including tax-payment deferrals, bridge financing, and targeted tweaks to corporate taxes. For all the moving parts, Ontario’s playbook remains unexcitingly familiar — like a band that insists on playing its early hits long after the fans are looking for something new.
There were also some common policy developments in the two documents. Both jurisdictions enriched corporate tax breaks for investment spending, delivered some HST relief for first-time homebuyers, and leaned heavily into infrastructure plans. A retreat from long-standing climate goals was tucked deep into each document. The alignment is telling: even with very different narratives and political instincts, both governments quietly converge on similar tools to manage a slowing economy and rising uncertainty.
Taken together, the two updates sketch a country in a holding pattern. Ottawa is betting on a more activist federal role to navigate a choppy global economy, while Ontario is sticking to its familiar playbook that expects private-sector-led growth to fill in the gaps. But focusing only on their differences misses a deeper reality: both levels of government feel constrained, both are steering into the same economic headwinds, and both are leaning on targeted incentives and long-horizon capital plans. The real test will come not from the numbers in these documents, but from whether either government can turn sprawling commitments into actual momentum. Until then, the country remains in its holding pattern: not crashing, not climbing, just circling, trays up, seatbelt light firmly on.
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