The budget includes areas of investments for pension funds
Prime Minister Mark Carney’s Liberal government has unveiled the 2025 parliamentary budget, with the government deficit expected to soar to $78.3 billion.
For institutional investors and pension funds, areas of interest and investments include $115 billion in infrastructure, $110 billion in productivity and competitiveness, $30 billion in defence and $25 billion in homebuilding.
The federal government is aiming to attract $500 billion in private sector investment over the next five years, a move it projects could boost real GDP by 3.5 per cent by 2030. A key part of this strategy relies on the effectiveness of the recently launched Major Projects Office, which is tasked with accelerating approvals for large-scale developments.
Finance Minister François-Philippe Champagne and Carney are betting on capital investments like new ports, mines and LNG terminals, which is expected to bring in as much as $1 trillion in investments into the country. Notably, these are areas where Sebastien Mc Mahon sees potential upside for Canadian equities in the coming years.
“The 2025 budget positions Canada for stronger long-term growth through infrastructure and export expansion. Investors should watch for opportunities in construction, logistics, and critical minerals but also monitor rising deficits that may test Canada’s credit strength,” said Mc Mahon, chief strategist and senior economist at iA Financial Group, in a statement.
In a pre-budget interview, Mc Mahon expected the fiscal plan to send clear signals to pension funds, insurers, and other large asset allocators about where long-term opportunities may lie.
He noted that the government’s ambition to increase the share of exports to non-U.S. markets from 25 per cent to 40 per cent over the next decade presents “a ton of opportunities” for Canadian firms and their investors.
While he acknowledges that headlines may focus on the federal credit rating or deficit size, he believes investors will be more attuned to whether the budget provides a “runway” for sustained growth in key sectors.
Infrastructure, manufacturing, and logistics are among the areas likely to benefit, he said, especially if the budget emphasizes public-private partnerships and regulatory predictability.
“Anything the government can do to make private investment contagious will be key,” he added.
Mc Mahon also weighed in on calls for pension funds to invest more domestically, a message recently amplified by the industry minister.
While supportive of the idea, he stressed that returns need to “be interesting.” The issue, he said, is not willingness but whether domestic investment opportunities are competitive.
“We’d be delighted to invest in Canada all the time—rather than, say, an airport in Sydney—but the conditions have to be right.”
The Carney government’s budget outlines a $4.2 billion investment over five years aimed at expanding trade-related infrastructure, including ports and rail networks. Consequently, the Liberals are targeting significant cost savings, projecting $58.2 billion in federal spending reductions over the same period partly through funding cuts, such as those affecting disability pensions for RCMP officers.
The fiscal plan also commits to lowering government operating expenses by $60 billion, which would see direct program spending fall from eight per cent to less than one per cent of GDP.
Notably, no additional funding has been allocated to pharmacare.
With earnings expectations for Canadian firms running high - about 20 per cent for the next 12 months, Mc Mahon said, any budgetary action that supports business investment could sustain market momentum.
“We’re optimistic, but now it’s up to the government to show that Canada is truly open for business,” he said.
