The 2025 budget (2): Now the worst is known

Before it tells you what's coming, the budget tells you where we are. In a word: Yikes

See also: Budget 2025 (1): Tempting fate strong

What a mess. The first Champagne budget, to coin a phrase, announces big moves to change the direction Canada’s on. I talk about those moves in today’s other budget post. But first the budget lays out the economic context for those moves, in an attempt to make the case for everything François-Philippe Champagne announced on Tuesday. It’ll come as no surprise to anyone who’s been following the news that the news isn’t good. I figure that context is worth this extra post.

Under “Current Economic Challenges,” the budget points out that the cost of living is high; unemployment is up; business uncertainty is delaying investment; global economic growth has slowed, which means there’s limited room for Canada to “borrow growth” from its (non-US!) trading partners; productivity is weak; and oil, traditionally the rabbit tucked inside Canada’s top hat, is of limited use because oil prices are relatively low and unpredictable.

The budget document includes a scary chart, a version of which appeared in Mark Carney’s Liberal leadership pamphlets almost a year ago, showing “unprecedented…uncertainty:”

This is definitely scary — although perhaps less so once you learn that the only thing the World Uncertainty Index measures is “the percent of word ‘uncertain’ (or its variant) in the Economist Intelligence Unit country reports.”

But more objective data are discouraging too. The Canadian economy grew by just 0.2 in the first six months of 2025. Unemployment is up, both in absolute terms and compared to the projection in the fall update Chrystia Freeland never delivered.

Real GDP growth for 2025-26 is now half what Freeland Dominic LeBlanc projected a year ago. “This is a risk that the economy is adjusting to a persistently lower growth trajectory,” the budget document states, “marked by weaker productivity and soft investment.”