Carney says to expect 'austerity and investment' in upcoming fall budget

OTTAWA — On a warm, sunny Wednesday morning in Toronto’s North York, Prime Minister Mark Carney said the “a” word most politicians balk at pronouncing.

Carney revealed that “austerity” was on the menu for his government’s first budget this fall while speaking to reporters before chairing a two-day cabinet retreat in Toronto.

“It’s an austerity and investment budget at the same time, and that’s possible if we are disciplined,” Carney said in French. “We can do both, and we will do both.”

“We need discipline for our spending, it’s necessary. For example, the rate of increase of federal government spending in the last decade was over seven per cent year over year. That’s faster than the rate of growth of our economy,” he added in an apparent swipe at his Liberal predecessor Justin Trudeau.

“We need to rein in spending, we need to find efficiencies… that create the room for these big investments.”

With that in mind, austerity is “necessary”, he noted. But at the same time, he promised the government would invest in the Canadian economy, workers and society.

He also said that some sectors would be “untouchable,” such as health care, education transfer payments as well as direct payments to individuals (such as Old Age Security).

The state of the economy, not U.S. tariffs, is top of mind for Canadians right now, Leger polling CEO Jean-Marc Léger told reporters after his presentation on the “mood of the country” to cabinet Wednesday afternoon.

That’s a big change from earlier in the year when tariffs were Canadians’ top concern, the pollster said.

“Tariffs rank fourth in Canada (now). This is important because people are less afraid of tariffs and Trump” which are the main issues Carney was elected on, Léger said.

“All the priorities are linked to the economy… the priorities are inflation, cost of living, access to affordable housing and then the commercial relationship with the U.S.”

Léger noted that Carney’s government remains in its “honeymoon phase” with Canadians, but voters have high expectations.

“People expect change, they expect real decisions, they expect budgetary restraint, more control on immigration, more control on the economy. There’s a perception that Canada had lost control of those issues,” he said.

Léger said he also told cabinet that polls suggest Canadians support the government’s push for so-called national interest infrastructure projects, but want more information as to why they’re necessary.

Last week, federal ministers submitted their departments’ and agencies’ plans to cut their spending by 15 per cent within three years. Only a handful of organizations were spared or had a reduced target, such as the RCMP and the Department of National Defence.

But little else is known of Carney’s first budget, which originally wasn’t expected this year until public outcry pushed the prime minister to promise a fiscal plan this fall.

Multiple departments have already announced staffing reductions as part of their spending reviews, setting the stage for a showdown between Carney’s Liberals and powerful public sector unions over the coming year.

Wednesday, Carney also announced that he had “very constructive” conversation with U.S. President Donald Trump Monday. He said both countries are working on smaller sector-specific deals as Canada pushes for the U.S. to drop its tariffs on steel, aluminium, autos and lumber.

He said that Canada’s top bureaucrat Michael Sabia was currently in Washington D.C. negotiating with the Americans.

Carney’s discussion with Trump came as a surprise to reporters as the prime minister’s office did not issue the standard brief summary of the call — called a “readout” — after it happened to alert the public to the discussion. A spokesperson did not explain why a readout of that call was not issued this time.

How to negotiate a new security and economic agreement with the U.S. is also a key part of the two day “cabinet planning forum.” Ministers will hear from Kevin Roberts, the president of the Heritage Foundation, a right-wing American think tank with close ties to top Republicans.

Cabinet will hear from Léger pollsters on the “mood of the country”, head of investment funds on private-public collaboration and Scotiabank Chief Economist Jean-François Perreault on the country’s economic outlook.

As cabinet meets in Toronto, Russian President Vladimir Putin, North Korean President Kim Jong Un and other world leaders descended on Beijing to attend a military victory parade organized by Chinese President Xi Jinping.

Asked about the meeting between three leaders generally viewed as adversaries of Canada, Carney said he had no intention of increasing trade with either Russia or North Korea.

But despite China being identified repeatedly as the biggest threat to Canada’s national security, he noted that there is room for trade to grow between both countries, namely in agriculture.

“We have differences with China, different approaches to a variety of things, but they are our second largest trading partner,” he said.

“There are areas where we can cooperate, and we will look to potentially expand those areas for cooperation in ways that are consistent with our values and are in the interests of Canadians.”

National Post

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