Will Canada’s 2025 Budget Boost Productivity? Experts Weigh In
Canada’s 2025 federal budget arrives at a pivotal moment for the country’s economic trajectory. Facing a decades-long productivity challenge, the government aims to reinvigorate growth through carefully targeted investment incentives and strategic reforms.
Rather than broad fiscal stimulus, the budget focuses on fostering innovation, modernizing tax credits like the Scientific Research and Experimental Development (SRED) program and encouraging private sector investment in new technologies.
This approach aims to break Canada’s productivity stagnation and position the economy for long-term competitiveness.
However, rising debt levels accompany these aspirations, leading to skepticism in some quarters. To understand what these changes mean for Canadian businesses and investors, the Investing News Network spoke with Chris Polson, a Chartered Business Valuator, and SRED.ca co-founder Logan Hanson.
Canada’s productivity dilemma
In a speech at the Association des économistes québécois (ASDEQ) and CFA Québec on November 19, Bank of Canada (BoC) deputy governor Nicolas Vincent declared that Canada is facing a “systemic problem” when it comes to productivity.
“To put it bluntly, we’re stuck in a vicious circle,” Vincent said. “There is no quick or easy way to improve productivity, and no single sector can do it alone.
“If we want to fix this, we’ll need to be thoughtful, systematic and resolute,” he added, suggesting that policymakers should focus on improving the country’s investment climate, increasing competition and developing talent.
Vincent’s comments echoed an earlier opinion shared by BoC Governor Tiff Macklem, who, following the bank’s most recent cut to its benchmark lending rate last month, warned that Canadians could face a lower standard of living unless governments and businesses can find ways to improve productivity.
Macklem added that the recent federal budget could enhance the country’s productivity, “but it’s going to come down to execution.”
Building on these concerns, Polson explained that for Canada to move beyond incremental progress and truly improve productivity and competitiveness, the country must tackle long-standing hurdles. “We’re looking for a reduction in interprovincial trade barriers… It’s becoming increasingly necessary…that we have to act cohesively there.”
Historically low and rapidly declining R&D investment was another factor negatively impacting Canadian productivity, identified in a report from the Council of Canadian Academies. The authors suggest that addressing this requires more than just a single policy or tax incentive.
Polson also highlighted the need to move beyond incremental measures and focus on disciplined, systematic changes that foster efficient capital allocation and strengthen the foundations of business decision-making.
From his vantage point, the modernization and expansion of the SR&ED tax…
