Budget 2025 Federal Spending to Support $1 Trillion in Total Investment

Key Findings

• Of the $285.0 billion in federal spending (cash basis) to support $1 trillion in total investment, only $41.3 billion represents new measures introduced in Budget 2025, while $243.7 billion is associated with planned spending that was in place prior to the budget.

• Finance Canada estimates that the $41.3 billion in new measures introduced in Budget 2025 could support total investment of $165.8 billion based on assumed cost-sharing ratios by program area. Based on less optimistic assumptions for cost-sharing ratios in certain program areas, PBO estimates that the same $41.3 billion could support $126.4 billion in total investment.

Federal spending to support $1 trillion in total investment

Budget 2025 introduced a new framework for reporting federal capital investment. Under this framework, the Government stated that of its planned capital spending, “about $280 billion (cash basis) is in support of third parties” and will “enable more than $1 trillion in total investments” over 2025‑26 to 2029‑30.

The approximately $280 billion ($285.0 billion) in spending is calculated based on the Government’s definition of capital investment[^1], which differs from PBO’s definition.[^2] The $1 trillion ($1.080 trillion) in total investment activity includes federal support of $285.0 billion, co-funding from other governments, and private sector investment.

Table 1 shows that the majority of the $285.0 billion in support of third parties comes from pre‑budget planned spending.[^3] Budget 2025 measures totalling $41.3 billion account for 14 per cent of federal spending to support third parties over the five‑year period 2025‑26 to 2029‑30.

Table 2 outlines how federal spending to support $1 trillion in total investment activity is distributed across major program areas. Infrastructure, housing and industrial development programs account for 71 per cent of the $285.0 billion in support of third parties. Combined, measures for infrastructure and housing announced in Budget 2025 account for more than half of new spending in support of third parties over 2025‑26 to 2029‑30.

“Enabling” $1 trillion in total investment

Table 3 outlines the Government’s estimates of total investment activity receiving federal support by program area. Based on these estimates, PBO calculated (the inverse of) implied cost-sharing ratios, which range from 2.1 for housing to 8.0 for industrial development programs.[^4] For example, a cost-sharing ratio of one-third, where each dollar of federal spending is matched by two dollars from other sources, yields three dollars of total investment (that is, an inverse cost-sharing ratio of 3.0).

Using Finance Canada’s assumptions, PBO estimates that $914.2 billion (85 per cent) of investment activity relates to pre-budget spending, with $165.8 billion (15 per cent) tied to measures announced in Budget 2025. The estimate of total investment activity of $1.080 trillion over 5 years represents an upper bound estimate, as it assumes full take-up of federal support within the specified timeframe.

Importantly, the estimated $1.080 trillion in total investment activity over 2025‑26 to 2029‑30 does not represent the incremental economic impact of federal spending in support of third parties.[^5] Our analysis does not assess whether these investments would proceed in the absence of federal support, nor does it examine whether federal spending in support of third parties could displace (“crowd out”) other projects.

PBO also assessed the Government’s implied cost-sharing assumptions using historical program data and conducted sensitivity analysis on the estimated $1.080 trillion in total investment activity presented in Budget 2025. Based on less optimistic assumptions for cost-sharing ratios[^6] in certain program areas, PBO estimates that the $285.0 billion in federal spending would support $896.1 billion in total investment, which is $183.9 billion less than estimated in Budget 2025. Of the $896.1 billion in total investment, $126.4 billion is tied to measures announced in Budget 2025. This figure reflects the scale of investment activity implied by cost-sharing structures rather than incremental investment generated by federal spending, as it assumes that each dollar of federal support scales to a larger total project cost, contingent on participation by external partners.