{"id":2079,"date":"2025-11-29T15:37:24","date_gmt":"2025-11-29T15:37:24","guid":{"rendered":"https:\/\/bondsandfonds.com\/index.php\/2025\/11\/29\/will-canadas-2025-budget-boost-productivity-experts-weigh-in\/"},"modified":"2025-11-29T15:37:24","modified_gmt":"2025-11-29T15:37:24","slug":"will-canadas-2025-budget-boost-productivity-experts-weigh-in","status":"publish","type":"post","link":"https:\/\/bondsandfonds.com\/index.php\/2025\/11\/29\/will-canadas-2025-budget-boost-productivity-experts-weigh-in\/","title":{"rendered":"Will Canada\u2019s 2025 Budget Boost Productivity? Experts Weigh In"},"content":{"rendered":"<\/p>\n

Canada\u2019s 2025 federal budget arrives at a pivotal moment for the country\u2019s economic trajectory. Facing a decades-long productivity challenge, the government aims to reinvigorate growth through carefully targeted investment incentives and strategic reforms.<\/strong><\/p>\n

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. <\/p>\n

This approach aims to break Canada\u2019s productivity stagnation and position the economy for long-term competitiveness.<\/p>\n<\/p>\n

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Canada’s productivity dilemma <\/h3>\n

In a speech at the Association des \u00e9conomistes qu\u00e9b\u00e9cois (ASDEQ) and CFA Qu\u00e9bec on November 19, Bank of Canada (BoC) deputy governor Nicolas Vincent declared that Canada is facing a \u201csystemic problem\u201d when it comes to productivity.<\/p>\n

\u201cTo put it bluntly, we\u2019re stuck in a vicious circle,\u201d Vincent said. \u201cThere is no quick or easy way to improve productivity, and no single sector can do it alone. <\/p>\n

\u201cIf we want to fix this, we\u2019ll need to be thoughtful, systematic and resolute,\u201d he added, suggesting that policymakers should focus on improving the country\u2019s investment climate, increasing competition and developing talent. <\/p>\n

Vincent’s comments echoed an earlier opinion shared by BoC Governor Tiff Macklem, who, following the bank\u2019s 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.<\/p>\n

Macklem added that the recent federal budget could enhance the country\u2019s productivity, \u201cbut it\u2019s going to come down to execution.\u201d<\/p>\n

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. \u201cWe’re looking for a reduction in interprovincial trade barriers… It’s becoming increasingly necessary\u2026that we have to act cohesively there.\u201d<\/p>\n

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.<\/p>\n

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. <\/p>\n

From his vantage point, the modernization and expansion of the SR&ED tax credit program can be a nudge in the right direction. \u201c(This country has) blessings in terms of resources, in terms of outstanding universities\u2026there is all kinds of great knowledge and innovation happening here, but no commercialization. People go elsewhere for it.<\/p>\n

\u201cThe SR&ED credit is going to do exactly the right thing. It’s going to keep (innovation) here. It’s going to hit one of those other really big issues for our economy, which is we need better-paying blue-collar jobs. It\u2019s (also) going to spur entrepreneurship and help us capture a bigger portion of the innovation that happens here.\u201d <\/p>\n

To build on that, Polson described the transformation of Canadian jobs driven by technology. \u201cI would almost call it sky blue collar, a beautiful mix of part white, part blue (collar jobs),\u201d he said to categorize emerging roles that combine the technical skills of traditional blue-collar work with the knowledge and productivity advances typically associated with white-collar jobs. <\/p>\n<\/div>\n

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The budget’s approach to productivity and growth <\/h3>\n

Hanson, a CPA and 20-year SR&ED expert, explained the changes to the SR&ED tax credit program, which include increasing the enhanced 35 percent credit\u2019s expenditure limit to C$6 million. The budget also raises the phase-out thresholds more broadly, allowing more businesses, especially SMEs, to benefit from the credit.<\/p>\n

\u201cThey\u2019ve also opened it up to public companies,\u201d he added.\u201cNow this is a really big one. You\u2019re going to see public companies that are not profitable now applying, as well as more companies actually looking to the public market in order to raise funds, because they weren\u2019t previously able to do so without losing the benefits of the program,\u201d he explained. <\/p>\n

By expanding the eligibility and scale of the credit, Hanson sees the government intending to incentivize greater R&D spending. \u201cI think that being able to raise these limits is very significant, and I think that the government kind of knows this.\u201d <\/p>\n

In addition to SR&ED reforms, the budget introduces accelerated Capital Cost Allowances (CCA) for technology asset investment. This enhanced CCA allows faster deduction of eligible capital costs, targeting sectors like clean energy, advanced manufacturing and digital infrastructure to boost productivity.<\/p>\n

\u201cA big part of manufacturing was the capital assets being able to claim those … now that that\u2019s actually back in the program, we\u2019re actually going to see a huge bump in manufacturing companies,\u201d he said.<\/p>\n<\/div>\n

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Fiscal challenges and transparency concerns <\/h3>\n

Despite comprehensive measures, the budget has gaps. The Parliamentary Budget Officer (PBO) flagged concerns about fiscal transparency and the government\u2019s optimistic capital investment classifications.<\/p>\n

The PBO estimates that actual productive capital investments from 2024-25 to 2029-30 total approximately C$217 billion, about C$94 billion less than the budget\u2019s reported figures. <\/p>\n

This discrepancy arises because the government\u2019s broadened definition of capital investments includes expenditures that, under international standards such as the System of National Accounts, would typically be classified as operating spending rather than capital formation.<\/p>\n

The report advised the government to establish an independent expert body to define federal capital investments, in order to improve transparency and fiscal discipline. <\/p>\n

Researchers for the PBO forecast the government will likely miss its Budget 2025 fiscal anchors: balancing operating spending by 2028-29 and maintaining a declining deficit-to-GDP ratio. Stress testing showed only a 7.5 percent chance that the deficit-to-GDP ratio will fall annually between 2026-27 and 2029-30. <\/p>\n

New spending and higher program costs mean the operating balance is projected to remain in deficit through 2029-30. The PBO warned the government now has limited fiscal room for tax cuts or increased spending if it aims to stabilize the long-term debt-to-GDP ratio.<\/p>\n

The office added that a lack of clarity on how incentives will spur business activity, as well as heavy reliance on complex tax credit compliance, may hinder smaller innovators. <\/p>\n<\/div>\n

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Ensuring delivery <\/h3>\n

The budget’s success ultimately rests on ensuring its incentives are not undermined by complex compliance or slow processing.<\/p>\n

\u201cBecause of the changes, we are going to see a lot more filers as a result. The time to process these claims (is) simply going to take longer,\u201d said Hanson, adding that companies will need to factor wait times into their budgeting. <\/p>\n

Additionally, Hanson described a current government consultation aimed at introducing \u201cupfront technical approval\u201d for certain classes of companies seeking SR&ED claims. \u201cI would like to see them move forward with that. I think that is a great idea, and I think that will provide a lot more certainty for larger (and) smaller companies.\u201d <\/p>\n

For Canadian businesses, the 2025 Budget is a promise; its value now depends entirely on delivery. <\/p>\n<\/div>\n

Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.<\/strong><\/p>\n<\/p>\n

This post appeared first on investingnews.com<\/div>\n

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Canada\u2019s 2025 federal budget arrives at a pivotal moment for the country\u2019s 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)…<\/p>\n","protected":false},"author":1,"featured_media":2080,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-2079","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"_links":{"self":[{"href":"https:\/\/bondsandfonds.com\/index.php\/wp-json\/wp\/v2\/posts\/2079","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bondsandfonds.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bondsandfonds.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bondsandfonds.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bondsandfonds.com\/index.php\/wp-json\/wp\/v2\/comments?post=2079"}],"version-history":[{"count":0,"href":"https:\/\/bondsandfonds.com\/index.php\/wp-json\/wp\/v2\/posts\/2079\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bondsandfonds.com\/index.php\/wp-json\/wp\/v2\/media\/2080"}],"wp:attachment":[{"href":"https:\/\/bondsandfonds.com\/index.php\/wp-json\/wp\/v2\/media?parent=2079"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bondsandfonds.com\/index.php\/wp-json\/wp\/v2\/categories?post=2079"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bondsandfonds.com\/index.php\/wp-json\/wp\/v2\/tags?post=2079"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}