What students can expect from the new federal budget
By Alexander Howey, December 12 2025—
On Nov. 4th, the federal government unveiled its highly anticipated budget.
The deficit for the 2025-2026 fiscal year is projected to be $78.3 billion, with a prediction that the deficit will go down to $65 billion in the year.
This is higher than the Liberals forecasted in their last fiscal update, but lower than what some economists predicted.
The budget plans to reduce the government’s operation costs by $60 billion over the next five years, reducing direct program spending from eight per cent to under one per cent of Canada’s GDP.
The federal government is also prioritizing private investment to create jobs and spur economic growth. However, the return on these billions of dollars in investments could take years to materialize.
Additionally, defense spending is to rise to $81 billion over the next five years to meet NATO’s two per cent GDP target, with the goal of investing five per cent of GDP into defence by 2035. Historically, Canada has fallen far below that target, only spending 1.37 per cent of its GDP on defense in 2024.
Immigration and post-secondary education
On the immigration front, Canada is proposing to drastically reduce the number of temporary residents it allows into Canada to about 43 per cent less than the 2025 target — including international students.
The budget commits to reducing the share of temporary residents to five per cent of the total population — down from around 7.5 per cent last year.
These new targets signal a shift towards a more restrictive immigration policy, with a focus on temporary residents. This is aimed at alleviating pressure on the country’s public services and housing market.
However, a spokesperson for the Migrant Rights Network advocacy group Syed Hussan criticized the government’s plan.
“This is part of a wider strategy of scapegoating migrants for crises governments created — blaming newcomers for unaffordable housing, strained health care and low wages instead of addressing corporate greed and decades of underfunding,” Hussan said in a statement.
The post-secondary sector was already adapting to the reduction of international study permits announced in January before the cap was tightened further.
This fall, the University of Calgary saw 16.3 per cent fewer international students than it did the previous year. In a statement to CBC News, the university said it’s losing an estimated $34.7 million this year due to this decline in international student enrolment.
This has industry watchers worried that it could damage Canada’s reputation as an attractive place to study and live.
Funding for post-secondary education has been receiving annual cuts from the province since 2019.
In a statement following the announcement of the provincial budget last February, the U of C’s Students’ Union (SU) discussed how “the University of Calgary is for all intents and purposes left out of the 2025 budget.”
“Even more troubling is that the post-secondary operating budget is projected to remain stagnant throughout the rest of this current administration, despite the glaring needs for additional funding.”
In addition to this, recent changes have tied portions of post-secondary funding to performance metrics such as enrolment and graduate employment rates, aiming to make these institutions more responsive to labour market needs.
This concerned some stakeholders, as the prioritization of programs with higher earning potential could marginalize other broader disciplines.
Originally, 15 per cent of an institution’s funding from the Campus Alberta Grant (CAG) was tied to these performance-based metrics. That number was increased to 40 per cent in 2022-2023.
The CAG is a crucial source of operational funds for most post-secondary institutions, yet it has been reduced for many institutions across the province. Since 2019, the University of Calgary has faced a $135 million cut to its CAG, unadjusted for inflation, which accounts for around 23 per cent of its total CAG funding.
Overall, the federal government’s intention to limit temporary residents, which likely encompasses prospective students, can potentially add to the financial strain Albertan post-secondary institutions have faced in the past few years.
Housing and infrastructure
To address the ongoing housing crisis, Budget 2025 commits to an initial investment of $13 billion over the next five years to increase affordable housing supply.
Last September, the federal government launched a new federal agency, Build Canada Homes. This agency aims to build and finance more affordable housing, while also prioritizing the use of Canadian resources such as lumber.
The government plans to offer tax incentives to developers to boost construction. It is also eliminating the GST on new homes up to $1 million and reducing it for homes between $1 million and $1.5 million, but this will only apply to new builds and first-time buyers.
Critics however are concerned that these measures fall short of addressing immediate affordability issues, and that they lack the necessary concrete measures to help Canadians who are currently aspiring to achieve affordable homeownership.
Climate
Canada, like other resource-oriented economies, has struggled to balance a need to increase production of commodities such as oil and gas, while maintaining commitments to climate-based initiatives.
Alberta’s provincial government frequently lobbies the federal government to remove environmental initiatives, claiming they hurt resource development in the province.
Alberta Premier Danielle Smith made a public statement prior to Carney’s election last spring.
“I provided a specific list of demands the next Prime Minister, regardless of who that is, must address within the first six months of their term to avoid an unprecedented national unity crisis.”
The demands included guaranteeing Alberta full access to oil and gas corridors, the elimination of the oil and gas emissions cap, the scrapping of clean electricity regulations, ending the prohibition on single use plastics, abandoning the net-zero car mandate and returning oversight of the industrial carbon tax to provinces.
“I also made it clear that Alberta, as owner of the resource, will not accept an export tax or restriction of Alberta’s oil and gas to the United States and that our province is no longer agreeable to subsidizing other large provinces who are fully capable of funding themselves” Smith wrote in the statement.
This was said in wake of a growing separatist movement in Alberta.
Following Carney’s election victory, Smith introduced Bill 54, which lowered the barriers to a potential provincial referendum on sovereignty.
“I expect to see meaningful action from Prime Minister Mark Carney and the federal government to remove the restrictive policies and barriers that have landlocked our resources and hampered our economy for the past decade,” Smith stated.
Budget 2025 commits to an industrial carbon tax, which sets an emissions target by sector and requires large-scale emitters to pay a price per tonne on what they emit above that target.
This follows the scrapping of the consumer carbon tax introduced by Prime Minister Mark Carney’s predecessor Justin Trudeau amid concerns around affordability. The industrial carbon tax was also originally a Trudeau-era policy.
Under the Paris climate pact, Canada has committed to cutting emissions to at least 40 per cent below 2005 levels by 2030, while multiple recent analyses have suggested this target will be missed by a large margin.
However, the budget was short on more details, offering no update on where the government stands on its 2030 and 2035 emission reduction targets.
For more information, the entire budget can be read here.