“A gambler’s budget…” Thus Calgary portfolio manager Petar Pejovic, talking on Hannaford tonight about last week’s federal budget.Delivered by Finance Minister Champagne it was nevertheless unmistakably the work of Prime Minister Mark Carney; it has been called many things: strange, opaque, even complacent.Now, a “gambler’s budget.” Why?.Pejovic: “For years, Canada has been criticized as an unfriendly place for private and foreign capital. Tax rules are uncompetitive; major projects have been delayed or abandoned altogether; the message to investors was that their money would be safer elsewhere. This budget attempts a correction. It offers more generous treatment of capital expenditures, closer to the American model, and raises the prospect of substantially higher capital-gains exemptions under certain conditions. In principle, these measures are what much of the investment community has sought.”.Capital, then, flows to where it is treated best. This budget is an invitation for it to return.But here’s the gamble.“There’s major execution risk in this budget. The people with the capital need to trust this government that it’s actually going to be able to execute and deliver on the major projects it has promised, such that there’s a profit to be made. Nothing about this is inevitable.”Mr. Carney’s plan comes with a large and growing debt tab.“If it is executed properly, things could be pretty good. But if it fails, we’re just going to be saddled with more and more debt. That is the gamble.”.The tax concessions reduce revenue in the near term. The hope is that new investment and approved projects will generate enough future activity to more than offset the loss. If the projects are built, the bet can pay off. If they are not, the country is left with higher debt, higher interest costs, and little to show for it. As the old proverb has it, the borrower is servant to the lender.The risk is not theoretical. Announcements are easy; approvals and construction are not. A special projects office was created early in the Carney government precisely to accelerate the pipelines, electrical infrastructure, ports, and other works that are supposed to justify the new tax regime. So far, the record of actual approvals is negligible. Disputes involving Indigenous communities, interprovincial barriers, and the particular politics of Quebec and British Columbia have stalled projects for years. None of those obstacles disappeared with a change of government or a new budget. Until picks and shovels are in the ground, the favourable tax treatment remains a promise rather than a result.The second uncertainty swirling around this budget is Mr. Carney’s approach to Europe. Pejovic sees little practical sense in closer association – whether associate membership or something more formal. Europe, he notes, is in worse fiscal and monetary shape than Canada, constrained in energy and resources, and currently marked by serious political strain..Canada, by contrast, is the “cleaner dirty shirt,” more abundant in energy, water, and other resources, and less burdened by the same regulatory weight. Integrating more tightly would likely hand the EU greater stability and resource access while exposing Canadian growth, especially in oil and gas, to rules that do not fit our economy.Or maybe it’s statecraft, political theatre in which talk of closer ties to Europe (and possibly China), Swedish Gripens, or new east-west export routes serve mainly as leverage for a better deal with the United States. That reading makes more geographic and economic sense – America is the larger market, the nearer neighbour, and the simpler route. Whether Carney is pursuing genuine European alignment or merely using the appearance of it remains, in Pejovic’s view, an open but highly consequential question.So which is it? Pushed, Pejovic thinks it’s more gambling by Mr. Carney.“Statecraft is what makes sense. The United States is our largest trading partner; it’s the largest economy on the Earth, and their right on our southern border. To what degree does it make sense for us to give up sovereignty to the EU for us to ship goods much, much farther distances to an economy that's much weaker?”“But here's the rub, though. How often do politicians do what makes sense? And that's where I get stuck.”.Set the European question aside for a moment however and look at the budget on its own terms, Pejovic says, and it is not the worst Canada has seen.On the fiscal side, the 2026-27 deficit is projected at $62.3 billion, or about 1.8 per cent of GDP – slightly better than the spring outlook and modest by G7 standards. Federal debt-to-GDP is expected to remain roughly flat near 40 per cent in the medium term. Higher oil revenues, primarily from Alberta and Saskatchewan and aided by the Iran war, supplied substantial fiscal room of roughly $158 billion over the horizon; although most of it is directed to new measures, rather than debt reduction. Cumulative deficits are about $34 billion lower than in the spring update once those revenues and the assumed growth from new measures are included. Operating spending is projected to balance with revenues by 2027-28, one year earlier than previously estimated, while direct program spending growth is to be constrained from roughly 8 per cent toward 2 per cent. The remaining deficit from that point is to be accounted for entirely by capital expenditures under a capital-budgeting approach that distinguishes longer-term investment from day-to-day operations..The centrepiece tax measure is the hugely attractive Productivity Mega Deduction, which permanently allows immediate expensing for roughly two-thirds of capital investment. It should cut the marginal effective tax rate on new business investment from 13 per cent to 6.4 per cent – the lowest in the G7 and well below the United States – and raise the level of GDP by about 0.5 per cent by 2030 through greater capital accumulation.A Canada Growth Incentive would exempt up to $15 million in capital gains on eligible investments in Canadian companies.On the energy and infrastructure side, the budget advances a National Electricity Strategy aimed at doubling grid capacity by 2050, provides support for nuclear and critical minerals, extends clean-technology and clean-electricity investment tax credits to 2040, and seeks to accelerate major projects..Housing receives roughly $44.7 billion in cash support, with near-term construction activity expected to aid GDP and employment, though outcomes will depend on provincial and municipal delivery.The government also cites an all-government net debt-to-GDP ratio of 9.3 per cent, still the lowest in the G7. That figure includes federal, provincial, territorial, local and Indigenous governments and subtracts the large net assets of the Canada and Quebec Pension Plans, a treatment that many would dispute because it treats those plans as government assets rather than assets of the Canadian people..In summary, the budget is framed as a productivity- and investment-led strategy that uses the oil-revenue improvement for capital formation while holding to operating-balance and deficit-to-GDP anchors.But, the near-term growth impulse is modest and remains constrained by trade uncertainty. Longer-term effects hinge on the private-sector response to the tax incentives, actual delivery of energy and infrastructure projects, and external conditions.Successful capital deepening would raise potential GDP and the tax base, supporting the debt trajectory and, if productivity improves, allowing non-inflationary expansion.Failure, however, whether from weak private uptake, project delays or persistent trade frictions, would leave higher debt without the offsetting growth..The budget is a necessary and overdue attempt to reverse a decade of under-investment and that some increase in debt is the price of competitiveness. The oil-and-gas revenue windfall is ironically the product of an unpopular war in the Gulf of Hormuz – and the Liberal government is using this temporary strength to make structural improvements. Perfect certainty is impossible in project development and waiting for every risk to vanish would mean waiting forever, says Pejovic. No serious country grows without taking some calculated risks on infrastructure and capital formation.The difficulty is that this calculation must eventually be tested by results, not rhetoric.Pejovic’s point is not that the tax changes are unwelcome; it was that their success depends on trust and delivery that have been in short supply. A budget can create the conditions for capital to arrive. It cannot, by itself, force the approvals, the intergovernmental agreements, or the political will required to turn those conditions into operating assets.If those pieces fall into place, the gamble looks shrewd. If they do not, the country simply adds to the stock of debt that future taxpayers must service.Pejovic concludes with his advice to investors.The Hannaford show is uploaded at seven o’clock.
