2026 Spring Economic Update Commentary

Despite global economic uncertainty, confidence in Canada as an investment destination continues to be strong. The 2025 Kearney FDI (foreign direct investment) Confidence Index ranked Canada second among 25 global markets. Finance Canada notes that our economy grew by 1.7 percent in 2025 (avoiding a recession) and the International Monetary Fund (IMF) expects Canada to have the second-fastest growth in the G7 over 2026 and 2027 (after the US). Canadian business sales to non-U.S. markets, and technology adoption is accelerating.

Inflation has remained within the Bank of Canada’s 1–3 per cent target range for over two years, increasing to a high of 2.4 per cent in March reflecting higher energy prices.

Canada’s unemployment rate was 6.7 per cent in March 2026, down from a peak of 7.1 per cent last summer. Ontario’s unemployment rate in March 2026 was 7.6 per cent. Youth employment has only slightly declined from its peak of 14.6 per cent in September 2025 to 13.8 per cent in March.

The Spring Economic Update proposes to make the Employee Ownership Trust tax exemption permanent.

An Employee Ownership Trust (EOT) can be used to help employees purchase a business. Under the current rules, individuals may be eligible for an exemption on up to $10 million of capital gains realized on the sale of a business to an EOT, provided certain conditions are met. The exemption was originally introduced as a temporary measure for the 2024, 2025 and 2026 taxation years. The government now proposes to make it permanent.

Why this matters: For some owner-managed businesses, an EOT may become another succession planning option. It will not be the right fit for every business, but making the exemption permanent may make this structure more attractive in appropriate situations.

The Spring Economic Update proposes to extend the repayment grace period under the Home Buyers’ Plan.

The Home Buyers’ Plan currently allows eligible individuals to withdraw up to $60,000 from their RRSP to buy or build a first home, without paying tax on the withdrawal at the time. Amounts withdrawn under the plan must generally be repaid to an RRSP over a 15-year period.

The federal government previously extended the grace period so that repayments would not have to begin until the fifth year after the year of withdrawal, for first withdrawals made between 2022 and 2025. The Spring Economic Update proposes to extend this five-year grace period to first withdrawals made from January 1, 2026 to December 31, 2028.

Why this matters: This may provide additional short-term cash flow relief for first-time home buyers who are already managing mortgage payments, housing costs and other household expenses.

The Spring Economic Update proposes changes intended to make the Disability Tax Credit easier to access.

The Disability Tax Credit provides tax relief for eligible persons with disabilities and supporting family members.

The proposed changes include:

• streamlining the application process for individuals with a formal diagnosis of certain long-lasting medical conditions (e.g. Dementia, Alzheimer’s disease, Parkinson’s disease);
• expanding the list of medical practitioners who can certify eligibility in certain circumstances; and
• recognizing certain provincial or territorial public guardians and trustees as qualified to certify Disability Tax Credit applications for adults in their care in specific situations.

The Spring Economic Update announces the government’s intention to reduce the contribution rate for the base Canada Pension Plan from 9.9 per cent to 9.5 per cent, effective January 1, 2027.

Finance Canada says this reduction would translate into annual savings of about $133 for an employee earning $70,000 a year, with equivalent savings for the employer.

The Spring Economic Update proposes to enhance the Labour Mobility Deduction for Tradespeople.

This deduction is intended to help tradespeople who travel for temporary jobs and incur relocation-related expenses. The proposed changes would increase the annual limit on deductible expenses from $4,000 to $10,000, indexed annually to inflation. The minimum distance threshold for relocations would also be reduced from 150 kilometres to 120 kilometres. These changes would apply for the 2026 and subsequent taxation years.

The Spring Economic Update includes several measures aimed at increasing the number of skilled trades workers in Canada.

The Build Canada Apprenticeship Service would help employers hire, train and retain apprentices by providing wage subsidies of up to $10,000 for an apprentice’s first-year salary. The program is also intended to help match apprentices to job opportunities and provide hands-on navigation and support.

The Update also proposes an Apprenticeship Training Grant of $400 per week while apprentices are attending mandatory in-class technical training, up to a total of $16,000 per apprentice, in addition to Employment Insurance.

Why this matters: These measures are intended to help more apprentices begin and complete their training. For employers, particularly small and medium-sized businesses, the wage subsidy may help offset some of the cost of bringing on first-year apprentices.