Canada's Growth Agenda: Diversification, Infrastructure, and Investment Drive Long-Term Prosperity

Canada's economy has faced challenges in recent years, but the country is poised for growth due to various structural drivers. According to Macquarie's analysis, Canada retains several sources of advantage, including a strong fiscal position, significant natural resources, and a highly educated workforce.

The country has been diversifying its trade relationships, with exports to the rest of the world increasing by 34% since late 2024, while goods exports to the US have declined by 6%. Prime Minister Carney's policy agenda includes doubling exports to non-US markets by 2035 through investment in trade infrastructure and negotiating free trade agreements.

Reducing interprovincial trade barriers is another key priority for Canada. Eliminating internal barriers could increase real GDP per worker by nearly 7% over the long term, according to IMF estimates. The federal government has introduced initiatives to reduce friction across provincial economies, including the One Canadian Economy Act and Mutual Recognition Agreement.

Broad-based fixed business investment is also expected to drive growth in Canada. Tax incentives such as accelerated depreciation and immediate expensing provisions have been introduced to support manufacturing equipment, data infrastructure, clean energy projects, technology, and research and development. The Major Projects Office has been established to streamline approvals and provide businesses with greater certainty regarding project timelines.

Canada's energy sector is another significant economic strength, with the country being the world's fourth-largest oil producer. Export infrastructure, including proposed west coast pipeline projects, could add more than one million barrels per day of export capacity, supporting trade diversification and investment.