Carney Looks to AI for Savings as Canada’s Budget Pressures Mount

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(Bloomberg) — Prime Minister Mark Carney said Canada will begin to use artificial intelligence “at scale” to make the government more productive, as his administration looks for ways to squeeze out cost savings in a time of economic pressure. 

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Carney released a letter spelling out seven major priorities for his new cabinet, one of which is “spending less on government operations” to free up money for other priorities. The prime minister promised during the recent election campaign to rebuild Canada’s military and use the financial backing of the government to accelerate home construction, among other spending ideas. 

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The government won’t release a budget until the autumn months; usually it does so in March or April. That will allow more time to assess the economic effects of the trade war and figure out what new defense spending is needed, Carney told reporters Tuesday evening. The last new federal budget was in April 2024.

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The Canadian government’s total program expenses are expected to reach C$500 billion ($360 billion) this fiscal year, excluding debt charges, up from about C$260 billion in 2016. Carney has said operating expenses are growing too quickly and must be reined in, but has given few details on how he believes AI can be deployed in government operations. 

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He did, however, appoint Canada’s first minister of artificial intelligence — Evan Solomon, a former television broadcaster — as well as a minister of government transformation, Quebec lawmaker Joel Lightbound.

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Economists are forecasting a budget deficit of 1.7% of gross domestic product this year, according to data compiled by Bloomberg. But the number is likely to be higher because of sluggish economic growth and the election pledges that Carney made. The Liberal Party’s platform projected a deficit of 2% of GDP for the fiscal year that ends next March.  

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“The delay of the budget is a bit concerning, as it raises questions about transparency and contributes to greater economic and fiscal uncertainty,” Josh Grundleger, a director at Fitch Ratings, said in an emailed statement. 

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Parliament will reopen next week, with King Charles III set to deliver what’s known as the throne speech on Tuesday, laying out the government’s priorities. 

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“It would be helpful for markets to have a clear sense of which aspects of the party platform will be implemented and what the ultimate impact will be on deficits, debt and the taxpayer,” said Fitch’s Grundleger. 

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Canada’s debt is rated AAA by S&P Global Ratings and Aaa by Moody’s, the highest ratings available from those agencies. Fitch downgraded the country to AA+ in June 2020.   

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“We hope to get more clarity on near-term priorities when the speech from the throne is introduced,” Travis Shaw, the lead analyst for Canada at Morningstar DBRS, said in an emailed statement. 

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Jennifer Love, an associate director at S&P Global Ratings, said Canada’s economic growth will remain “constrained” because of the tariff war launched by the US, its largest trading partner. However, “we continue to believe that Canada’s credit strength will persist even with lower growth and trade uncertainties,” she said. 

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