Canada Allows Immediate Expensing: Economic and Market Impacts

Recently, Canada has announced a measure that will allow immediate expensing for most new capital investments. This initiative, spearheaded by Prime Minister Mark Carney during an investment summit in the country, aims to spur corporate investments. The measure echoes recent proposals from the Trump administration's 'Big Beautiful Bill,' which also introduced immediate tax benefits. While not entirely novel, this policy builds on previous measures implemented in 2018 for industrial equipment and more recently for building materials and clean energy equipment. Government estimates suggest a cost of C$36 billion over five years. In the broader macroeconomic context, this measure comes as inflation is becoming a growing concern, particularly following conflicts in the region of Iran. The market already anticipates five interest rate hikes by the Bank of Canada (BoC) through 2027, posing significant challenges for both the real estate sector and corporate borrowing.