Canada to allow immediate write-offs for most new capital spending: Carney

The Canadian dollar has dropped for five straight sessions as the U.S. dollar strengthens broadly on anticipation of a Federal Reserve rate increase.

Beneath the surface, Prime Minister Mark Carney is working to set the stage for a surge in investment. He is holding an investment summit in Canada this week, which has brought a string of spending-related announcements, including one on a data centre on the previous day.

Tuesday's announcement offers a strong incentive for businesses considering new spending and follows a similar approach by the Trump administration in the Big, Beautiful Bill. Allowing immediate expensing on longer-term investments accelerates the flow of deductions back into corporate treasuries, benefiting from the time value of money. However, Canada already implemented immediate expensing for machinery in 2018, and last year added building materials and clean energy equipment. Some accelerated depreciation is also in place.

Therefore, the real effects will hinge on individual company circumstances, but the signal is strong.

The larger challenge for Canada and much of the globe is inflation linked to the conflict in Iran. Markets are forecasting five Bank of Canada rate hikes by 2027, which will pose a significant obstacle for a struggling housing sector and corporate borrowing.