It is correct that because of the push for innovation there was a de-emphasis on the investment in curiosity-driven, long-term research. Your assumption is correct. However, increased funding in NSERC in the last few years seems to be reversing this trend.
There's a note that needs to be made here. Canada is a small country, and we cannot be expert in everything. It is important that the science policy in Canada have some priorities. We cannot be good in everything—that's impossible. We're not big enough; we're not good enough in everything. We need to have priorities that we can concentrate and be excellent in, but we cannot be in everything. We need centres of excellence.