That's a myopic rewrite of history.
The same thing that occurred in Canada occurred in the US and the UK; In the 80s, neo-liberal conservative candidates trounced progressive challengers. They proceeded to reshape the country by instilling neo-liberal principles like rationalization, efficiency mania, NPM, civil service cuts, anti-unionism, and a concern (rhetorically, at least) with the deficit. In the early 90s, those candidates or their successors are defeated by more progressive parties, but the winners are not progressive--instead they intentionally emphasize their moderation. Chretien/Martin, Clinton and the DLC, Tony Blair and New Labour / The Third Way. In fact, they spent more time attacking their party's progressive past than anything else, and adopted many of the ideological characteristics of the neo-liberals before them. There's nothing unique to Canada here, and there's nothing necessary about it at all.
The same thing happened to a lesser extent in a few other countries, including Australia (Hawke and Keating bringing in the neoliberal revolution, Rudd following it) although the party order was different there, with the power transition going "Centrist" -> "Right" rather than the reverse.
Chretien and Martin weren't forced into austere budgets by the mess Mulroney left, they chose austere budgets and an emphasis on deficit reduction because the Liberal party and Canadian political culture were jerked to the right. They were jerked to the right because the whole paradigm surrounding politics in the Anglosphere changed in the 80s. And we see it now in the US in the retroactive way Jimmy Carter is called a terrible president, and even here in the way that Liberals run from the Trudeau legacy in almost every substantive way, endorsing it only on an emotional level.
Progressives shouldn't let Chretien and Martin off the hook. Martin's best moments were in the dying days of his government, when he actually grew a progressive conscience and tried to use government to make the country a better place.