The Top Line
Earlier today, Ontario Finance Minister Peter Bethlenfalvy introduced his Fall Economic Outlook and Fiscal Review. In a period of rapid population growth, great uncertainty and fear of high interest rates, the Minister emphasized his confidence in the Ontario economy, and is continuing his targeted approach to spending that gives Ontario some flexibility in uncertain times. The government is aiming to build a strong Ontario by investing in infrastructure, and attracting new jobs and investments.
“Our population is growing, jobs are being created and more and more companies are choosing Ontario as a place to do business,” said Minister Bethlenfalvy. “While this is good news, this cannot be taken for granted at a time of geopolitical and economic uncertainty. The choice for the road ahead is clear. We must continue with our government’s targeted approach — it has the flexibility we need while still investing to build the critical infrastructure to support growing communities across Ontario.”
In recent days, the province has led with some significant economic announcements, providing breaks for Ontarians by scrapping the provincial portion of the harmonized sales tax on new purpose-built rental housing construction, lowering the age for regular breast cancer screenings and has extending the gas tax cut for another six months to June 2024.
A Fiscal Snapshot
In today’s update, the government is building critical infrastructure faster and smarter, continuing to attract investments and more jobs, and providing better services for people. “The road ahead is not going to be easy, but we have seen what the people of Ontario can accomplish together,” said Minister Bethlenfalvy.
- The Government is projecting a deficit of $5.6 billion in 2023-24; $5.3 billion in 2024-25; and a surplus of $0.5 billion in 2025-26 – thereby balancing the budget in the next 2-3 years.
- Ontario’s nominal GDP growth is expected to rise 3.6 percent in 2023, and 2.9 percent next year. Real GDP is projected to rise 1.1 percent in 2023 and 0.5 percent in 2024. (Note: The Government is prudent in its projections as these numbers take into account geo-political factors and fluctuating interest rates, resulting in more modest numbers than private sector projections).
- Net debt-to-GDP ratio is now forecast to be 38.4 percent, compared with the forecast of 37.8 percent projected in the 2023 Budget.
- The current slow growth rate is hindered by CPI Inflation projected at 3.7 percent this year, and dropping to 2.5 percent in 2024.
- On the employment front, Ontario added 170,000 new jobs in 2023, with an unemployment rate of 6 percent.
The Ontario Fall Economic Outlook 2023 has two major themes: “Building Ontario” and “Working for You”. Key updates from both themes include:
- The Government will extend the current gas and fuel tax rate cuts through to June 30, 2024 – saving households $260 on average.
- Taking steps to remove the 8 percent provincial Ontario Harmonized Sales Tax on qualifying projects for new purpose-built rental housing. This will remove the full 13 percent HST on new qualifying rental buildings when combined with federal level enhancements.
- Beginning in fall 2024, expanding provincial eligibility for breast cancer screening for people ages 40 to 49.
- Launching the Ontario Infrastructure Bank with a proposed initial investment of $3 billion, with the goal of attracting institutional investors for critical infrastructure projects.
- $185 billion over 10 years towards a ‘Plan to Build’ to highways, hospitals, transit, schools, LTC homes, broadband, and other critical infrastructure.
- $48 billion over 10 years towards building healthcare infrastructure – adding 3,000 new beds during the period.
- Additional $12 million per year in tax credits to support the critical minerals mining industry.
- Additional $100 million to the Invest Ontario Fund for a total of $500 million.
- $200 million over 3 years in a new Housing-Enabling Water Systems Fund.
- Ontario is accepting the federal government’s invitation to levy an additional excise duty on vaping products intended for sale in Ontario at the same rate as the existing federal excise duty.
Not surprisingly, the Opposition parties saw little in the statement that appealed to their political base:
“We need real measures to invest in public services and make people’s lives easier. All people got today from Ford was more of the same. People have lost trust in this government, and after seeing today’s budget – I can see why.”
Catherine Fife, MPP, NDP Finance Critic
“It is unbelievable, that at a time when families are struggling to keep up with the soaring cost of living, and a record number of Ontarians are relying on food banks, this Conservative government would choose to include zero new measures to provide families with immediate pocketbook relief in their Fall Economic Statement,” Bowman said.
Stephanie Bowman, MPP, Ontario Liberal Party Finance Critic
What This Means to You
The Fall Economic Outlook announced the review of the Ontario tax system which will be reported in Budget 2024 and encouraged interested parties to submit budget ideas by January 31, 2024. Also of note are the creation of the Ontario Infrastructure Bank and the Housing-Enabling Water Systems Fund.
The Ontario Infrastructure Bank is a new arms-length, board-governed agency to enable public-sector pension plans and other trusted institutional investors to participate in large-scale infrastructure projects across the province. The initial focus will be on immediate demands that include long-term care homes, affordable housing and infrastructure in the municipal, community, energy and transportation sectors.
The Housing-Enabling Water Systems Fund will be funded by a $200 million investment over three years that will provide all municipalities an opportunity to apply to for monies to fix and secure core water, wastewater and stormwater projects that promote growth and enable housing development. The new fund is intended to complement its recently announced “building faster fund,” a $1.2 billion fund to help municipalities reach housing targets set by the province.
The government continues to work at becoming the leader in the electric vehicle (EV) market and key to that investment is the continual commitment to opening up the Ring of Fire. Today’s Outlook also contains an existing tax credit for critical mineral exploration, that would provide an additional $12 million in tax credits. The Premier has made expanding mining in the province for the minerals needed for EV batteries a signature priority.
It is clear that Minister Bethlenfalvy is identifying the current economic situation as fragile and uncertain, but believes his government is utilizing the tools at its disposal to build for the future. Slow growth is expected in the short term but projections 2 and 3 years out begin to show strength in the economy leading to a balanced budget in 2025-2026.