Ontario Economic Outlook and Fiscal Review, 2023
Today the Ontario Government released their 2023 Ontario Economic and Fiscal Review, entitled Building a Strong Ontario Together. The fall economic statement highlighted key investments in infrastructure, healthcare, and continuing to build Ontario’s workforce. While previous fiscal updates over the past several years focused on the Government’s response to the pandemic necessary spending, this year's fiscal update focused on global economic instability.
While the Government didn’t hit the panic button, there remained a theme of caution for Ontario’s finances as a result of slowing economic conditions, geopolitical concerns in Europe and Asia, and uncertainty regarding inflationary pressures and increased interest rates.
“The road ahead is not going to be easy, but we have seen what the people of Ontario can accomplish together,” said Peter Bethlenfalvy, Ontario’s Minister of Finance. “Together, we can face the uncertainty of today and build a strong Ontario.”
This year’s Fall Economic Statement was divided into two major priorities:
- Building Ontario; and
- Working for You
The biggest surprise in this year's fiscal update was the notable increase in the province’s deficit. Ontario’s 2023 Budget released earlier this year had forecasted a $1.3 Billion deficit, but the Province is now expecting that to almost quadruple to $5.6 Billion. The Government is also forecasting an increase in next year’s projected deficit of $5.3 Billion despite forecasting in March that the province was planning a $200 Million surplus. The Province is now forecasting a return to a balanced budget in 2025-26 with a projected $500 Million surplus.
The Government continues to make record-investments in public infrastructure, despite uncertain economic headwinds and raising interest rates, and with today’s fiscal update the Government showed no signs of slowing down on these investments.
The big take-a-ways from today’s announcement include the extra $100 Million to Invest Ontario (the provinces’ investment-attraction agency) as well as the creation of Ontario’s very own infrastructure bank with $3 Billion as their initial funding. There is roughly $4 Billion added towards expanding high-speed internet access across the province and a whopping $70 Billion over 10 years for more schools, hospitals, and commitments to continue the PCs election-winning promise to build more highways. All of these commitments come with big price tags, which is why the Ontario Government has called for the Federal Government to “step up” and help provinces with their infrastructure spending needs.
Other highlights include a commitment to expand Ontario’s electricity grid, starting work on a large nuclear station and advancing three small modular reactors, as well as completing the Ontario Place redevelopment. There was also a $2 Billion commitment for small, rural and northern municipalities to upgrade and fix their infrastructure. “Getting it Done” and “Building Ontario '' were big themes during the 2022 election and for the PC’s expanded majority, and we can see that reflected in today’s fiscal update.
Investments in Northern Ontario continue with new funding for mining exploration and $5 Million towards the Critical Minerals Innovation Fund. Minister Bethlenfalvy also proposed expanding the “Flow Through Share Tax Credit” which would result in an extra $12 Million in tax-credit relief to the mining sector. Additionally, the Northlander, which plans to reintroduce train service by 2026, is getting three new train sets at a cost of $139.5 Million.
We also saw investment in clean energy infrastructure with the Government announcing the launch of Ontario’s clean energy credit registry and directing the proceeds of clean energy credits towards Ontario’s Clean Energy Fund. The Government announced that it will procure 2, 500 megawatts of clean energy for Ontario’s energy grid.
Working for You
The Ford Government continues its “working for workers” approach, largely credited in helping them win an increased majority. There was a re-announcement of a $160 million in the Skills Development Fund by creating a fourth round of funding, $3 Million towards the Ontario Bridge Training program that provides skills training to newcomers, $32.4 Million over three years to support thousands of research internships through the non-profit national research organization Mitacs, and the creation of new target benefit pension plans. Of interest is the inclusion of “an acknowledgement of the importance of the Canada Pension Plan” (CPP), likely included because of recent calls by Alberta’s premier to leave the program. We also saw the potential for a new tax on vaping, with the offer to join with the feds on creating new taxes on vaping products.
As expected, the previously announced continued gas tax and fuel tax cuts as well as the removal of HST from new purpose-built rentals were included in today’s update. The $51 Million of funding towards combating auto thefts, that was announced last spring, is included as well. The Government also announced an increase to the minimum wage to $16.55 an hour (an increase of 6.8%).
Roughly 300,000 more individuals will be able to get tested early for breast cancer, thanks to the Government’s expansion of breast cancer screening eligibility for people aged between 40-49. There is a commitment of $330 Million to improve children's healthcare and mental health, investing $33 Million over three years for more doctors trained in the province (opening up more college seats for medical schools and undergraduate programs), $569 Million for home care (part of the $1 Billion total over three years of investments), and immediately investing $200 Million in 2023-24 to address healthcare staffing shortages.
It’s clear from today’s fiscal update, and even more so from Minister Bethlenfalvy’s speech in the Legislature that there is cause for concern on the horizon for the Province’s economy. While these are pressures that are facing jurisdictions around the world, it was a clear signal and recognition that Ontario is not immune.
Today’s fiscal update focusing on key themes from the successful 2022 election demonstrates the Ford Government's desire to fulfill these promises and buttress their “get it done” mantra. Generally, and of importance to note, is that this year's Fall Economic Statement was much less of a political and communications document than those of the recent past where the Fall Economic Statement has served as a mini-budget. There was little new, but rather a focus on expanding many of the successful initiatives that the Ford Government has championed since 2018.
The Government has been navigating through a political storm for much of the last few months, and it is clear from today’s announcement that the pathway through the storm is to focus on areas of strength and credibility for the Government. The PCs were elected in 2018 on a promise to return to balance in a measured and responsible manner without making drastic cuts, which is a sign to why the province has pushed back its path to a balanced budget by a year.
With today’s tabling of the 2023 Ontario Economic and Fiscal Review, the Ministry of Finance has officially opened up its consultation period for the 2024 Ontario Budget. Upstream looks forward to working with you in putting together your pre-budget submission and assisting you with the budget consultation process. If you haven’t already been in touch with Upstream regarding your pre-budget strategy, you can click here to set-up a consultation.