OVERVIEW
Ontario’s Fall Economic Statement, tabled by Finance Minister Peter Bethlenfalvy, is driven by the government’s commitment to promoting growth during these times of global economic uncertainty. In the midst of the document’s release, the Ford government is actively seeking to manage the Greenbelt spectacle and is eager to chart a path forward out of the political challenges they presently find themselves in.
Every year, the Fall Economic Statement provides a snapshot of the government’s financial standing, economic projections for the coming months, and an update on investments made in the spring budget. This year’s Statement pushes forward a number of measures that aim to bolster Ontario’s economy through continued investments in community infrastructure projects, leveraging Ontario’s critical minerals, and attracting manufacturing and innovation.
THE PRESSURES
Canada’s wider economy is displaying unmistakable signs of a slowdown. Numbers posted by Statistics Canada in September saw the employment rate only rise by 0.3 per cent, with no decrease in unemployment and the country’s GDP has remained stagnant for two consecutive quarters. Meanwhile, the Bank of Canada’s overnight rate has reached five per cent after 10 consecutive rate hikes.
Elevated interest rates and persistent inflation are exerting pressure on the province’s economy, leading Ontario to follow a longer path to fiscal balance than projected in last spring’s budget. Ontarians are bearing the brunt of these fiscal indicators, with the burden of increasing grocery bills and rising mortgage rates affecting family budgets across the province.
Much of the focus of the Ontario government has been advancing progress on the housing file, doggedly pursuing their target of building 1.5 million homes by 2031. The Fall Economic Statement includes measures aimed at alleviating the financial strain on homebuilders, such as the removal of Harmonized Sales Tax (HST) on purpose-built rental construction.
The government has prioritized making Ontario an appealing jurisdiction for construction, touting their continued success on rental housing starts since first taking office in 2018. However, housing has become both a sword and a shield for the government. The government’s credibility has taken a hit over the Greenbelt headlines, and this Statement is a key opportunity to change the channel to shift the focus to other issues important to the government.
Recently, Minister Bethlenfalvy issued a letter to Canada’s Deputy Prime Minister and Minister of Finance, Chrystia Freeland, regarding Alberta’s threatened withdrawal from the Canadian Pension Plan. This measure was supported in today’s Statement, citing its “collective and uniquely Canadian approach” that benefits all workers and their families.
THE SPENDING
The Statement now projects a deficit of $5.6 billion this year, four times higher than initially projected in the spring budget. The expected $200-million surplus for next year has been revised to a $5.3 billion deficit. Ontario is now on track to get back to balance in 2025-2026, with a projected surplus of $500 million, in time for the 2026 provincial election.
Minister Bethlenfalvy allocated another $2.5 billion into the province’s contingency fund, increasing its total to $5.4 billion. This fund aims to provide more fiscal flexibility amid continued economic uncertainty.
The government continues to spend significantly on infrastructure, health, and education.
Key Measures in the 2023 Fall Economic Statement
- Launching an Ontario Infrastructure Bank to attract and de-risk private investment for projects ranging from transportation, long-term care, affordable housing, energy generation, and more. Consistent with the federal government and other global jurisdictions, this new agency will be board-governed. While the bank has launched, leadership and board members are expected to be announced in the coming weeks.
- Providing an additional $100 million to the Invest Ontario fund for this fiscal year, in an effort to attract more business investment and support ventures already here.
- Creating the Housing-Enabling Water Systems Fund, a new initiative that will invest $200 million over three years that will unlock new housing opportunities.
- Extending the gas and fuel tax subsidy to June 2024. Commuters and industry that frequent the pumps can expect to save more than five cents on gasoline and fuel tax well into 2024. The cut was first introduced shortly after the 2022 election and has been extended on more than one occasion.
- Eliminating HST on new and qualifying purpose-built rental housing construction, done in tandem with the federal government removing their share of the Goods and Services Tax (GST). Qualifying projects that begin construction between September 14, 2023, and December 31, 2030, and complete construction by December 31, 2035, are eligible.
- Maintaining the current rate for WSIB Premiums for businesses in Ontario at $1.30 per $100 of insurable payroll.
- Increasing the general minimum wage from $15.50 to $16.55 per hour, a 6.8 per cent pay raise that took effect October 1st. Going forward, starting last year, the province has noted that minimum wage increases will take effect every October 1st and be published on or before April 1st every year.
- Investing $5 million in the Critical Minerals Innovation Fund to support the critical minerals sector through targeted research and innovation to address supply chain gaps.
- Proposing to enhance the Ontario Focused Flow-Through Share Tax Credit, starting in 2023, resulting in an additional $12 million per year in tax credit support to the critical minerals mining industry.
You can read the full 2023 Fall Economic Statement here.
THE BOTTOM LINE
High inflation and persistent interest rates are factors guiding Ontario’s economy right now and in the foreseeable future. As the guiding economic light for Canada’s national economy, eyes will be on Minister Bethlenfalvy and Premier Ford to continue making strategic and targeted investments into Ontario’s economy. While today’s “mini-budget” may appear as a setback in the province’s pursuit of a balanced budget, the province remains committed to investments in industries that stimulate economic growth and job creation.
Now more than ever, it is important for businesses in Ontario, or those looking to invest in Ontario, to ensure your industry’s priorities and policies are prioritized.
When you need to cut through the noise, McMillan Vantage is here to help your organization navigate Queen’s Park and keep your issues at the top of the agenda. To find out more, contact us at info@mcmillanvantage.com.
