Ontario doubles down on infrastructure and economic development in 2023 Fall Economic Statement
As each level of government takes steps to address the affordability and economic challenges facing the country, it came as no surprise that Ontario Finance Minister Peter Bethlenfalvy’s 2023 Fall Economic Statement focused on typical economy driving themes: housing supply, infrastructure investment, and economic development.
The 2023 Fall Economic Statement reflects the Ontario government’s continued priorities as it positions itself as a stable vessel charting uncertain waters. The 2023-2024 deficit projection has increased to $5.6B (up from $1.3B in the 2023 Budget) and budget balance has been pushed out a year to 2025-2026 (previously projected to be 2024-2025). Despite geopolitical uncertainties and a slower economy, the government is confident in its fiscal plan given continued economic growth in Ontario.
Budget consultations kick-off
The 2023 Fall Economic Statement also marks the start of the 2024 Budget Consultations. The government will spend the coming months travelling the province to better understand the pressures facing Ontario businesses, families, and individuals as it seeks to advance its “plan to build Ontario” in the upcoming budget – marking the halfway point of the current term.
As the government embarks on this endeavour, Ontario faces mounting pressure from Toronto’s newly elected Mayor, Olivia Chow, to address not only the policy challenges facing the province, but also the fiscal pressures facing Ontario’s largest city. Now more than ever, Ford must work hand-in-hand with municipalities and the federal government in order to realize the meaningful change promised through this Fall Economic Statement.
FES by the numbers
The Ontario economy has been more resilient in 2023 than the last Budget expected. However, the Fall Economic Statement paints a grimmer picture of the economic trajectory of the province in 2024 and 2025. Real GDP is now expected to only grow by 0.5 per cent next year and 2 per cent in 2025. Lower growth will result in slower job creation and the unemployment rate will jump from 5.6 per cent in 2023 to 6.4 per cent in 2024 according to the numbers published today.
Housing starts likely to fall short
Despite strong economic headwinds, the anticipated positive effects of the new provincial and federal housing measures appear to be reflected in the housing starts forecasts as they improved compared to the 2023 Budget numbers. However, with a projected peak of 94,400 in 2026, housing starts will still fall short of what is needed to meet the government’s 1.5 million homes over 10 years (which would translate to 150,000 per year).
A snapshot of what’s new
Ontario Infrastructure Bank – The Ontario Government is launching its own Ontario Infrastructure Bank, a new arm-length provincial agency designed to leverage investments by public sector pensions plans and other trusted Canadian institutional investors to help build the large-scale infrastructure projects such as long-term care homes and transportation projects.
Housing-Enabling Water Systems Fund – $200M over three years to help municipalities repair or expand water related infrastructure. The fund will be tied to housing starts and compliment the $1.2 billion Building Faster Fund that was announced this summer at the AMO Conference.
Gas Tax Reduction Extension – extending the gasoline and fuel tax rate cuts until June 30, 2024, saving households an average of $260 a year. This initiative aims to ease financial pressures caused by inflation, maintaining reduced rates of 9 cents per litre for both gasoline and fuel taxes.
HST Removal on Purpose-Built Rentals – removing the provincial portion of the Harmonized Sales Tax (HST) on new purpose-built rental housing, encouraging the construction of more rental homes across the province such as apartment complexes, student residences, and senior homes.
Coordinated Vaping Product Taxation Agreement – In the fall of last year, the Trudeau government implemented a federal vaping tax and has invited all provinces and territories to participate in that tax. Ontario is accepting that invitation to levy an additional excise duty on vaping products intended for sale in Ontario at the same rate as the existing federal duty.
The road ahead
With budget balance now projected for 2025-2026, the government must stick to its revised fiscal plan if it wants to deliver a balanced budget before the next election. This could mean increased scrutiny on any new spending measures moving forward as the government expects Ontario’s economic growth to slow over the coming years, creating new fiscal and political challenges for the Ford government.
With upcoming by-elections in Kitchener-Centre (November 30) and Lambton-Kent-Middlesex (yet to be called), a new Liberal leader to be elected in December, and affordability issues being top of mind for the public, the Ford government will increasingly need to demonstrate progress on its “Plan to Build Ontario” to maintain support rather than introducing new spending measures in the face of increased political pressure.
Expect government decisions to be motivated by data-driven results over the coming months and years, like housing starts, job creation, and the number of long-term care beds. As the government prepares for Budget 2024, preparations for Election 2026 will soon follow.