High interest rates are expected to take a toll on Ontario’s economy this year, the province said in its 2024 budget, which includes projections of weak economic growth and a ballooning deficit.
Finance Minister Peter Bethlenfalvy tabled the government’s $214-billion budget at Queen’s Park Tuesday, saying it is investing in housing, roads and public services during a time of uncertainty without raising taxes.
“These investments and more are a signal to Ontarians of our commitment to keep building Ontario while retaining a prudent, targeted and a responsible approach to public finances,” Bethlenfalvy said at a news conference.
“We’re not backing down from investing in what matters most and we are not going to increase costs on our people.”
CBC News is carrying Bethlenfalvy’s speech live. You can watch it in the player above.
The 200-page document forecasts Ontario’s deficit will more than triple from $3 billion last year to $9.8 billion in 2024-2025 — the highest non-COVID budget deficit since former premier Kathleen Wynne’s 2014 spending plan.
Last year’s budget predicted Ontario would be back in the black with a modest surplus of $200 million by 2024-2025. Now, the province doesn’t expect to return to balance until 2026-2027, when a $500 million surplus is projected.
High interest rates, inflation and a slowing economy hit Canadian wallets hard in 2023. CBC’s Peter Armstrong breaks down the financial outlook for 2024 and why there’s still a lot of uncertainty ahead.
The increase to the deficit was largely caused by slowing economic growth projections leading to lower tax revenues, an official with the Ministry of Finance said at a technical briefing for the media, but also due to an expected drop in revenue caused by the federal cap on international study permits.
Also driving spending upwards are more than $6 billion in payments to public sector workers last year and this year as a result of the provincial government’s wage-restraint legislation being found unconstitutional and another extension to the gas tax cut, the budget says.
The outlook for economic growth has “deteriorated significantly” over the last year, the government says, with gross domestic product (GDP) expected to slow to 0.3 per cent in 2024, down from the estimate of 1.2 per cent in last year’s budget.
While GDP is expected to recover to 1.9 per cent in 2025 and 2.2 per cent over the next two years, those numbers are still below previous forecasts.
Inflation is expected to slow from 3.8 per cent in 2023 to 2.6 per cent in 2024, before returning to the Bank of Canada’s target rate of two per cent in 2025, according to projections from the finance ministry.
“We’re not immune from global forces in the economic environment, so our revenues are down and the costs for many things are up, including for governments,” Bethlenfalvy told reporters.
“You can either put on the brakes or you can keep going forward, supporting the infrastructure spend, supporting the economy, supporting workers, and that’s the way we’ve chosen.”
With the budget now tabled, it will be debated by MPPs and is guaranteed to pass given that the Progressive Conservatives have a majority of seats in the Legislature.
NDP Leader Marit Stiles said the budget won’t help Ontarians with the cost of living, people without a family doctor struggling to access health care or those seeking affordable housing.
“What we got today just goes to show how deeply out of touch and out of ideas Doug Ford’s Conservatives are,” Stiles said.
“It’s half-measures after half-measures and, you know, really at the end of the day, we’re spending more and getting less at the end of the day from this government.”
Key budget takeaways
New money in the budget includes an additional $2 billion over three years for home and community care, a $200-million community sport and recreation infrastructure fund and more money for autism therapies.
In total, the province is forecasting $205.7 billion in revenue in the coming fiscal year, and $214.5 billion in spending, up from $207.3 billion spent last year.
Base spending on health care, the largest slice of the budget pie, will increase from $74.6 billion last year to $75.6 billion, a below-inflation increase of only 1.3 per cent amid an ongoing family doctor shortage and a growing population.
Key health spending initiatives include $564 million over three years to connect approximately 600,000 people to primary health care teams and a $155 million construction subsidy to fast-track the construction of long-term care homes.
More than two million people in Ontario don’t have a family doctor and that number is forecasted to double by 2026. As CBC’s Mike Crawley reports, there’s growing pressure on the provincial government to make family medicine more sustainable by paying doctors more — including for administrative work.
Amid a shortage of family doctors, the province will establish a medical school primarily focused on family medicine at York University in Toronto. Around $9 million has been set aside to support planning for the school, the ministry official said.
The government is planning a big increase in spending to improve high-speed internet access across Ontario, with $1.3 billion allocated this year, up from $300 million in each of the previous few years.
Capital plan spending has also jumped, with $190.2 billion set aside for major infrastructure projects like building highways, hospitals and schools over the next decade.
Affordability measures
To help Ontarians cover increased costs, the province will extend until the end of the year a tax cut that reduces the gas tax by 5.7 cents per litre and the diesel fuel tax by 5.3 cents per litre. The cut, which was scheduled to expire on June 30, has saved households an annual average of $320 since it was introduced, the province estimates.
More Ontarians will be eligible for subsidies that reduce their electricity bills, a move that will push the cost of that program above $7 billion.
The province will also expand access to the Ontario Guaranteed Annual Income System (GAINS) program, which is expected to help around 100,000 more seniors annually, and index those monthly payments to inflation.
The budget also pledges to “modernize” the auto insurance system with reforms that will provide drivers with the option to opt out of certain coverage benefits to lower their premiums.
New funds for housing
To support the province’s housing plans, the government is investing more than more than $1.8 billion in two funds that will help municipalities build “housing-enabling” infrastructure, including roads, bridges as well as drinking water, wastewater and stormwater infrastructure.
The province will also allow all single- and upper-tier municipalities to impose a tax on vacant homes. Currently, only Toronto, Ottawa and Hamilton have that authority. A new policy framework will also encourage municipalities to set a higher rate for foreign-owned vacant homes.
Municipalities will be allowed to lower their property tax rates on new purpose-built rental housing to encourage construction of more of those units.
The moves are meant to speed up the construction of homes towards the goal of building 1.5 million new homes by 2031.
But figures in the budget show the province is falling behind.
There were 89,300 housing starts in Ontario in 2023, with 87,900 projected for 2024, 92,000 for 2025 and 94,400 for 2026. All are well below the pace of at least 150,000 per year needed to achieve the province’s goal.
Source Agencies
