Ontario’s economy is showing signs of growth and improvement as interest rates finally fall and tax revenues shoot up, according to the government’s latest update, but growing unemployment, stalling housing starts and lower public spending on vices suggest people aren’t feeling the benefits.
In its annual fall economic statement, the Ford government announced that higher tax revenues and lower borrowing costs had left it in a better-than-expected position, which, the government said, allows it to promise a $200 rebate cheque to every man, woman and child in the province.
“Today we are in a position to do more, build more and put more money back in the pockets of Ontario taxpayers,” Finance Minister Peter Bethlenfalvy said on Wednesday.
“Ontario’s finances are in better shape today than they have been in decades.”
The government tabled a $6.6-billion deficit in 2024 and plans a $1.5-billion deficit in 2025; it is projecting to balance the budget in 2026 with a $ 900 million surplus. The government’s current plan for a $1.5-billion deficit in 2025, however, includes $1.5 billion in reserve funds.
While government finances are in better shape, other indicators in the fall economic statement suggest the benefits are not being felt by most.
Unemployment in Ontario has grown steadily since a post-pandemic recovery to sit at 6.9 per cent in September and revenues from government enterprises — which include gambling and alcohol — are also down.
As a result of “challenging” economic conditions, housing starts are set to fall below previous expectations.
Ontario NDP Leader Marit Stiles said the government had missed a chance to improve affordability.
“Today’s fiscal update was an opportunity for this government to make the right choices to ease the cost of living. Instead, all Ford has to offer are stale ideas and empty promises,” Stiles said in a statement on Wednesday.
“It’s time for a government and a Premier that gets the basics right and lives up to the promise of our province.”
Government hands out cash
The government said its revenues have grown faster than expected, partly because of changes to the capital gains tax introduced by the federal government that Ontario Premier Doug Ford sharply criticized earlier this year.
“I’m not in favour, I just don’t like hurting people and taxing people,” Ford said of increases to parts of the capital gains tax in April. “Folks, you can’t tax your way to prosperity — it never works, never has worked in our country, never works anywhere in the world.”
The province said in its fall economic statement that the extra money from those capital gains tax changes have allowed it to send rebate cheques to everyone in Ontario early next year.
Personal tax income, which includes capital gains, increased by $2.8 billion compared with the 2024 budget — with the cost of the rebate cheque program set at $3 billion. The government said it expects the capital gains changes to net it an extra $3.3 billion over three years.
The plan to send $200 cheques in early 2025 could coincide with a long-rumoured early election in Ontario, leading opposition critics to call the policy a “gimmick” and a “bribe,” a charge the government has denied.
The policy was announced a day before the fall economic statement, with the government poised to deliver one-time $200 cheques to every taxpaying Ontario resident in early 2025, regardless of socio-economic status.
The province said about 12.5 million people who filed taxes, along with 2.5 million children, would benefit. The fall economic statement offered more detailed information on who would be eligible for the “personal income tax credit.”
In order to qualify, an individual must:
- be 18 years or older at the end of 2023
- be a resident in Ontario on Dec. 31, 2023
- have filed their 2023 income tax and benefit return by Dec. 31, 2024
- not be bankrupt or incarcerated in 2024
The government said children under the age of 18 would also receive a one-time cheque for $200 if the family received the Canada Child Benefit in 2024.
The mini-budget also clarified that if a divorced couple shares custody of the child, “payments would be split based on the most recent CCB available.”
The province said that families with children who did not receive the Canada Child Benefit in 2024 would have an “opportunity “ to receive the $200 cheque “through an alternative process” that has yet to be outlined.
Officials with the Ministry of Finance said they have not yet calculated the cost of mailing cheques to millions of people across the province.
The government also announced its regular extension of the cut to the gas tax, keeping 5.7 cents of tax per litre off the cost of gas.
People feeling the pinch
The fall economic statement reveals that, while the government may be bringing in more money and the economy is showing strong signs of growth, the effects are not being felt by many in the province.
Unemployment has been trending up since 2023 and now sits at 6.9 per cent — just below the historical average of 7.4 per cent but well above the 1989 low of 4.7 per cent. Job losses and low wages in the manufacturing sector appear to be a particular concern for the government.
People are also spending less on leisure activities and vices like gambling or drinking, which make up government revenues, something the province believes shows a pull-back in people’s shopping and spending habits.
Overall, the government is projecting spending on its business enterprises — including the LCBO and iGaming — to decrease by $92 million. Spending on both alcohol and gambling is expected to drop, according to the financial document.
“This reflects several factors, including net income from the Ontario Lottery and Gaming Corporation, which is projected to be lower, primarily driven by economic impacts on consumer discretionary spending,” the fall economic statement said.
LCBO revenues were also hit by a weeks-long strike in July that the government calculates cost the agency $102 million, with fewer people drinking as well, and the cost of moving alcohol into corner and grocery stores.
The government is projecting short-term impacts on LCBO revenues as it ramps up the number of private retailers that can sell alcohol but, through a move to become the exclusive alcohol wholesaler, it is expecting long-term growth.
The Crown corporation is preparing for $2.16 billion in net income this year — down $286 million on its original expectation; it will see $2.32 billion in revenue next year — a drop of $254 million; and is expecting to net $2.65 billion the year after — up by $96 million on previous projections.
Stuttering housing starts are another indicator that the economic benefits are now being felt throughout the province.
In its latest numbers, the government is now bracing for housing starts to fall below expectation every single year until 2027, as home building grinds to a halt.
The province originally projected nearly 88,000 housing starts in 2024 but the latest update shows the government is now projecting 81,000 starts – falling well below the government’s own target of 125,000 in 2024.
“While progress is being made, homebuilders across the province continue to face a challenging economic environment, including elevated interest rates that impact the pace of new home construction,” the document said.
Ontario Green Party Leader Mike Schreiner said the government had walked away from its commitment to housing.
“The Ford government has abandoned us,” Schreiner said in a statement.
“All the things that we should be able to expect from provincial governments – to keep our neighbours housed, to make sure homes get built, that doctors are available, mental health is accessible – the Premier has walked away from.”
Cheaper borrowing and higher spending
The government numbers revealed on Wednesday that the economy is growing, spending is marginally up and the cost of debt has fallen.
Overall, the fall economic update outlines government spending plans of $218 billion, making it the most expensive financial document in the province’s history. Revenue is up by $6.9 billion compared with the budget tabled in the spring, while expenses increased by less at an additional $3.8 billion.
Tax revenue makes up a total of 71.3 per cent of the province’s revenues, with $157.7 billion brought into the provincial coffers every year from taxes alone.
The cost of debt is also down compared with previous projections but remains the fourth-highest spending line in the government’s plan.
This year, Ontario expects to pay $12.7 billion on interest and debt — $1.2 billion less than it had previously projected. The fall economic statement said lower rates are expected going forward.
The Canadian Taxpayers Federation released polling it commissioned ahead of the fall economic statement.
“The poll shows that Ontarians want the Ford government to start taking Ontario’s debt seriously,” CTF Ontario director Jay Goldberg said.
“Ontario has more debt than any non-national government in the world and folks don’t want to pass a massive debt burden onto their children and grandchildren.”
Ontario Liberal finance critic Stephanie Bowman accused the province of having misplaced its priorities.
“And while Doug Ford spends millions more on TV ads to pat his government on the back, more and more people are finding themselves out of work under his watch,” she said in a statement.
“Rent is up by 83 per cent, foodbank use is at an all-time high, we owe more money per capita than ever before, and the Conservatives still have not made good on their promise to implement a middle-income tax cut.”
Few details on major infrastructure projects
The financial document includes few details of the cost of the government’s key infrastructure projects, including its $28-billion highway expansion plan and tens of billions on subway and transit projects.
The signature Highway 413 looks set to begin early works construction — and not full highway building — in early 2025, with the government currently in the process of handing out contracts for that work. The province has refused to disclose the cost of building the project until contracts are signed with its proposed builders.
Ministry of Finance officials said they expect the current $28-billion highway program number will have to be revised in the future as contracts are handed out for projects like Highway 413 and the Bradford Bypass.
A recently announced plan to study and build a tunnel below Highway 401 from Brampton to Scarborough is also referenced in the document. The cost or timeline of the planned study, however, is not disclosed and the potential tens of billions of dollars the tunnel would cost are not yet baked into the financial plan.
On the transit front, the government has long refused to share the details of when a series of delayed LRT projects will open or the costs of adding to one of them. The Eglinton Crosstown LRT has been without an opening date for years, while both the Finch West and Hurontartio LRTs are now without dates.
The three lines have struggled with delays and financial squabbles between Metrolinx, the Crown agency in charge of transit, and the consortiums building them. Money is being withheld from the Eglinton Crosstown and Finch West LRTs, while the Hurontario LRT has been in danger of having its credit rating downgraded.
Ahead of the 2024 budget, the Ford government promised to expand the Hurontario LRT with a loop in downtown Mississauga and an extension into downtown Brampton. The cost of that expansion has not been revealed and was not included in the fall economic statement.