Ontario Premier Doug Ford continues to paint a bright picture of the province’s economy, but many economists will paint a much less optimistic picture when Ford’s finance minister unveils his budget on Tuesday.
“The world is talking about Ontario right now,” Ford said when asked about the state of the economy at a press convention in Richmond Hill last week.
“What’s here in Ontario is certainly amazing,” he said. “We are an economic powerhouse. “
Ford pointed to Stellantis and Volkswagen’s multibillion-dollar plans for electric vehicle battery plants in Ontario and predicted the province will see a record amount of business investment this year.
Let’s compare this to what bank economists are like when it comes to budgeting:
“Ontario’s economy is poised for a steeper pullback,” says RBC’s latest provincial economic outlook report. It argues that the gigantic plans to build battery factories for electric vehicles “will be enough to counteract the overall slowdown due to high interest rates and slowing global growth. “
“Business bankruptcies in Ontario have risen in months amid economic weakness,” says TD Economics’ latest provincial economic forecast. “Private sector employment has been declining since mid-2023. “
“There’s a lot of uncertainty,” says Marc Desormeaux, senior economist at Desjardins Financial. “The full effects of interest rate hikes have yet to be felt, and there are doubts about their effect on public sector wages. Increases can affect monetary results. “
These more measured tests of Ontario’s economic and fiscal scenario are why many observers are predicting a relatively cautious budget by Finance Minister Peter Bethlenfalvy.
“Savings are going down and, you know, the prices of things are going up for people, and we are that,” said Bethlenfalvy, who will present his fourth budget since Ford appointed him finance minister in 2021.
While Ontario’s economy appears to be developing according to official figures, the immediate population expansion is supporting GDP, says Brian Lewis, the province’s former chief economist.
Lewis, now a senior fellow and professor at the Munk School of Global Affairs and Public Policy, calculated that Ontario’s real GDP in capita terms has declined since mid-2022 and is ultimately lower than it was before the COVID-19 pandemic.
“The state of the economy hasn’t been very smart over the last year and a half,” Lewis said in an interview. “We have a population greater than the price of economic production. “
The Ford government is now grappling with the new prices it will offer this developing population, as well as the monetary effects of inflation and prolonged interest rate increases.
“What I’m hoping is that they will at least keep the new spending in check, unless they don’t go any deeper into this budget,” Lewis said. “Funding services that literally want it, but don’t do anything. “more than you want. “
Mitch Heimpel, a former senior political official in the Ford administration and now director of policy at public affairs firm Enterprise Canada, says the Conservative Party’s main policy goal with the budget is to show progress on election promises.
“You were elected because of construction issues. Show that doing things builds,” Heimpel said in an interview.
Halfway through the administration’s four-year term, analysts don’t expect the budget to involve major policy concessions designed to win over voters, but they do expect Ford to portray it as helping others cope with the burden of life.
“We’re on a relentless project to save other people money,” Ford said Monday. “We’re going to make sure we put cash in other people’s wallets instead of the government’s. “
Anti-poverty groups point out that the government has not put more money in the wallets of Ontario Works recipients to cope with emerging costs. The welfare program provides a single parent with a child with $642 per month for housing and $360 for basic expenses. No amount has been replaced since Ford took over in 2018.
CBC News has learned that a central element of the budget will be adjustments to auto insurance.
Several industry resources familiar with the government’s plans say the budget will include reforms that will give Ontario drivers a wider variety of features in their auto insurance premiums.
Bethlenfalvy declined to elaborate on the insurance adjustments at a press conference on Monday. “We’re working to make things more convenient for motorists,” he said.
Also on Monday, Ford announced a measure for drivers that will be included in the budget: a further extension of the current 5. 7 cents per liter relief on the provincial fuel tax until the end of the year.
For a driver who fills up a 50-liter tank once a week, the fuel tax relief means a savings of around $150 per year. For the provincial treasury, this means giving up about $1. 2 billion a year in revenue.
This is in addition to the roughly $1 billion in profits the government has given up every year since 2022 by getting rid of passenger vehicle registration fees.
Meanwhile, when it comes to fees, the government continues to spend more than $6 billion a year subsidizing families’ electric bills, and recently distributed $6 billion in back wages to physical care staff and other public sector employees after the Ontario court ruled on its bill. increases violates the Charter.
“This repeal of House Bill 124 represents a significant surprise to the province’s fiscal situation,” said Karl Baldauf, senior vice president of government relations firm McMillan Vantage and a former Bethlenfalvy leader.
But does this fiscal surprise triggered by a rise in public sector wages mean that Tuesday’s budget will be offset by spending cuts?
Baldauf doesn’t see it that way. He says Ford and his team communicate far less about efficiencies now than they did in his first term.
“There were too many demanding situations in the first term of this government, where they were looking to create efficiencies and cut costs, and the political backlash was much greater than what the prime minister was looking to handle,” Baldauf said in an interview.
The government also faces constant political pressure over the health care formula (in a province where more than 2 million people do not have a family doctor) and for accelerating the pace of housing construction.
Ford has pledged to build 1. 5 million new homes in Ontario by 2031, but two years into the 10-year period, housing starts are still at a slow pace.
The budget will include a new $1. 8 billion fund for municipalities to build new infrastructure, Ford announced last week. Cities said a lack of water and sanitation capacity has hampered their ability to build housing.
Bethlenfalvy noted last fall that its previous goal of getting rid of the deficit in this year’s budget would be pushed back to 2025-2026.
“I haven’t noticed any conclusive evidence in the polls that the electorate cares about balanced budget schedules, not in the last 15 years,” Heimpel said.
The government’s forecast for the 2023-2024 deficit is $4. 5 billion.
Senior Journalist
Mike Crawley covers provincial affairs in Ontario for CBC News. He began his career as a journalist in British Columbia, reporting on 19 African countries as a freelance journalist, and then joined CBC in 2005. Mike was born and raised in Saint John, New Brunswick.
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