Thursday’s Ontario budget will pose a test for Premier Doug Ford: how willing is he to spend the kind of money needed to protect people from COVID-19 and spur economic recovery from the ongoing pandemic?
In arguably the clearest sign of how vastly the pandemic has changed the political landscape in Ontario, a government led by Ford, elected on a crusade to cut spending, is about to table the biggest budget deficit in the province’s history.
“This is going to be a great budget,” Ford said Wednesday during his daily COVID-19 briefing.
This is just the second budget of Ford’s mandate. The first, delivered in April 2019 by then-minister of finance Vic Fedeli, spurred outrage for its wide swathe of spending cuts — including a proposal to slash funding to public health units that was eventually reversed.
It’s a safe bet that Finance Minister Rod Phillips will not propose cutting public health spending in the midst of a second wave of COVID-19 with an average of nearly 1,000 new cases a day. Nor will there be any new taxes or fees, according to both Ford and Phillips.
So what will be in the budget? Phillips dropped some hints on Wednesday.
Ontario Premier Doug Ford and Finance Minister Rod Phillips delivered the province’s 2020 fiscal update at Queen’s Park on March 25. The government postponed tabling its full budget until November because of the COVID-19 pandemic. (Frank Gunn/The Canadian Press)
The budget “will begin to remove the biggest barriers to growth for communities across the province,” said Phillips, who joined Ford for the news briefing.
“We need to be making sure we’re dealing with the structural challenges that will get in the way of [economic recovery] and quite frankly, were getting in the way of Ontario’s potential even before the pandemic.”
Phillips did not specify what “barriers to growth” are to be removed, but it’s clearly something to watch for.
“We cannot expect our economy just to bounce back or for the lost jobs to return on their own,” he said.
“We will make available every necessary resource to continue to protect people’s health and [the budget] will expand on the support our government has provided for those still facing financial hardship due to the pandemic.”
There are those who question whether the government has truly thrown every necessary resource at the pandemic, whether in supports to the private sector or the public sector.
“We’re hoping the government will step up and really open their wallet for small businesses,” said Julie Kwiecinski, director of provincial affairs for the Canadian Federation of Independent Business (CFIB).
Julie Kwiecinski is director of provincial affairs in Ontario for the Canadian Federation of Independent Business. (Julie Kwiecinski)
“Just letting businesses open is not going far enough,” said Kwiecinski in an interview with CBC News.
Only one quarter of Ontario small businesses are seeing normal sales revenues, according to a CFIB survey.
“How are they going to pay their bills?” said Kwiecinski. “We’ve seen the premier in news conferences saying he understands, that it breaks his heart. So we want to see him transfer that emotion into some tangible results and programs for small business.”
Among the CFIB’s hopes for the budget: some relief on employers’ provincial health tax contributions, funding to buy personal protective equipment, a top-up to the federal commercial rent subsidy, and making good on Ford’s campaign promise to cut hydro rates by 12 per cent.
A new poll shows plenty of support in Ontario for pandemic spending, and limited concern about red ink.
The provincial government’s most recent forecast for the Ontario economy is a 6.7 per cent drop in GDP in 2020-21. (David Donnelly/CBC)
The survey by Abacus Data found 82 per cent of respondents want the government to “do what needs to be done to protect people impacted by the pandemic and public services,” even if it means big deficits. Only 18 per cent of respondents want the government to aggressively limit the size of the deficit.
The Abacus Data survey was conducted through an online panel of 1,000 Ontario residents from Oct. 28 to 30. The margin of error for a comparable random sample of the same size is +/- 3.1 per cent, 19 times out of 20. The results were weighted according to census data to ensure that the sample matched the age, gender, educational attainment, and regional breakdown of Ontario’s population.
The polling results suggest people and businesses are counting on the government for support to get through the pandemic, said Abacus Data CEO David Coletto.
“When people are feeling vulnerable, when they don’t know how long this is going to go on for, now is not the time in their mind to be pulling back, to be cutting services, to be looking for any efficiencies or cuts,” Coletto said in an interview.
“This is the moment where this government really needs to put its money where its mouth is,” said Sheila Block, senior economist with the Canadian Centre for Policy Alternatives, a non-partisan research agency with links to organized labour.
“We need to see funds flowing quickly and funds flowing in a way that’s consistent with the plan to support essential public services,” said Block in an interview with CBC News.
“We really need the Ford government to take a larger role in the economy through this crisis. And we haven’t seen either of those things.”
Sheila Block is senior economist with the Canadian Centre for Policy Alternatives. (Lauren Pelley/CBC News)
Research by Ontario’s Financial Accountability Office found that provincial government spending accounts for just three per cent of the $110 billion in direct pandemic-related support to people, businesses and the public sector in Ontario. The federal government is the source of the other 97 per cent.
Block is calling for big investments in the public sector — such things as school renovations and increased staffing in long-term care — as a way of stimulating the recovery.
“What is going to be the engine of economic activity in Ontario over the next six months to a year?” Block asked.
“What we really are going to need is public-sector job creation and public-sector leadership to get us through this phase of the economic crisis that we’re in.”
Phillips has said the budget will lay out three scenarios for how the economy could play out over the next three years.
The government’s most recent financial report — published in August — projects the deficit for the 2020-21 fiscal year at $38.5 billion. That is based on a forecast that the economy would contract by 6.7 per cent this year, with government tax revenues taking a hit of some $10.8 billion.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
