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 carryingBethlenfalvy’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.
WATCH | What’s ahead for Canada’s economy in 2024:
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Canada’s economy in 2024: 4 things to watch
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 (new window).
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 (new window) 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.
Key budget takeaways
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.
WATCH | Can Ontario fix the province’s family doctor shortage?:
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Can Ontario fix the province’s family doctor shortage?
15 days agoDuration3:03More 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.
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.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
