Ontario Premier Doug Ford keeps on describing the province’s economy in glowing terms, but plenty of economists believe a far less rosy picture will be painted when Ford’s finance minister tables his budget on Tuesday.
“The world is talking about Ontario right now,” Ford said when asked about the state of the economy during a news conference in Richmond Hill last week.
“It’s absolutely staggering what’s happening here in Ontario,” he said. “We’re an economic powerhouse.”
Ford pointed to the multi-billion-dollar plans by Stellantis and Volkswagen for electric vehicle battery plants in Ontario, and predicted the province will see a record amount of corporate investment this year.
Contrast that with what bank economists are saying ahead of the budget:
“Ontario’s economy is set to take a more pronounced step back,” says RBC’s latest provincial economic outlook. It says major construction projects for electric vehicle battery plants “won’t be enough to counteract the broader cooldown from high interest rates and slower global growth.”
“Business bankruptcies in Ontario have surged in recent months amid economic weakness,” says the latest provincial economic forecast from TD Economics. “Private sector employment has been falling since mid-2023.”
“Uncertainty abounds,” says the budget preview from Marc Desormeaux, principal economist for Desjardins Financial. “The full effects of interest rate hikes haven’t yet been felt and there are questions about how public sector wage increases could impact the bottom line.”
The latest provincial forecast from TD Economics says business bankruptcies in Ontario have surged in recent months amid ‘economic weakness.’ (Evan Mitsui/CBC)
These more measured assessments of Ontario’s economic and fiscal situation are why many observers predict a relatively cautious budget from Finance Minister Peter Bethlenfalvy.
“Economies are weaker and you know, the costs of things are up for people, and we recognize that,” said Bethlenfalvy, who will table his fourth budget since Ford appointed him finance minister in 2021.
While Ontario’s economy looks like it’s growing according to official figures, rapid population growth is actually propping up GDP, says Brian Lewis, the province’s former chief economist.
Lewis, now a senior fellow and lecturer at the Munk School of Global Affairs and Public Policy, has calculated that Ontario’s real GDP per capita has declined since mid-2022, and is currently lower than it was before the COVID-19 pandemic hit.
“The state of the economy has not been great over the last year and a half,” Lewis said in an interview. “We’ve increased population way more than we’re increasing the value of economic output.”
The Ford government now has to cope with the added costs of providing services to that growing population, as well as the cost impacts of inflation and prolonged higher interest rates.
Ontario’s top court ruled the government’s Bill 124 wage cap violated workers’ bargaining rights. The government has now spent $6 billion in retroactive pay to compensate health-care and other public sector employees. (Francis Ferland/CBC)
“What I’m hoping to see is that they at least keep the new spending under control, at least, don’t dig the hole any deeper in this budget,” Lewis said. “Fund the services that really need to be funded, but don’t do anything more than you really need to do.”
Mitch Heimpel, formerly a senior political staffer in the Ford government, now director of policy at public affairs firm Enterprise Canada, says the PCs’ key political aim with the budget should be to show progress on campaign promises.
‘Relentless mission to save people money’
“You got elected on getting stuff built. Demonstrate you’re getting stuff built,” said Heimpel in an interview.
Coming midway through the government’s four-year term, analysts don’t expect the budget to contain big political goodies designed to win over voters, but they expect Ford to pitch it as helping people cope with the cost of living.
“We’re on a relentless mission to save people money,” Ford said Monday. “We’re always going to make sure we put money into people’s pockets rather than the government’s pockets.”
Anti-poverty groups point out that the government has not put any more money into the pockets of Ontario Works recipients to help them cope with rising costs. The social assistance program provides a single parent with one child $642 a month for shelter and $360 for basic needs. Neither amount has changed since Ford took office in 2018.
Auto insurance reforms will be a key plank in Tuesday’s Ontario budget. Industry sources told CBC News the Ford government’s proposals will give drivers more ways to reduce their premiums. (@OPP_HSD/Twitter)
CBC News has learned that one central feature of the budget will be auto insurance changes.
Multiple industry sources with knowledge of the government’s plans say the budget will include reforms that give Ontario drivers a wider variety of options to lower their car insurance premiums.
Bethlenfalvy declined to offer details about the insurance changes during a news conference Monday. “We’re always working to make things more convenient for auto drivers,” he said.
Also on Monday, Ford announced another measure targeted at drivers that will be in the budget: a further extension of the ongoing 5.7 cents per litre cut to the provincial gas tax, until the end of the year.
For a driver who fills a 50-litre tank once a week, the gas tax cut means saving about $150 a year. For the provincial treasury, it means forgoing revenue of about $1.2 billion a year.
That’s in addition to the roughly $1 billion of revenue the government has forgone yearly since 2022 by scrapping registration fees for passenger vehicles.
More than 2 million people in Ontario don’t have a family doctor, according to estimates from the Ontario Medical Association. (The Canadian Press)
Meanwhile on the costs side of the ledger, the government continues to spend more than $6 billion a year to subsidize household hydro bills, and recently forked out $6 billion in retroactive pay for health care and other public sector workers after Ontario’s top court ruled its Bill 124 cap on wage increases violates the Charter.
“This overturning of Bill 124 does present a significant shock to the fiscal situation in the province,” said Karl Baldauf, senior vice president of the government relations firm McMillan Vantage and a former chief of staff to Bethlenfalvy.
But does that fiscal shock of higher public sector wages mean compensating in Tuesday’s budget with spending cuts?
Baldauf doesn’t see it that way. He says Ford and his team are talking a lot less often about finding efficiencies now they did during their first term in office.
Political blowback from spending cuts
“There were too many challenges in the first mandate of this government where they tried to create efficiencies, scale back costs, and the political blowback was far greater than what the premier wanted to deal with,” Baldauf said in an interview.
The government is also facing steady political pressure to improve the healthcare system – in a province where more than 2 million people don’t have a family doctor – and to get the pace of home building ramped up.
Ontario’s housing starts in 2022 and 2023 fell well short of the pace needed to hit the government’s target of 1.5 million new homes by 2031. (Michael Wilson/CBC)
Ford has pledged that 1.5 million new homes will be built in Ontario by 2031, but two years into the 10-year timeframe, housing starts remain well off pace.
The budget will include a new $1.8 billion fund to help municipalities build new infrastructure, Ford announced last week. Cities have said a lack of water and sewage capacity has hampered their ability to get housing built.
Bethlenfalvy signalled last fall that his previous target of eliminating the deficit in this year’s budget will be pushed back to 2025-26.
“I’ve seen no conclusive polling evidence that voters care about balanced budget timelines, certainly not in the last 15 years,” said Heimpel.
The government’s latest forecast for the 2023-24 deficit is $4.5 billion.
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.
