After the fiscal ructions created by the COVID pandemic, the Ontario budget tabled on Thursday by Ontario Finance Minister Peter Bethlenfalvy represents a return to business as usual. In common with Provinces across Canada, Ontario is seeing a rapid and substantial improvement in its fiscal position, driven by the expiry of COVID-related spending programs and by inflation-driven revenue gains.
Even a quick glance at the bottom line -- the deficit projections -- makes the remarkable extent of the fiscal turnaround crystal clear. A year ago, the Government was projecting a deficit for the 2022/23 fiscal year of C$ 19.9 billion. With the end of that fiscal year now just days away, the actual outcome is now expected to be a deficit of just C$ 2.2 billion. The improvement is expected to continue over the three-year planning horizon, with FY 2023/34 expected to show a deficit of C$ 1.3 billion (previous projection: C$ 12.3 billion), giving way to small surpluses in the two succeeding years, which had previously been forecast to show further deficits. If achieved, this outcome will of course set the Ford government up nicely for a giveaway budget ahead of the next Provincial election, expected in 2026.
The economic projections underlying the fiscal projections appear reasonable and are, in the usual way of things these days, based on private sector forecasts. Provincial real GDP is expected to grow marginally this year and to accelerate only modestly in the next two years, while inflation is projected to fall to 3.6 percent this year and decline to just above the Bank of Canada's target of 2 percent next year.
Although the budget trumpets the Government's plans to invest in key areas such as infrastructure and health care -- "the most ambitious capital plan in Ontario's history" -- spending growth over the planning period will be very limited. The dollar value of program spending for FY 2023/24 year will be almost unchanged from FY 2022/23, with the expiry of COVID programs making a direct comparison difficult. For the remaining two years of the forecast period, nominal spending growth will be barely 3 percent, which implies minimal growth in real terms.
There is one significant item absent from the spending plan that will bear careful watching over the coming weeks and months. The City of Toronto, by far the largest in Ontario and in all of Canada, has been appallingly mismanaged over the past eight years by now-disgraced former Mayor John Tory. City services are collapsing (sadly not an exaggeration) and despite regularly holding out the begging bowl, the city cannot pay its bills.
Before his ignominious departure, Tory had pleaded for more than C$ 500 million from the Province in order to balance the books. The budget did not even mention this. Questioned about the issue, Bethlenfalvy suggested Ontario was waiting to see what help the Federal government might offer when it tables its own budget next week. Perhaps so, but it is equally likely that Ford is waiting to see whether he likes the cut of the new Mayor's jib before deciding how much help to provide; since the mayoral election will not take place until June, the city may be left twisting in the wind for some time to come.
On, then, to that Federal budget. Will the Federal coffers show a similar revenue boost to that revealed by Bethlenfalvy yesterday? That seems very likely. Will Finance Minister Chrystia Freeland show as much spending restraint as Bethlenfalvy has? That seems much less certain. Tune in on March 28 to find out.
No comments:
Post a Comment