Ontario to release fall economic statement as interest rates, inflation remain elevated

The Ontario government is poised to unveil its fall economic statement as the province grapples with elevated interest rates and persistent inflation, casting a shadow of uncertainty over its financial landscape. Finance Minister Peter Bethlenfalvy is scheduled to present the annual fiscal outlook in the legislature at 1 p.m. ET.

The economic statement is anticipated to outline the province's approach in navigating the ongoing economic challenges, with an emphasis on responsible financial management and building a robust foundation for future generations, according to Minister Bethlenfalvy. He expressed confidence in Ontario's economy and its resilience in the face of adversity, despite the prevailing economic headwinds.

The release of this economic update coincides with broader concerns about the Canadian economy, which has displayed signs of stagnation, with the GDP remaining flat for at least two consecutive quarters. The Bank of Canada has raised its overnight rate ten times, bringing it to a current level of five percent, while inflation, although moderating, continues to pose challenges.

In addition to these economic pressures, the government led by Premier Doug Ford has faced a protracted controversy surrounding Greenbelt land swaps and urban boundary expansions, a contentious issue that has now been reversed.

Brian Lewis, a senior fellow at the Munk School of Global Affairs and Public Policy at the University of Toronto and former chief economist for Ontario, suggests that the economic statement could serve as an opportunity for the government to redirect public attention away from the Greenbelt scandal.

The Finance Minister has already disclosed several measures expected to be part of the accompanying legislation, including the extension of the 5.7 cents per liter gas tax reduction until June 2024 and the removal of the provincial portion of the HST on purpose-built rental units.

One of the key elements to watch for will be the status of the government's deficit reduction program. In the spring budget, the Ministry of Finance projected a $1.3 billion deficit for this year, a figure that remained unchanged in an August fiscal update. The province's fiscal outlook suggests the potential for modest surpluses by 2024-2025, increasing to approximately $4.4 billion the following year.

Simultaneously, Ontario's Big City Mayors, representing municipalities with populations exceeding 100,000, have sought guidance from the government regarding potential losses resulting from Bill 23, the province's housing legislation.

Both the Official Opposition NDP and Ontario Liberals have issued statements calling on the government to reinstate rent controls, a measure that was removed in 2018, in an effort to address the rising cost of living crisis and assist renters.

The province's fall economic statement also arrives against the backdrop of municipalities throughout Ontario grappling with growing challenges related to homelessness, mental health, addiction, and the financial repercussions of climate change. The Association of Municipalities of Ontario has recently conveyed concerns to Premier Ford about the "provincial-municipal fiscal framework," describing it as "broken." Municipalities have been shouldering significant financial burdens, with a $3.8 billion deficit in 2022 due to cost-sharing arrangements in areas of provincial responsibility like social housing, long-term care, land ambulance, social services, and child care, according to the association's president, Colin Best. These pressures underscore the complex financial landscape that the Ontario government must navigate as it unveils its fall economic statement.