The Conference Board of Canada says Ontario ‘s balanced budget came without the heavy spending restraint that was projected in previous budgets. The main contributor was higher than expected Corporate taxes. Low interest rates mean it’s costing less to service the province’s debt. Together, these changes have allowed the government to increase spending to the tune of $5.3 billion this fiscal year.
You can tell and election is on the way. Government spending will increase 4.8 percent this year but the forecast shows no spending increases will be possible in the next 2 or 3 years if the balanced budgets are to continue. This is because economic growth is forecast to slow over the medium term—which will constrain revenue growth. Moreover, interest rates are expected to start to rise again in 2018, and this will result in higher interest payments. Also there is some balance sheet magic. Federal Infrastructure money is being treated as income. But the assets they build will be amortized over a number of years.
The provincial net debt reached $302 billion in 2016–17. That is a 93 per cent increase since 2007–08, the last year that the province was in a surplus position.
Ontario’s economy grew at a solid average pace of 2.6 per cent over the last three years, making it the growth leader among Canadian provinces, but the Board says such growth is not expected to continue. Consumer spending has been the main driver of the economy in recent years, thanks to strong labour markets, rapidly appreciating home prices, and record-low interest rates. Meanwhile, interest rates are expected to begin to rise again in 2018. These trends will make it difficult for consumers to keep up their current pace of household spending growth.
With a windfall in revenues, the province was able to announce some new spending measures, especially for health care and education.
Health care received a boost in the form of a free prescription drug program that covers every Ontarian under the age of 25. The program takes effect next January. Additionally, the province is attempting to shorten wait times by increasing the number of MRIs, as well as by providing more cataract and hip/knee replacement surgeries. The government also increased funding for hospitals after years of budget freezes.
Education will receive a boost over the next three years. The government increased funding for childcare. There was also additional funding for the Ontario Student Assistance Program (OSAP) that will increase the number of OSAP recipients and lift the minimum annual salary (from $25,000 to $35,000) that people need to earn before they must begin repaying their OSAP debt. Other measures include funding for career training and expanded skills training for adult learners.