Jimmy Jean, Vice-President, Chief Economist and Strategist
Randall Bartlett, Senior Director of Canadian Economics
Ontario: Budget 2022
Substantially Improved Revenue Outlook Left Ample Room for New Measures
Summary of the publication
Ontario’s economic outlook has improved considerably since it was last published, including upward revisions to forecasts for real GDP growth, inflation, and the labour market. The only aspect of the outlook that may give room for pause is the interest rate projection, which is lower than what we forecast, but this is expected to be only a modest blemish on an otherwise clean and clear starting point for fiscal planning.
As the economy goes, so go revenues. And Ontario’s 2022 Budget is not exception, with better-than-expected economic activity having boosted the starting point for revenues. This freed up room for cuts to taxes and fees, which the Government of Ontario took advantage of, scrapping fees for license renews and expanding the Low-income Individuals and Families Tax (LIFT) Credit.
Not to be forgotten, the Government of Ontario also announced substantial new spending in this year’s budget. This included measures to shore up the economy and labour force, invest in highways and other key infrastructure, keep costs down for Ontarians, and keep the economy open by investing in health care staff and infrastructure.
As a result of these new measures, the Government of Ontario managed to use up all of the fiscal room freed up by the improved economic outlook. Indeed, the outlook for the deficit track is almost identical to that projected in Fall 2021. This is expected to lead to a return to budget surpluses in the 2027–2028 fiscal year, two years early than was forecasted in Budget 2021.
As a result of the better-than-expected economic outlook and a similar deficit track to that published late in 2021, net debt as a share of GDP is expected to remain broadly in line with its estimated 2021–2022 fiscal year level. Indeed, the net debt-to-GDP ratio is expected to only converge to its pre-COVID level by the end of the forecast in the 2027–2028 fiscal year.
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