Don’t Let Ontario’s New Budget Challenges Curb Your Fiscal Enthusiasm: Six Questions in the Lead‑Up to the Province’s 2023 Fall Economic Statement

As Ontario prepares to release its 2023 Fall Economic Statement, we discuss six questions that should be on your radar. We also estimate four possible paths for the province’s finances.

Ontario can still achieve the slim fiscal year 2024–25 (FY2025) surplus predicted in Budget 2023. But uncertain economic conditions and much weaker than anticipated revenues last year suggest a longer period of red ink is also possible. Notably, for personal income tax receipts to hit their Budget 2023 target for this year, they would need to rise at almost twice the highest growth rate seen in any prior fiscal year.

With population growth now expected to come in much stronger over the next several years, Ontario policymakers face a conundrum: the surge will boost economic activity and government revenues but also increase spending pressures.

Nevertheless, Ontario looks likely to maintain its existing fiscal advantages. These include a declining debt load that stays low relative to recent history except under the worst‑case economic scenario, a large and liquid borrowing program, and prudent issuance practices that limit exposure to higher interest rates.

Going forward, fiscal policy will need to strike a fine balance. The province must exercise restraint to avoid exacerbating inflation and keep its finances sustainable. But it also needs to relentlessly work towards meeting housing supply and infrastructure investment targets.