TORONTO – Ontario Finance Minister Charles Sousa announced Thursday the province’s budget deficit have reduced more than expected and that the Liberals take presctiption pace to return to a balanced budget by 2017-18, even as net debt is set to improve for the reason that timeframe.
Highlights of the 2016 Ontario budget
By Keith Leslie
Finance Minister Charles Sousa delivered the Ontario budget on Thursday. Here are a few of the highlights:
The budget deficit for fiscal year 2015-16 is anticipated in the future in at $5.7 billion, down from the last estimate of $7.5 billionThe deficit for 2016-17 is projected in the future in at $4.6 billion and be reduced to zero the next fiscal yearOntario’s net debt will hit $308 billion in 2016-17, the largest of any sub-national jurisdiction on the planet, costing $11.8 billion in charges, which will increase to $13.1 billion by 2018-19Income in the cap-and-trade plan to battle climate change is expected hitting $1.9 billion in 2017, up from last year’s projection of $1.3 billion
University and college tuition will be free for college students from families with incomes of $50,000 or less, and most half of students from families with incomes as much as $83,000 will get non-repayable grants that exceed the typical tuition – mostly students who survive their ownThere will be a $3 increase in the price of a carton of 200 cigarettes, effective at 12:01 a.m. Friday, and the tobacco tax could keep rising at the rate of inflation every year within the next 5 years.The minimum price for any bottle of wine rises to $7.95, there is a number of increases within the LCBO’s mark-up on wine, beginning with a two percentage point hike in June – about 10 cents a bottle – followed by another two percentage points in 2017 and 2018, having a one-point hike in 2019There will also be annual increases of about 10 cents in the tax on wine bought from private retail outlets, increasing from 16.1 cents to 20.1 cents over four yearsThe $30 fee for Drive Clean vehicle emissions tests is going to be eliminated in 2017-18, but not the tests themselves, which will cost the province $60 million a yearHospitals can get their first funding increase in 5 years, up $345 million, plus $12 billion over 10 years in capital grants for about three dozen major hospital projectsSingle seniors earning as much as $19,300 per year will be entitled to cheaper drugs from August, in contrast to the prior threshold of $16,018. Couples with an income of as much as $32,300 may also be eligible, where before only those earning $24,175 qualified. The expense is going to be offset by raising deductibles and co-payments for seniors above the new income thresholds. Annual deductibles will rise to $170 from $100 and co-payments will increase with a dollar to $7.11There will be $333 million over 5 years to revamp and improve autism servicesShingles vaccines for seniors, which cost $170, will be free.
The Canadian Press
Sousa said that the deficit is now down from the $7.5 billion projected after this past year to $5.7 billion, as stronger economic growth in Ontario boosted government revenues. The budget forecasts that Ontario’s economy grew 2.5 per cent in 2015, a significantly stronger level than the 1.2 per cent forecast for that national economy.
Ontario’s deficit will also be helped by $1.1 billion gained in the sale of Hydro One, as well as growing cash injections from the federal government, that will hit $24.6-billion this year and rise to $26.6-billion by 2018.
But net debt goes up as the federal government continues to borrow to fund projects, including a massive $160 billion infrastructure project within the next 12 years. Net debts are set to improve to $326.8 billion in 2018-19, from $296.1 billion in 2015-16, even as the Liberals are set to possess a balanced budget by then.
The projection that Ontario’s debt will continue to rise which debt-to-GDP will continue to hover near 40 percent within the medium-term won’t thrill debt rating agencies. Standard & Poor’s downgraded the province’s debt last year, while some for example Moody’s Investors Service have placed a negative outlook on provincial bonds.
Sousa dismissed the idea of further debt downgrades, however, saying a declining debt-to-GDP ratio would be welcomed.
“I believe credit agencies are going to look at this budget and understand that we’re achieving what we should said we’re likely to do,” he said throughout a news conference.
The government has stated it has a target of reducing net debt-to-GDP to the pre-recession degree of 27 percent, though it gets no where near to that level in its projected forecast, with net debt-to-GDP hitting 38.5 in 2018-2019. The ratio is anticipated to peak at 39.6 per cent in 2015-16, remain level in 2016-17 and just start to decline in 2017-18.
The government is projecting that total revenue in 2015-16 will be $2.2 billion greater than the 2015 budget had considered, because of “higher asset optimization” and more tax revenue because of a stronger Ontario economy.
“I think your budget is a big step in the best direction,” said Douglas Porter, chief economist at BMO Capital Markets inside a phone interview. “The deficit targets were a significant step from the $10 billion deficits of past years.”
Patrick Brown, leader of Ontario’s Progressive Conservatives, said he cast doubt around the Liberals having the ability to go back to a balanced budget by its target date and warned the budget was raising costs on Ontarians.
“The reality is taxes ‘re going up,” he explained.
Total government expenses within the upcoming fiscal year will be $0.2 billion greater than forecast within the 2015 budget. Program expenses is going to be $0.4 billion higher, but unchanged in the call produced in the 2015 Ontario Economic Outlook and Fiscal Review late this past year. The rise in expenses is usually because of the Green Investment Fund, which includes a $325 million down payment aimed at reducing greenhouse gas emissions
The government is projecting a budget deficit of $4.3 billion in 2016-17, and balanced budgets in 2017-18 and 2018-19. The 2016-17 deficit projection is an improvement of $0.5 billion when compared to forecast in the 2015 budget.
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The Liberal finances are obtaining a revenue boost from an Ontario economy that’s gaining steam. The province boasts one of the fastest growth rates in Canada, and Statistics Canada noted that 100,000 new jobs happen to be created there in the past 12 months.
A weak loonie and low oil costs are helping manufacturers ramp up as exports become competitive again.
“They’re getting the aid of the subtle underlying improvement in the Ontario economy,” Porter said. “They’re also being helped by steady downdraft in low borrowing costs and debt service charges, which still flow to the bottom line.”
“Spending restraint, unfortunately, hasn’t been just like advertised previously,” he added.
Real estate and construction continue to be two biggest contributors to gdp, though economists are increasingly concerned about the red-hot Toronto housing industry, that is being a disproportionately large part of the economy.
Sousa noted that Ontario’s stronger economy is key to balancing the budget.
“We’ve improved revenues from – the development in our economy and housing as well,” he said.
And while debt is going up, the federal government asserted it’s reduced its risk to rate volatility by issuing long-term debt and locking in rates. The typical rate of interest Ontario pays on its debt has declined from 10.9 percent (on a weighted-average basis) for an expected 3.6 percent as of March 31, 2015.
About $53 billion worth of bonds issued forever of fiscal 2010-11 have been with terms longer than 3 decades. The weighted-average term to maturity of long-term provincial debt issued has gone from 8.1 years in 2009-10, to 14 years in 2015-16.
Ontario is forecast to invest $11.2 billion servicing its debt in 2015-16, $210 million less than forecast within the 2015 budget as a result of lower rates. But as debt rises, so will rate of interest payments, which are set to develop to $11.756 billion in 2016-17 and to $12.453 billion in 2017-18.
