Ontario deficit grows $10B as province tables $232.5B budget aimed at protecting economy from tariffs
'Ontario and all of Canada are at a precipice, and we need to take serious steps to make sure we do not find ourselves anywhere near the bottom,' Finance Minister Peter Bethlenfalvy said Thursday as he presented Ontario's latest budget, the first since the Ford government won re-election in March.
The government says it is setting aside $5 billion for the Protecting Ontario Account – a fund promised during the campaign to provide support to businesses facing 'significant tariff-related business disruptions.'
The province will also bolster the Skills Development Fund by another $1 billion over the next three years. There's also $500 million for a new Critical Minerals Fund the government says will 'unleash the potential' of the mineral sector.
Finance Minister Peter Bethlenfalvy called the tariffs imposed by the United States 'a wake-up call for Canadians' in prepared remarks but said this is a time for growth rather than fear.
The government says it plans to spend about $200 billion over the next 10 years on infrastructure. That will include $33 billion in 2025-26.
Over the next decade., the plan includes $30 billion for highway construction and rehabilitation; $61 billion for public transit, such as the GO 2.0 expansion and subway projects; $56 billion for health care infrastructure; and around $30 billion to build more schools and child care spaces.
Many of the measures included in the budget were previously unveiled.
As announced earlier this week by Premier Doug Ford, the budget keeps an election promise to permanently lower the gas tax and to eliminate tolls on a provisionally owned portion of Hwy. 407 East, between Clarington and Pickering.
Last week Bethlenfalvy announced an expansion of the Ontario Made Manufacturing Investment Tax Credit – a tax credit meant to bolster Ontario's manufacturing sector. That will provide $1.3 billion over three years to help the sector.
A six-month deferral of some taxes for businesses, worth $9 billion, was announced in April and is also included in the budget.
Impact of tariffs still uncertain
The new spending means the government is now projecting a deficit of $14.6 billion in 2025-26 -- $10 billion more than last year's budget predicted and $13 billion more than the fall economic statement projected just a few months ago.
A deficit of $7.8 billion is expected in 2026-27 instead of the $500 million surplus that had been projected previously.
The government still believes that it can balance the books by 2027-28, predicting a small surplus of $200 million in that fiscal year.
Fiscal outlook
Ontario's 2024-25 deficit is now projected to be $6 billion -- $3.8 billion lower than the 2024 budget predicted. The government says that's due to higher-than-expected tax revenue.
While there have been fears that tariffs could send Ontario's economy into a recession, the budget actually predicts mild growth.
Ontario's real GDP grew by 1.5 per cent in 2024, but is expected to rise by just 0.8 per cent in 2025 and one per cent in 2026 because of tariffs. GDP is forecast to grow by 1.9 per cent in 2027-28.
However, ministry staff stress that the economic environment remains highly unpredictable. They say that the impact of tariff actions has not yet been fully observed in recent economic data, but forward-looking economic indicators are down significantly, close to levels not seen since the pandemic.
No major increases for health, education spending
The government plans to spend $91.1 billion on health care. That's up from $89.3 billion from last year, but the increase is still less than inflation.
While health care spending growth looks somewhat flat, the government says that's because of higher costs in previous years when the province experienced an influx of newcomers and there were added pressures on OHIP.
Spending in 2025-26 will include $235 million to create and expand 305 additional primary care teams as part of a plan announced in January to connect more Ontarians with primary care.
The latest budget also includes a fertility tax credit that would cover 25 per cent of fertility treatments up to $20,000 per year, for a maximum of $5,000.
Education spending is up at $1 billion, compared to $38. 4 billion last year, but it appears that it will remain relatively flat for the next two years. The government says that's because of higher capital spending in previous years.
Wher your money goes
Opposition slams budget as 'band-aid'
Opposition Leader Marit Stiles slammed the government's latest budget at Queen's Park Thursday, calling it a missed opportunity to strengthen the province.
'This is a band-aid budget, a missed opportunity to strengthen Ontario,' Stiles said.
She said she was 'shocked' there was plenty of discussion around alcohol prices, but little attention to child care or post-secondary spending.
When it comes to housing, MPP Jessica Bell said the government 'quite frankly have thrown in the towel on housing in this budget.'
When it comes to housing, the government is lowering its projections, expecting just 71,800 housing starts for 2025. That's about 20,000 fewer housing starts than the 92,300 predicted in the 2024 budget. The forecast has also been lowered by about 20,000 homes for 2026 and about 13,000 homes for 2027.
However the government notes that those are macro-economic projections which may differ from the ministry's real-time numbers, which could potentially be higher.
Ontario has set a goal of building at least 1.5 million homes by 2031 and needs to build more than 100,000 homes each year to stay on track. Bethlenfalvy said Thursday they are still committed to that goal.
The budget includes no new details on Premier Doug Ford's proposal to build a vehicle and transit tunnel under Highway 401 to relieve gridlock, simply saying that feasibility work will be carried out.
Other highlights
$75.5M extra beyond annual funding to homelessness prevention programs, such as boosting shelter capacity and ready-to-build affordable housing projects
$57M on helicopters for police in Niagara and Windsor
$15.5M more over three years to increase production of medical isotopes to 24 hours a day
The province will create an 'Ontario Grown' badge this summer for cannabis products with at least 75 per cent Ontario content
Cannabis shop windows will no longer have to be blacked out to 'increase comfort, security, and safety' of customers and employees, though products cannot be visible from the outside
The province will be making various changes to alcohol pricing and taxes, with revenue from the LCBO and the beer, wine and spirits tax expected to drop significantly in 2025-26.
-With files from CTV Toronto's Siobhan Morris
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Globe and Mail
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CBC
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Sour news for pickle lovers: Bick's pickles no longer stocked at some Canadian retailers
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CBC
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Carney says Canada's trade with U.S. is mostly tariff-free. But that's not the whole story
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"If the consequence is that trade overall falls, as we are seeing now in the data, that's going to be a cost that we disproportionately bear relative to other countries." Prior to Trump's tariffs, Canadian exporters could trade with the U.S. under Most Favoured Nation (MFN) status. That allowed them to trade with very low tariffs — or none at all — without registering for preferential treatment under CUSMA. All World Trade Organization (WTO) members, such as Canada, have MFN status when trading with each other. How do Canadian goods get preferential treatment? Products are certified CUSMA-compliant if they meet the agreement's rules of origin. Their eligibility is determined on a case-by-case basis since they must meet product-specific requirements. A certain amount of the product needs to be made in Canada with Canadian inputs to qualify for an exemption. 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He didn't use the right colour ink.'" Since March, more Canadian exporters reported that they would absorb tariff costs or raise prices than apply for relief through Canada's remission program, according to a report published in July by the Canadian Federation of Independent Business (CFIB). In exceptional circumstances, the federal program grants companies relief from the payment of tariffs applied as of March 4 on products from the U.S. or issues refunds for tariffs already paid. The federation, which advocates for the interests of small businesses, surveyed its members about the actions they have taken to mitigate risks during the trade war. Why not fire back with more counter-tariffs? Carney was asked on Tuesday whether he would retaliate against the U.S. with a new tariff rate, days after failing to reach a deal by the Aug. 1 deadline. "We've always said we will apply tariffs where they had the maximum impact on the United States and minimum impact in Canada," he said. Unlike most countries subjected to Trump's tariffs, Canada has a comprehensive trade agreement with the United States in CUSMA. U.S. tariffs kick in for dozens of countries, sparking protests, outrage 2 days ago More than 60 countries were hit with U.S. President Donald Trump's latest wave of tariffs on Thursday. Despite global backlash and signs his own economy is taking a hit, Trump continues to promise even steeper tariffs ahead. The country is also one of few to have retaliated against the U.S. in response to Trump's economic disruption, a step Canada took before the U.S. targeted virtually all of its global trade. Wednesday, Trump threatened to hit goods imported from India with a total of 50 per cent tariffs, citing New Delhi's continued purchases of Russian oil. And Trump imposed tariffs on dozens of countries' exports last week through an executive order. Tariffs now vary between 10 per cent for the U.K. and 41 per cent on war-torn Syria. That same order brought the total tariff rate of Brazil — Latin America's largest economy — to a staggering 50 per cent.
