Insights

2017 Ontario Economic Outlook

Posted by
John Capobianco
Insights

2017 Ontario Economic Outlook

Écrit par
John Capobianco

Earlier, Ontario  Finance Minister Charles Sousa presented the Ontario government’s 2017  Ontario Economic Outlook, also known as the Fall Economic Statement (FES).  With the June 7, 2018 election looming, the FES, known to many as a ‘mini  budget’ for its combination of broader, more visionary strokes coupled with a  handful of detailed policy announcements, serves as a key opportunity for the  Ontario Liberals to try to build momentum with voters on major focus areas,  while trying to mitigate potential headaches with certain vocal stakeholders.

A government’s core message  can often be found in the title it chooses for the Fall Economic Statement  and the budget, and this one was no different. “A Strong and Fair Ontario” is a line Ontarians should get used  to: they’re going to be hearing it often from any government official in a  public setting between now and June. While various polls show a continued  lead for Patrick Brown’s Progressive Conservatives, the Ontario Liberals tend  to build momentum in the months and weeks leading up to campaigns, and the  government’s shift back towards a more activist, progressive agenda (rent  control, minimum wage, pharmacare for everyone under 25, etc.) have generally  been well received by the electorate.

So, what did the  Ontario Liberals see as areas most in need of a pre-election shot-in-the-arm?  

Relief for small  businesses

The (not unexpected) announcement receiving the most headlines initially  is a textbook example of a government trying to mitigate the headaches (both  political and economic) resulting from one policy by making a corresponding  investment. Ontario will cut its corporate tax rate on the first $500,000 of  profits to 3.5 per cent effective Jan. 1, down from the current level of  4.5 per cent – Jan. 1 being the date when, in no way coincidentally, the  minimum wage will rise to $14 an hour from $11.60 (before again increasing to  $15/hour in 2019). It also includes a broader package of $500 million in new  incentives over the next three years for companies with fewer than 100  employees, including $124 million to hire and retain workers between the ages  of 15 and 29.

Maintaining a Balanced  Fiscal Outlook

Importantly, (particularly in an election year), Ontario is continuing to project a balanced budget in  2017–18 and ongoing balance in 2018–19 and 2019–20, unchanged from the 2017  Budget forecast. Government revenues are anticipated to be $150.1 billion  this fiscal year, slightly more than its expenses of $149.6 billion. Ontario  is expecting a surplus of $500 million for the year that ends March 30. 

Recognizing  Indigenous Institutes

The government  announced it plans to introduce legislation to recognize a new pathway for  Indigenous students to earn a diploma, certificate or degree. The proposed  legislation recognizes that Indigenous Institutes play a unique role in  Ontario’s postsecondary education system by providing accessible education  and training to Indigenous students in culturally responsive learning  environments. This commitment is in addition to the province’s $56 million  investment in Indigenous learners, announced in the 2017 Budget.

Updated Apprenticeship  Training Tax Credit

The government is proposing to transform the existing Apprenticeship Training Tax Credit (ATTC)  into a new Graduated Apprenticeship Grant for Employers (GAGE). The GAGE is  designed to encourage employers to ensure apprentices complete their training  programs by providing providing the following employer grants:

  • $2,500 upon the  apprentice’s completion of level one and again at level two;
  • $3,500 upon the  apprentice’s completion of level three and again at level four; and
  • $4,700 upon the  apprentice’s attainment of certification (either through a certificate of  apprenticeship or certificate of qualification if applicable).

The GAGE would be available to all 125 trades that are currently eligible for the existing  ATTC, plus an additional five Red Seal service sector trades.

Potential Headwinds

Despite the rosy  projections overall, there was still some sober text. The FES noted that  “high levels of household debt have left Ontario households more sensitive to  rising interest rates,” and that, “there is a risk that faster-than-expected  interest rate increases may lead to a more significant slowing in consumer  spending and housing activity.” The FES also noted that although global  equity prices remain near record highs, geopolitical risks “raise the  likelihood of a significant market correction should risks materialize, which  would dampen growth and confidence globally.”

Next up: 2018 Budget  Consultations

To prepare the 2018  Ontario Budget, the Minister of Finance and the Parliamentary Assistant to  the Minister of Finance will again meet — both in person and virtually — with  communities across the province, beginning in December 2017.

For the 2018 Budget  Talks process that invites the public to offer ideas for the budget, the total funding has been increased to up to $5 million. This year’s program will also feature live events where people throughout the province can discuss the ideas and help determine the shortlist for public voting.

Earlier, Ontario  Finance Minister Charles Sousa presented the Ontario government’s 2017  Ontario Economic Outlook, also known as the Fall Economic Statement (FES).  With the June 7, 2018 election looming, the FES, known to many as a ‘mini  budget’ for its combination of broader, more visionary strokes coupled with a  handful of detailed policy announcements, serves as a key opportunity for the  Ontario Liberals to try to build momentum with voters on major focus areas,  while trying to mitigate potential headaches with certain vocal stakeholders.

A government’s core message  can often be found in the title it chooses for the Fall Economic Statement  and the budget, and this one was no different. “A Strong and Fair Ontario” is a line Ontarians should get used  to: they’re going to be hearing it often from any government official in a  public setting between now and June. While various polls show a continued  lead for Patrick Brown’s Progressive Conservatives, the Ontario Liberals tend  to build momentum in the months and weeks leading up to campaigns, and the  government’s shift back towards a more activist, progressive agenda (rent  control, minimum wage, pharmacare for everyone under 25, etc.) have generally  been well received by the electorate.

So, what did the  Ontario Liberals see as areas most in need of a pre-election shot-in-the-arm?  

Relief for small  businesses

The (not unexpected) announcement receiving the most headlines initially  is a textbook example of a government trying to mitigate the headaches (both  political and economic) resulting from one policy by making a corresponding  investment. Ontario will cut its corporate tax rate on the first $500,000 of  profits to 3.5 per cent effective Jan. 1, down from the current level of  4.5 per cent – Jan. 1 being the date when, in no way coincidentally, the  minimum wage will rise to $14 an hour from $11.60 (before again increasing to  $15/hour in 2019). It also includes a broader package of $500 million in new  incentives over the next three years for companies with fewer than 100  employees, including $124 million to hire and retain workers between the ages  of 15 and 29.

Maintaining a Balanced  Fiscal Outlook

Importantly, (particularly in an election year), Ontario is continuing to project a balanced budget in  2017–18 and ongoing balance in 2018–19 and 2019–20, unchanged from the 2017  Budget forecast. Government revenues are anticipated to be $150.1 billion  this fiscal year, slightly more than its expenses of $149.6 billion. Ontario  is expecting a surplus of $500 million for the year that ends March 30. 

Recognizing  Indigenous Institutes

The government  announced it plans to introduce legislation to recognize a new pathway for  Indigenous students to earn a diploma, certificate or degree. The proposed  legislation recognizes that Indigenous Institutes play a unique role in  Ontario’s postsecondary education system by providing accessible education  and training to Indigenous students in culturally responsive learning  environments. This commitment is in addition to the province’s $56 million  investment in Indigenous learners, announced in the 2017 Budget.

Updated Apprenticeship  Training Tax Credit

The government is proposing to transform the existing Apprenticeship Training Tax Credit (ATTC)  into a new Graduated Apprenticeship Grant for Employers (GAGE). The GAGE is  designed to encourage employers to ensure apprentices complete their training  programs by providing providing the following employer grants:

  • $2,500 upon the  apprentice’s completion of level one and again at level two;
  • $3,500 upon the  apprentice’s completion of level three and again at level four; and
  • $4,700 upon the  apprentice’s attainment of certification (either through a certificate of  apprenticeship or certificate of qualification if applicable).

The GAGE would be available to all 125 trades that are currently eligible for the existing  ATTC, plus an additional five Red Seal service sector trades.

Potential Headwinds

Despite the rosy  projections overall, there was still some sober text. The FES noted that  “high levels of household debt have left Ontario households more sensitive to  rising interest rates,” and that, “there is a risk that faster-than-expected  interest rate increases may lead to a more significant slowing in consumer  spending and housing activity.” The FES also noted that although global  equity prices remain near record highs, geopolitical risks “raise the  likelihood of a significant market correction should risks materialize, which  would dampen growth and confidence globally.”

Next up: 2018 Budget  Consultations

To prepare the 2018  Ontario Budget, the Minister of Finance and the Parliamentary Assistant to  the Minister of Finance will again meet — both in person and virtually — with  communities across the province, beginning in December 2017.

For the 2018 Budget  Talks process that invites the public to offer ideas for the budget, the total funding has been increased to up to $5 million. This year’s program will also feature live events where people throughout the province can discuss the ideas and help determine the shortlist for public voting.

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