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2016 Ontario Fall Economic Statement Update


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Edelman Canada shares a perspective on the 2016 Ontario Fall Economic Statement Update.

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2016 Ontario Fall Economic Statement Update

  1. 1. Edelman Toronto | 150 Bloor St. West, Suite 300 | Toronto, ON M5S 2X9 | 416 849 1913 This afternoon Minister of Finance Charles Sousa presented the Fall Economic Statement. The statement reiterated the government’s priorities, such as balancing the budget by 2017-18, investing in infrastructure, education, and healthcare, as well as new initiatives regarding housing affordability and consumer protection. As the Ontario Liberals move towards the 2018 general election, the Fall Economic Statement attempts to shift the political narrative away from the by-election loss and the ongoing Sudbury controversy, towards the results achieved since Budget 2016 and their plan for economic growth. To do so, the government has decided to return to their traditional political roots by focusing on issues that are important to families, such as infrastructure, health care, education and tackling the rising costs of homeownership. These issues are items that the Ontario Liberals will look to campaign on as they seek their fifth consecutive mandate, campaign themes that have worked for them electorally in the past. The most notable new announcement assists first-time homebuyers with skyrocketing housing prices in Ontario. The average home price in the GTA has increased 21 per cent to $762,975 in the past year. As of January 1, 2017, the Ontario government will double the Land Transfer Tax (LTT) rebate for first-time homebuyers from $2,000 to $4,000. The increase means first-time buyers will not pay land transfer tax on the first $386,000 of the cost of their homes. To pay for these breaks, the government will hike land transfer rates on houses that cost over $2 million from 2 per cent to 2.5 per cent. According to government officials, this tax increase on luxury homes will fund the rebate by bringing in approximately $105 million annually, these changes only apply to properties with one or two single-family residences. With regards to other types of properties, such as commercial, industrial, multi-residential and agricultural properties, the only increase will be on those over $400,000, which will jump from 1.5 per cent to 2 per cent. In addition, the Wynne government will limit eligibility for the LTT refund to Canadian citizens and permanent residents. First-time homebuyers who become Canadian citizens or permanent residents within 18 months of purchasing a home could apply for the refund. In an attempt to protect renters, the government is also freezing the property tax on apartment buildings while reviewing the impact high property taxes have on rental market affordability. 2016 ONTARIO FALL ECONOMIC STATEMENT UPDATE OUR PERSPECTIVE BUDGET FIRST-TIME HOMEBUYERS Bob Richardson Executive Vice-President & National Practice Lead 416.849.1913 | The Finance Minister reaffirmed that the 2016-17 deficit will be $4.3 billion, and recommitted to bringing in a balanced budget in 2017-18. Last week, the province’s fiscal watchdog warned that the government cannot reach balance without either restricting spending or finding more revenue. The Finance Minister admitted that “It’s not going to be easy, but … we will make the right choices to bring Ontario to balance” in 2017-18. Ontario is forecasting real gross domestic product growth of 2.2 per cent on average until 2019, with unemployment projected to steadily decline in that same time period. Consultations for the 2017-18 budget begin next week. ONTARIO’S PLAN TO ELIMINATE THE DEFICIT
  2. 2. Edelman Toronto | 150 Bloor St. West, Suite 300 | Toronto, ON M5S 2X9 | 416 849 1913 2016 ONTARIO FALL ECONOMIC STATEMENT UPDATE HIGHLIGHTS BUSINESS-FRIENDLY ENVIRONMENT ›› $32.4 million over four years to help more small and medium-sized enterprises grow into larger, export-oriented firms under Ontario’s scale-up voucher program that tailors support for high-impact companies. ›› $28.8 million over five years to the Small Business Innovation Challenge pilot program, which will help Ontario-based small and medium-sized enterprises. EDUCATION ›› On top of their commitment in the 2016 budget to invest $160 billion over 12 years to public infrastructure, the government announced today $65.5 million this school year to support the creation of about 3,400 additional child care spaces so that families receive affordable child care. CONSUMER PROTECTION ›› Establishing a new Financial Services Regulatory Authority (FSRA), an independent regulator that will “modernize regulation of financial services and pensions.” According to Minister Sousa, the FSRA will be more “consumer-focused and offer improved protection for customers, investors and pension-plan beneficiaries.” ›› Banning door-to-door marketing and protecting consumers from feeling pressured to sign contracts of certain household appliances at the door including furnaces, water heaters, air conditioners and water filters. ›› Introducing mandatory licensing and qualifications for home inspectors in order to regulate the industry. HEALTH CARE ›› An additional $140 million in funding this year for Ontario’s public hospitals to: reduce wait times, support better care, and improve services for patients across the province. ›› As a part of a new opioid strategy, the government is investing $17 million to create or enhance 17 chronic pain clinics across the province to improve timely patient care. CHALLENGE STAKEHOLDER REACTIONS BALANCING THE BUDGET A major challenge facing this government will be balancing the budget by 2017-18 while continuing to invest heavily in infrastructure, health care and education. The government’s ability to balance depends on achieving an average of 2.2 per cent real GDP growth until 2019—a target many believe will be difficult to reach. In addition to these potential roadblocks, achieving balance became even more difficult after an accounting change by the auditor general resulted in an increase of $2.2 billion to the deficit this fiscal year. Tim Hudak, OREA CEO Designate: “A tax break for first-time buyers will give a lot of young families the leg up they need to get into home ownership. Premier Wynne and Minister Sousa deserve credit for taking positive steps to address affordability.” Victor Fedeli, MPP, Nipissing: “This feels a whole lot like déjà vu… The government is clearly spending beyond its means. We already know there is a trust deficit with this government… now we know there is a fiscal one as well.” Ontario Chamber of Commerce: “The chamber supports the government’s expansion of the land transfer tax program as a means to enable first time home buyers access into the housing market. The ability to own and purchase a home plays an invaluable role in maintaining a strong economy for Ontario.” Andrea Horwath, Leader of the Ontario NDP: “We should be building a great future for every child in this province, but, instead, thousands of children in Toronto are being left behind. When will this government finally take bold action to actually eliminate child poverty in the city of Toronto and right across Ontario?”