TORONTO — Ontario has sharply lowered its projected deficit for next year, setting the stage for the government to easily be able to present a balanced budget ahead of a possible spring election.
Earlier this year, the government had forecasted a $4.6-billion deficit for 2025-26, but in its fall economic update presented Wednesday, that is now set at $1.5 billion.
The fiscal document shows revenues and expenses for that year are actually balanced, and the entirety of the projected $1.5-billion deficit is a $1.5-billion reserve.
“Ontario’s finances are in better shape today than they have been in decades,” Finance Minister Peter Bethlenfalvy said as he tabled the economic update.
The province maintains its projection of a surplus by 2026-27, he said.
The province attributes the more positive outlook since the spring budget to population growth, more jobs, reduced inflation, lower interest rates and a boost from changes to capital gains taxes from the federal government.
The capital gains tax changes proposed by the federal government have yet to become law, but Ontario has it baked into its projections to a tune of $3.3 billion.
It’s all good news for Ontarians, Bethlenfalvy said.
“This lower deficit came thanks to a number of different factors, including higher revenues, lower borrowing, and of course – lower interest on debt,” he said. “In fact, our interest on debt relative to revenues is currently at its lowest level since the 1980s.”
Premier Doug Ford and Bethlenfalvy have already announced two main affordability items from the fiscal update that serves as a mini budget – a continuation of a cut to the gas tax, and a $3-billion plan to send $200 cheques to every Ontario taxpayer.
Opposition critics have suggested the cheques that are set to be mailed early next year are timed to arrive ahead of a possible spring election.
Ford has repeatedly refused to rule out an early election ahead of the next fixed date of June 2026, although he has said an election will not come this year. Opposition parties are preparing for the possibility of an election this spring.
Ford and Bethlenfalvy have said the province can afford to mail out $3 billion in cheques because of higher-than-expected revenues due to the impact of inflation on provincial sales tax money coming into government coffers.
On the revenue side, the government is expecting an eventual increase in the dividend the Liquor Control Board of Ontario pays to the province, as a result of its expanded wholesale role in the alcohol marketplace that now includes convenience stores.
