A Special To the Point for the Week of March 22, 2026
A Special To the Point for the Week of March 22, 2026
To The Point is coming at you a day early this week to bring you our analysis of the Ontario government’s release of 2026 Ontario Budget: A Plan to Protect Ontario. We went through it with a fine-tooth comb to breakdown what it all means for you.
ONTARIO
A Plan to Protect Ontario
In our tee-up of the provincial budget last week, we predicted the government would approach the budget in a cautious, risk-averse way, designed to reinforce its perceived competence on economic and infrastructure files. Tweaks here and there, but no major new initiatives or spending priorities were expected.
The province ended 2024–25 with a $1.1 billion deficit, lean by recent standards, but the numbers deteriorated quickly from there. The current year (2025–26) closed with a $12.3 billion deficit, an improvement on the $14.6 billion originally projected, but still a clear sign of how quickly things shifted. And this year’s budget locks in a $13.8 billion deficit for 2026–27, nearly double what the government forecast just last fall, when it had pencilled in $7.8 billion.
Importantly, this is still within the government’s fiscal guardrails.
The total program spending envelope in today’s budget is a record $227 billion, with a total spend of $244.2B (programs and interest). For the first time in Ontario history, net debt is projected to cross the half-trillion-dollar mark, hitting $485 billion this fiscal year and $514 billion next. To put that in perspective, Ontario's annual debt service bill now sits at $17.2 billion.
On the economic side, U.S. tariffs did real damage, but not quite the catastrophe the province once feared. Ontario narrowly avoided a recession in 2025, real GDP came in higher than expected, though growth for 2025 was still only 0.9 per cent.
Manufacturing took the brunt of it: 20,600 jobs shed over two years. Exports dropped 5.8 per cent in a single quarter, and manufacturing's share of Ontario employment fell below 10 per cent for the first time since 1976.
That’s not a blip.
The unemployment rate is now forecast at 7.4 per cent for 2026–27, easing to 6.9 per cent the year after, better than the worst-case projections, but still elevated.
Nominal GDP growth, the broadest measure of the tax base, is projected to slow from 4.2 per cent in 2025 to 3.2 per cent in 2026, which puts pressure on revenues just as spending demands are climbing. The FAO had projected a path to balance was unlikely even before this budget. The new numbers push the government's own target back another year to 2028–29, with a projected surplus of $600 million at that point.
In economic terms, the Ford government is borrowing more even as the economy grows at a slower pace. Unemployment is rising and the province is paying more in interest every year than at any point in its history. While these are important considerations, the government’s budget reflects a cautious approach the government believes is necessary to mitigate against outside political and economic shocks. Here’s what the government commits to spend in 2026.
Tax Action Plan, tax and business competitiveness
As part of a multi-year Tax Action Plan, Ontario is updating its tax framework to improve competitiveness and lower costs
Small business corporate income tax drops from 3.2% to 2.2% on July 1, 2026, representing roughly $1.1B in relief over three years, affecting more than 375,000 firms, with up to $5,000 in annual relief per qualifying business
More than $3.5B over four years in provincial tax relief through accelerated write-offs and enhanced capital cost allowance across machinery, buildings, clean tech and R&D, as well as productivity-enhancing and rental housing assets
Budget 2026 implements the Ontario Made Manufacturing Investment Tax Credit and other measures aimed at positioning Ontario as the most competitive jurisdiction in the G7 for new investment
Housing, affordability and municipalities
Temporary enhancement to HST rebates removes the full 8% provincial portion of the HST on new homes up to $1M, up to $80,000 in relief, with that maximum maintained for homes valued up to $1.5M and tapered above that
Budget 2026 carries on with the $2.3B over four years of funding committed to housing-enabling municipal infrastructure (MHIP and related funds), although most of this funding has already been allocated
Capital plan and infrastructure
A 10-year capital plan of over $210B, with about $37B in 2026–27 alone, focused on highways, transit, hospitals, schools and other community infrastructure (e.g. water and wastewater infrastructure)
Trade, tariffs, and industrial strategy
Protect Ontario Account Investment Fund: up to $4B in provincial funding, structured to crowd in pension and private capital, targeting sectors such as AI, defence, advanced manufacturing, life sciences and critical minerals
Continued emphasis on internal trade and labour mobility, including removal of Ontario’s CFTA party-specific exceptions and “as of right” cross-provincial credential recognition, to offset external shocks and deepen domestic market integration
No major new broad-based tariff relief programs beyond previously announced liquidity, tax-deferral measures, and other targeted supports
Health, education and workforce
Approximately $1.1B in additional annual funding to stabilize and strengthen hospital operating budgets
A four year, $3.4B Primary Care Action Plan to expand access to team-based primary care, supporting roughly 300 primary care teams province-wide
Around $30B over 10 years for schools and childcare, including more than $22B in capital grants for new builds and expansions
A $66M annual Classroom Supplies Fund delivering $750 per elementary homeroom teacher per year
Postsecondary, skilled trades and apprenticeship investments continue, framed as productivity, growth and workforce strategy measures rather than purely social policy
Fiscal stance
Deficits remain large: about $13.8B in 2026–27, $6.1B in 2027–28, with a small surplus targeted in 2028–29
Balanced budget date pushed back by a year
Net debt crosses the $500B mark
Debt-to-GDP and interest-to-revenue remain below the 40% and 7.5% thresholds the government treats as red lines
The most critical item in the budget is the enhanced HST relief on new homes, designed to be both a housing policy and an economic policy. Of course, the critical intent of the measure is to lower upfront costs for new-build buyers. But it’s also intended to spur 8,000 additional construction starts in 2026, sustain approximately 14,000 jobs, and add $2.7B to the province’s GDP. Ottawa has agreed to cost-share the rebate with the province, covering the 5% federal portion of the HST.
The temporary removal of HST is not intended to be a standalone policy. The government is expected to reinforce this initiative with additional housing legislation that includes updates on public utilities for wastewater and community water systems, standardization of official plans and further consultation on the development application process.
While the one-year window may seem too restrictive, it could create a sense of urgency among prospective buyers, sparking momentum by pushing them off the sidelines and into the housing market. Critics and industry agree, however, the program should continue beyond the current one-year mark.
The biggest drawback is that it does not address the housing stock developers have built up over the last couple of slow construction years. Advocates have pushed for this HST program to match the existing first-time homebuyers program, and the government should have considered backdating it to March 20, 2025. Details on how the program addresses the backlog of vacant product remain vague, and industry will be looking for clarity.
Ontario’s 2026 budget attempts to stabilize the province against outside shocks and pressures, specifically the continued economic volatility resulting from President Trump’s tariffs and global shocks tied to the war in the Middle East. The province is still running a $13.8 billion deficit in 2026–27, but that’s considered relatively disciplined, according to the Royal Bank of Canada’s analysis. Ontario is borrowing heavily, no question, but it’s doing so within the lines it has set for itself. Net debt-to-GDP sits at 36.8 per cent, still below the government’s 40% red line, and interest costs are running at roughly 6.3% of revenues. That’s a near 40-year low. It helps that the average borrowing rate is 3.85 per cent, alongside tighter spreads than any other province.
The other silver lining is Ontario is now the only large province that can point to a credible path back to balance by 2028–29, even if that timeline has already slipped and still runs through a $6.1 billion deficit the year prior. This tracks with our budget prediction last week. It’s cautious, risk-averse and defensive. It’s enough to maintain confidence. Markets are rewarding that approach.
And that’s exactly the point.
But there’s a trade-off. Stability comes at a cost. Deficits stay larger for longer, and the harder decisions get pushed out. Spending restraint, productivity, growth, those questions are still sitting there. Just not being answered.
Christopher Mourtos, writing on behalf of ONpoint Strategy Group
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