Ontario’s 2026 Budget: Turning priorities into policy

This afternoon, Finance Minister Hon. Peter Bethlenfalvy tabled Ontario’s 2026 A Plan to Protect Ontario. The $214.5 billion fiscal plan is framed as a response to economic uncertainty driven by tariffs, slowing growth, and declining revenues, while positioning Ontario as a more competitive, resilient, and self-reliant economy.

In our pre-budget outlook, we highlighted five key areas to watch: fiscal discipline, economic resilience, housing, infrastructure, and affordability. With the budget now tabled, those themes are reflected in the government’s approach, alongside a clearer shift toward a growth-oriented strategy that prioritizes economic stability and competitiveness over near-term deficit reduction.

Affordability remains the central priority

Affordability anchors the budget with cost-of-living pressures shaping key policy choices. The government has focused on targeted, visible measures aimed at delivering near-term relief while supporting broader economic objectives.

Housing is central to this approach. The removal of the full 13% HST on eligible new homes of up to $1 million, with partial relief up to $1.5 million, supported by an anticipated $2.2 billion federal partnership, is intended to stimulate construction and improve supply.

Other measures remain targeted and incremental, including continued transit cost relief through the extension of the One Fare program. This reflects an approach focused on specific, high-impact interventions rather than broad-based cost reductions.

This signals a continued reliance on targeted, time-limited tax measures as a primary policy lever, enabling near-term impact while preserving fiscal flexibility.

Housing policy takes on a larger economic role

Housing has become a central pillar of the government’s economic strategy, extending beyond affordability to driving growth.

There is also recognition that housing outcomes will take time. While tax relief can provide immediate support, improvements in affordability will depend on how quickly new supply comes online.

Measures to reduce development charges and enable faster project delivery are intended to accelerate supply. The government is relying on market response and private sector participation to translate these measures into increased housing supply.

Economic resilience moves to the forefront

External risks, including trade disruptions and global volatility are central to the government’s approach with a focus on competitiveness, domestic investment, and strategic sectors as part of a more self-reliant economic model.

Key measures include reducing the small business tax rate from 3.2 per cent to 2.2 per cent, introducing accelerated depreciation for capital investments and creating a $4 billion Protect Ontario Account Investment Fund to attract private and institutional capital.

Targeted support for sectors such as energy, critical minerals, artificial intelligence, and advanced manufacturing reinforces a focus on long-term economic transformation, alongside maintaining flexibility for case-by-case investment attraction.

Overall, the approach aims to lower costs, mobilize private capital, and strengthen domestic capacity in the face of external uncertainty.

Fiscal discipline remains a balancing act

The province maintains a path to balance while prioritizing flexibility. Ontario projects a $13.8 billion deficit in 2026–27, following $12.3 billion in 2025–26, with a return to surplus by 2028–29. The net debt-to-GDP ratio is expected to remain below 40 per cent.

The fiscal framework prioritizes continued spending and economic stability over short-term deficit reduction, signalling that maintaining growth and resilience is the immediate priority.

At the same time, the commitment to no new broad-based taxes and controlled spending growth implies ongoing pressure on public services. In sectors such as health care and post-secondary education, funding increases may not fully keep pace with underlying cost drivers.

Health care remains the largest and most sensitive area of spending. While targeted investments such as the $3.4 billion Primary Care Action Plan and expanded autism funding aim to improve access, structural pressures driven by population growth, aging, and workforce constraints are expected to persist.

The use of time-limited measures will be important. Temporary programs help manage fiscal exposure but raise questions about long-term sustainability, particularly if economic conditions weaken.

Infrastructure and competitiveness continue to underpin the plan

Infrastructure remains central to the province’s growth strategy. The government is advancing a more than $210 billion, 10-year capital plan, including $37 billion in 2026–27, spanning highways, transit, hospitals, and community infrastructure.

Additional investments, including $300 million for community recreation infrastructure, major health, and education capital commitments, are intended to support capacity and long-term growth.

Sustained infrastructure spending is positioned as a key driver of economic activity, job creation and productivity. Execution, delivery timelines, and cost management will be critical as these projects move forward.

What comes next

With the budget tabled, attention shifts to implementation and legislative debate.

Opposition parties are likely to focus on affordability, the fiscal trajectory, and pressures on public services, particularly housing, health system capacity, post-secondary funding, and municipal challenges. Ministries will begin rolling out program details, including timelines, eligibility, and coordination with federal and municipal partners.

The next phase will also depend on external conditions, with economic performance shaping revenues and the province’s path to balance. Ultimately, the plan’s success will hinge on execution, particularly whether measures translate into tangible gains in housing supply, infrastructure delivery, and private investment.

A shift from outlook to action

Compared to last year’s Fall Economic Statement, the 2026 Budget reflects a more immediate and targeted response to economic risk. The government is moving from identifying pressures to deploying time-limited, outcome-focused measures that support both growth and fiscal flexibility.

As the economic environment evolves, the province’s ability to translate growth into fiscal recovery will be critical to achieving its planned return to balance by 2028–29.

As the government moves to implementation, NATIONAL Toronto’s Public Affairs team is available to support organizations in assessing impacts and navigating the evolving policy and stakeholder landscape in the weeks and months ahead.