Today, the Ontario government tabled its 2026 Fall Economic Statement (FES), an update that keeps the government's protect-Ontario framing front and centre as U.S. tariffs continue to weigh on the provincial economy. Rather than a reset, the statement is a holding pattern: targeted relief for tariff-exposed sectors and homebuyers, a significant new business tax measure delivered alongside the Federal Government, and a greater emphasis on spending discipline.
On the fiscal side, the province is projecting a deficit equal to 1.3% of GDP this year and has maintained a path to balance in 2029-30. Revenue for 2026-27 is now projected at $232.6 billion, $2.0 billion above Budget 2026, against total expense of $247.3 billion. Real GDP growth is forecast at a modest 0.5% in 2026 before improving to 1.5% in 2027, and interest on debt continues to consume roughly 7 cents of every revenue dollar, near its lowest level in 40 years.
Key highlights from the 2026 Fall Economic Statement include:
- HST Relief for New Homes: The government is continuing temporary relief on the full 13% HST for buyers of new homes valued up to $1 million, worth up to $130,000 per eligible buyer, along with relief on the 8% provincial portion of the HST for first-time buyers.
- Accelerated Capital Write-Offs: An estimated $8 billion in corporate income tax relief over five years by allowing businesses to accelerate write-offs of certain capital investments, in parallel with proposed federal measures.
- R&D Tax Support: More than $50 million in additional tax support over the next three years to lower research and development costs for approximately 700 businesses.
- Ontario Electricity Rebate Cap: Beginning May 1, 2027, the OER will be capped at 1,200 kWh of monthly consumption for residential customers. The average household uses roughly 700 kWh, and small businesses and farms are excluded from the change.
- Film and Television: Eligibility for the Ontario Computer Animation and Special Effects Tax Credit will be transitioned solely to film and television producers to support the competitiveness of the sector.
- Forestry: More than $90 million to strengthen competitiveness and innovation in the forest sector, alongside more than $86 million for forest biomass projects that expand long-term wood utilization.
- Red Tape and Permitting: Continued review of more than 350 economic development-related permits through the government's permit review initiative.
- Program Review: A coordinated, enterprise-wide review of priority programs and services to identify efficiencies and reduce error, waste, abuse and fraud.
- Health: Ministry of Health spending reaches $100.7 billion in 2026-27, with $64 billion over 10 years committed to health infrastructure and $6.4 billion to build 58,000 new and upgraded long-term care beds. The statement also proposes allowing the sale of over-the-counter hearing aids for people with mild to moderate hearing loss.
- Capital Plan: The province's capital plan now totals $210 billion over 10 years, including $37 billion this year, $63 billion for transit and $31 billion for highway expansion.
- Education and Post-Secondary: $30 billion over 10 years to build schools and child care spaces, including $22 billion in capital grants, and $5.5 billion for the post-secondary sector, including $2.2 billion in capital grants.
- Digital Credentials: A new option for Ontarians to securely access and present government identification digitally.
- llegal Cannabis Enforcement: New measures to strengthen enforcement against illegal cannabis activity and protect the legal marketplace.
Upstream's Analysis
This is a statement built to buy time. With growth forecast at just 0.5% this year, the government has chosen to hold its fiscal line rather than introduce major new spending, leaning instead on tax measures that cost little upfront and on the contrast it continues to draw with Ottawa: a smaller deficit as a share of GDP, a lower interest burden, and a stated path to balance that the federal government does not have. Expect that comparison to feature heavily in the government's messaging over the coming weeks.
That said, the path to balance has moved. A year ago the province was projecting a return to surplus in 2027-28; it now points to 2029-30. Combined with an enterprise-wide program review targeting "error, waste, abuse and fraud," the signal to transfer-payment recipients is clear: new money will be harder to come by, and existing funding will face more scrutiny. Organizations that depend on provincial programs should be prepared to demonstrate outcomes and value for money well ahead of Budget 2027.
The most politically sensitive item is the new cap on the Ontario Electricity Rebate. The government has been careful to set the threshold well above average household use and to exempt farms and small businesses, but any change to a visible affordability program invites criticism, particularly in northern and rural communities with higher electric heating loads. Paired with opposition claims that the statement offers "nothing new" on affordability, this is where we expect the debate at Queen's Park to focus on over the remainder of the legislative session.
For industry, the more meaningful story is competitiveness. The $8 billion accelerated write-off measure, aligned with Ottawa, the new R&D support, and continued permitting reform all point to a government trying to keep investment flowing in tariff-exposed and strategic sectors, with advanced manufacturing, critical minerals, artificial intelligence and defence named as priorities. Housing remains a pressure point: the extended HST relief is a direct response to soft housing starts, and builders and developers should watch closely for how long the government is prepared to sustain it.
“Ontario continues to face significant economic uncertainty driven by U.S. tariffs on Canada, but our government has a plan to protect workers, businesses and communities while building a stronger economy for the future,” said Minister Bethlenfalvy.
Upstream works with clients across healthcare, energy, real estate, technology and industry associations to understand what fiscal updates like this mean for their priorities. With Budget 2027 consultations on the horizon, now is the time to position your organization. If you would like support preparing a pre-budget submission or engaging with government, contact us for a consultation.
