What to expect at Queen's Park in 2024

Economic Outlook

Reasons for optimism

Economists suggest there is reason for cautious optimism in 2024. Inflation is widely expected to decrease throughout the year, within reach of the Bank of Canada’s target range of 2-3% (although December inflation numbers increased to 3.4% after holding steady at 3.1% in October and November).

The Bank of Canada held its benchmark interest rate at 5% in its last five decisions after raising the rate 10 times since early 2022. The BOC’s next rate decision is January 24th and given Tiff Macklem’s recent statement that the Canadian economy is no longer in “excess demand”, it’s expected the BOC will hold the rate once again. C.D. Howe’s council of monetary policy experts recommends the BOC get rates down to 4% by the end of the year, with some economists predicting 2025 will see even lower rates.

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Potential bumps in the road

Tempering the optimism is Canada’s stagnating economy, which hasn’t grown in two quarters despite being bolstered by record-high immigration last year. On a per-capita basis, Canadian GDP has declined for five consecutive quarters. ?The unwanted combination of high cost of living and slow economic growth is recipe for a recession. And with thousands of small business owners struggling to repay CEBA loans coming due this month, unemployment may rise while economic growth slows further (If Q1 sees negative economic growth, Canada will be in a technical recession).

Another threat on the horizon is the impact of the BOC’s campaign of interest rate hikes over the last 21 months, which still has not worked its way through the economy. ?According to the Canadian Mortgage and Housing Corporation, only about 300,000 homeowners have renewed their mortgages at these higher rates. Another 2.2 million Canadian households will do so over the next two years. ?

Even if the economy doesn’t experience a deep recession in 2024 it will be a challenging year for many, particularly younger Canadians and lower-income households who will most acutely feel the effects of high interest rates.

Backdrop of issues

In addition to economic uncertainty, an overarching challenge for the province and the country is the interconnectedness of three issues:

1. Low productivity – On the macro level, governments need to create an environment that allows for business investment, growth, and innovation. ?On the micro level they must find a way to close the shortage gap of skilled workers, which otherwise will only grow over the next decade resulting in continued productivity challenges. Some governments will try to mask low productivity by pointing to growth in overall GDP (but they’ll leave out the fact it’s fuelled by an increasing population). Drilling down to the GDP per capita will reveal Canada’s true productivity.
2. ?Record-high immigration numbers – While immigration targets fall under the jurisdiction of the federal government, they impact provincial and municipal governments who are tasked with service delivery (recall Toronto Mayor Olivia Chow calling out the feds as hundreds of asylum seekers slept on the streets of Toronto last summer because shelters were full). The federal government recently announced revised immigration targets that will be capped at 500,000 per year starting 2025 and will prioritize economic immigrants. Canada needs skilled immigrants to boost productivity, but the record influx of newcomers exacerbates the housing challenge, which leads us to…
3. Lack of affordable housing supply – The Canadian Mortgage and Housing Corporation believes 3.5 million additional new homes are needed by 2030 to restore affordability. That’s 500,000 a year for the next seven years. Based on the number of housing starts in the first three quarters of 2023, we will have reached less than 50% of that target last year. ?In Ontario, Premier Ford’s much publicized goal of 1.5 million new homes by 2031 has so far been daunting – last year the province saw 85K housing starts against the yearly average 110K required to get to 1.5 million by 2031. All types of housing are needed, and governments will need to work together in 2024 to resolve a myriad of bottlenecks and disincentives related to zoning, density, development-related charges, taxes, delays at the LTB, among others.

What to expect from the Parties

The Ontario PC Party

For several reasons, the PC’s were happy to see the flip of the calendar and are hopeful it provides a fresh start. Ford will be looking to get his government back on track after spending the second half of 2023 undoing many of his government’s policy decisions and weathering the Greenbelt scandal storm that saw him lose two Cabinet Ministers and three senior staff. The Premier can take comfort in the fact that despite a rocky year and a new leader at the helm of the Liberal Party, his polling numbers have not taken a major blow. In the final Abacus Ontario political survey of 2023 taken after Bonnie Crombie won the Liberal leadership race, the PC’s were at 39% while the Liberals and NDP were at 27% and 24% respectively. Ford’s conservatives won majority governments in 2018 and 2022 with just over 40% of the vote.

A number of issues will be at the forefront for the Ford government in 2024.

Affordability is top of the list for all levels of government. Inflation, economic growth, interest rates, and unemployment rate are all variables the government must consider and navigate as part of its policy development across Ministries.

University/college domestic tuition freeze has resulted in unintended consequences, most would agree. Several Ontario universities are running deficits and Queen’s University Provost Matthew Evans recently said he is concerned about the university’s survival if the issue isn’t addressed. Many colleges and universities have responded to the domestic tuition freeze by increasing the number of international students (a more lucrative revenue stream for the institutions). However, the increased number of international students has added to the strain on availability of affordable housing.

Hallway healthcare grew to the highest number of patients receiving treatment in unconventional places last year, despite the government’s efforts to reverse the trend. Critics say the main causes are staffing shortages resulting in Emergency Department closures, and ‘alternate-level-of-care’ patients who no longer require hospitalization but cannot be discharged because there are not enough safe discharge destinations, particularly LTC facilities.

The government is now entering the second half of its mandate, typically when we see the transition to ‘good-news’ announcements leading up to the 2026 election. However, there are political risks that Ford and his government may need to manoeuvre in 2024. The timing of the RCMP investigation into the Greenbelt scandal could be problematic if the outcome is negative and it remains on voters’ minds. The redevelopment of Ontario Place could also pose a risk if it remains in the spotlight, although Toronto mayor Olivia Chow has largely stood down on the issue since the province agreed to upload the Gardiner Expressway and DVP (she will also be doing her own stickhandling in 2024 after introducing a property tax hike in the range of 10%-16%).

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The Ontario Liberal Party

2024 brings high hopes for the OLP, as Bonnie Crombie has officially resigned as Mayor of Mississauga to lead the Party into the next election. The Liberals believe Crombie is a concern for the governing PC’s, pointing to the fact the Premier didn’t congratulate her after winning the leadership and the millions already spent by the PC’s on attack ads. Crombie has gotten off to a strong start, setting and surpassing an aggressive fundraising target of $1 million in the final month of the year. In an email sent to members, Crombie said the Party received $1.2 million, which is their strongest year-end campaign under the new fundraising rules.

The new leader will have her own challenges to navigate, as her profile and name recognition are not as strong in rural and northern Ontario as in the GTHA. The Liberals will need to introduce and define the new leader to those voters. However, the PC’s are already investing heavily in ads that portray Crombie as wealthy, out of touch, and pointing to her record of raising taxes. The NDP are also attempting to define Crombie as ‘Liberal, Tory – same old story’, alleging she has a cozy relationship with developers and has centrist policy views. An important rule in politics is you must define your candidate, or their opponents will. The Liberals would be wise to immediately launch their own ads to define Crombie and counter the narrative already out there from her opponents.

Crombie remains without a seat in the legislature. With the Liberals only holding nine of 124 seats (three shy of official party status) it doesn’t seem likely that one of their members would resign. The Liberals aren’t allotted regular questions during Question Period, so it also builds the case for Crombie getting out to meet voters across the province instead of watching NDP leader Marit Stiles joust with the Premier in the legislature.

The New Democratic Party

Members of the NDP may not be quite as optimistic as the Liberals entering the new year. Leader Marit Stiles had to weather internal turmoil as some factions within her party questioned her leadership over her handling of the now-independent MPP Sarah Jama discord. Stiles attempted to placate her membership by saying she agreed with “much of what MPP Jama was saying” regarding Israel/Palestine, but it was the rookie MPP’s breach of trust that resulted in the decision to expel her from the NDP caucus. Not all party members accepted that explanation, and as we head into the new year there may be a remaining undercurrent of discontent within party ranks.

Stiles and the NDP enjoyed the benefit of a leader-less Liberal party since the last election. With a strong Liberal leader now in place, Stiles will have to share some of that opposition spotlight with Crombie. Stiles will continue to take advantage of Liberal MPP’s not receiving regular questions during QP, or full standing on committees. She will also likely try to woo progressives within the Liberal party who feel that Crombie’s ideology and policies may be too centrist for their liking.

Finally, expect Stiles to leverage the new Mayor of Toronto – and card-carrying member of the NDP – Olivia Chow. Stiles has already publicly lauded Chow after the Mayor and Premier reached a new deal for Toronto to support the city’s essential public services, transit, and housing: “Toronto needed a new deal, and Mayor Chow got it. She inherited a huge mess from a Conservative mayor who drove the city’s finances into a ditch. And now she has managed to get the Premier to come to the table and negotiate a new deal for Toronto.”