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Finance Minister Dwight Duncan leaves a press conference at Queen's Park Wednesday.Michelle Siu/The Canadian Press

Ontario's fiscal outlook has brightened in recent months, thanks largely to higher than expected revenues from corporate and personal taxes.

In the fall economic outlook tabled on Monday, the deficit is projected to reach $14.4-billion in fiscal 2012-13. The government is shaving $400-million off the deficit projection in the budget last March, despite weakening global economic growth.

Finance Minister Dwight Duncan said the province remains on track to eliminate the deficit by fiscal 2017-18. However, the minority Liberal government cannot execute its fiscal plan without the co-operation of the opposition.

The government's plan for erasing the deficit provides no funding for wage increase for public sector workers who bargain collectively. The government has tabled draft legislation that would freeze wages for public sector workers for two years, a move that would avoid spending increases of $2.8-billion over three years.

However, the draft legislation faces an uphill battle. The New Democratic Party has made it clear they will not support the proposed wage freeze. The Progressive Conservatives are on side, but only if the government tears up existing collective agreements and imposes a wage freeze immediately. The government has rejected such a move, and plans to impose a freeze as exisiting contracts expire.

"The door opened by the PCs is the only door available to us in this minority government," Mr. Duncan said in his speech to the legislature. "So we will continue talking with the PCs."

But Progressive Conservative Leader Tim Hudak said the Liberals are not going nearly far enough to address the province's fiscal woes. The Tories, he said, would eliminate the deficit well before 2017-18. Mr. Hudak is calling for tax cuts - either corporate or personal - to help kick-start the economy and for slashing public-sector jobs to curtail spending.

Ontario needs to take a different path back to prosperity, Mr. Hudak said in the legislature on Monday.

"We do not believe that the sun is setting on the great province of Ontario," he said. "We believe Ontario's best days are ahead of us."

NDP finance critic Michael Prue pointed out that labour leaders have gone to court to challenge the government's proposed wage freeze legislation.

"This government knows their plan is doomed to failure," Mr. Prue said in the legislature.

In the economic outlook, the government says revenues from corporate taxes are $300-million higher than projected in the budget. Revenues from personal income taxes are $280-million higher.

The government is projecting that real gross domestic product will grow 1.9 per cent in 2012-13.