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A ‘tall order’ for Kathleen Wynne’s new government

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Now that Ontario's Kathleen Wynne has won a majority government, it's back to the books. And what some observers consider a "tall order."

Ms. Wynne and her Liberals, who won re-election in Canada's most populous province, plan to quickly re-introduce the proposed budget that sparked Thursday's vote.

As The Globe and Mail's Adrian Morrow reports, that document proposes increased spending on social programs, billions of dollars for transit and transportation, a new provincial pension scheme, and higher taxes on the wealthy.

The Liberals also said they would miss their short-term deficit targets, though stick to the original longer-term goal, projecting a fiscal 2014-15 shortfall of $12.5-billion, or 1.7 per cent of gross domestic product.

Now, back at it. And the challenge remains the same.

"While the province continued to target FY17/18 for a balanced budget, it took a clear step back this fiscal year as a combination of higher program spending and weaker-than-expected underlying revenues more than offset tax increases," senior economist Robert Kavcic said Friday in the wake of the Liberal victory.

"However, while all of the austerity talk during the election campaign was focused on the [Progressive Conservatives], the Liberal budget itself carried a stiff dose of fiscal restraint; it was just buried deeper in the document and pushed further out on the forecast horizon," he told BMO clients in a research note.

"That is highlighted by zero room for public-sector compensation increases over the medium term, and flat nominal program spending for three years starting in 2015 – a tall order indeed."

Mr. Kavcic said many now wonder what all of this could mean to Ontario's credit rating, and the agencies that rate its debt are watching closely.

They have already cited the challenges of meeting the targets.

Some metrics are "slightly better" than they were two years ago, Mr. Kavcic said, while others are in worse positions.

"Meantime, the cost-containment plan remains a major question mark, and after some progress in recent years, this year's budget left some questioning the resolve to hit those targets," he said.

"A majority government, though, now makes pushing through necessary restraint a bit easier."

Adrian Morrow: Fresh off victory, Wynne eyes ambitious Ontario budget

David Parkinson in ROB Insight (for subscribers): Can Wynne put the brakes on Ontario's credit rating slide?

Why so many (except the truckers and me) hate Ontario's budget

Full coverage of the Ontario campaign and election

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