UPDATE 2-Ontario unveils budget, opposition support not clear

Thu May 2, 2013 6:17pm EDT

* Unclear if budget will be supported by opposition

* Government sees balanced budget by 2017-18

* Government limits expense growth

By Cameron French

TORONTO, May 2 (Reuters) - Ontario's minority Liberal government unveiled a budget on Thursday that projected a narrower-than-expected 2013-14 deficit and included measures aimed at securing opposition support and preventing an early election for Premier Kathleen Wynne.

However, it was not clear whether the budget will receive enough support to keep the Liberals in power, as opposition New Democratic Party leader Andrea Horwath said she would consult with voters before deciding what to.

Canada's most populous province, which accounts for about 40 percent of the country's economy, will run a budget shortfall of C$11.7 billion ($11.60 billion) in 2013-14 under the C$127 billion budget plan unveiled by Finance Minister Charles Sousa, who succeeded Dwight Duncan in February.

The deficit is below the government's year-ago forecast of C$12.8 billion, but above its 2012-13 shortfall of C$9.8 billion.

With just 51 seats in the 107-seat Ontario legislature, Wynne's Liberals need the support of at least one opposition party to pass the budget and avert an automatic election.

The right-leaning Progressive Conservatives, who hold the second-most seats, said they will not support the document, while Horwath gave it a lukewarm reception, even as she acknowledged the government listened to many the demands she has made in recent weeks.

"This budget clearly reflects the budget proposal we put forward ... but we want to make sure (voters) get those results," she told reporters.

Wynne, whose party's popularity jumped when she took over from longtime Liberal Premier Dalton McGuinty in January, has since watched poll numbers move in favor of the PCs, as her government struggled with the fallout of a power generation spending scandal.

The PCs currently enjoy 36 percent support, followed by 33 percent for the Liberals and 26 percent for the NDP, according to an aggregation of recent polls published in the Globe & Mail newspaper on Tuesday.

As such, the budget featured more than a little input from NDP leader Horwath in certain areas, most notably a pledge to cut auto insurance premiums 15 percent, as well as a C$295 million youth job creation program.

"We recognize that we're in a minority situation and we need to work with all sides of the house," Sousa told reporters.

The auto insurance reduction follows ballooning premiums in recent years, which insurers have blamed on rising claims and fraud-related costs.

Sousa said he has been in touch with insurance companies - Ontario's largest publicly traded auto insurer is Intact Financial Corp - and hopes to see rates start to come down within a year.

PATH TO BALANCED BUDGET

The deficit is seen shrinking to C$10.1 billion in 2014-15 and C$7.2 billion the following year, and disappearing by 2017-18, a projection that relies on average annual revenue increases of 3 percent over the next three years and expense growth of just 1.8 percent.

"To maintain that (expense growth), it's going to be very challenging," said Jonathan Bendiner, an economist at TD Economics.

Ontario's deficits spiraled higher in the wake of the 2008 financial crisis when global automakers shed jobs, sending tremors through the province's industrial base.

Public long-term borrowing during 2013-14 should total C$33.4 billion, down C$3.2 billion from 2012-13 and C$5.7 below forecasts, which the government attributed to lower-than-projected deficits in 2012-13 and 2013-14.

The government's total public debt is expected to hit C$272.8 billion next year.

The budget extends a freeze on corporate tax implemented in the previous year's budget and will extend an accelerated capital cost allowance program for manufacturers at a cost of C$265 million over three years.

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