Ontario’s Finance Minister: Steering Through Turbulence, Building for Tomorrow

Weeks before delivering Ontario’s Fall Economic Statement, the province’s Finance Minister joined the Board's President and CEO, Giles Gherson, for a timely and candid conversation about how Ontario is navigating global trade tensions and economic uncertainty.

From record infrastructure investments to interprovincial trade and the race to lead in nuclear innovation, the Minister outlined a vision of nation building at speed; built on fiscal discipline, domestic strength, and long-term growth.

Transcript

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From the Toronto Region Board of Trade, this is Toronto Talks. Toronto, let's talk about how the government will steer through these challenging, changing times. The bottom line is Ontario is in the crosshairs of a trade war with the danger that will fall further behind the eight ball. So, Minister, your mission, if you choose to accept it, turn things around. I'm very confident that we are going to come out much stronger on the other side. I'm just going to talk briefly about one thing and then I want to get into the questions, Giles, and I want to hear from everyone around the table. challenges that we have in the takeout tariffs or COVID, the laws of the economy still operate in the world. There are expansions and there are contractions. And when there are, you've got to be fiscally ready for that. And that's why you have a fiscal responsible plan is so critical so that you can deal with the years that are coming up there. So where are we spending our money? infrastructure. Why are we borrowing money? Well, when we took over in 2019, 2018, 2019,$144 billion in infrastructure, and seven years later, unprecedented infrastructure investment. Now, why is that so important? First of all, I would submit that we inherited an infrastructure deficit. If you don't build every year at pace, you're going to fall behind. So we're catching up. Layer in, our population has grown by 2 million people in the last seven years. They got to go to school. They need hospitals. They need roads. They need subways. You need to move people. There's a host of things. So you can't let your foot off the pedal of infrastructure, which has then led us to the debt picture. $337 billion when we came in an office seven years later. Oh my God, $100 billion more. What's going on? Well, there's three components to debt. One is refinancing existing debt, but that's just one in, one out. The second is deficits. Well, we don't have deficits by and large. So the debt is going up because of we borrow money for infrastructure. These are assets, by the way, that are going to be around for a long, long time. Giles, longer than you and I are going to be around, but they're long. Don't leave me out of it. Okay, longer than I'll be around. You know, invest, that's the right way around. If you want to build economic prosperity, if you want to put people to work, you want to have good jobs, build, build, build. And I don't mind borrowing debt for infrastructure. These are 30, 50, 75, 100-year assets. And a third of our borrowing is in 30-year bonds. Now, I was growing up in Montreal, all the interest rates were like 12%. So when we saw two and a half percent for 30 year bonds, a third of our issuance over the last 10 years has been 30 year bonds. Our borrowing costs are the lowest since 1985 relative to our revenues, five and a half cents on the dollar. Remarkable. But that's because take advantage of the situation you're in. And by the way, borrowing 30 years to build a subway or a hospital or a school, that is a smart investment. Get it the right way around is so critical. And then of course, you know, while you put on a hundred billion dollar debt, even if it's for infrastructure, isn't that bad? Well, no. What's important is that we grow the economy faster. So when we took over, the economy was 860 billion GDP in Ontario. Fast forward today, a $1.2 trillion economy, almost a $350 billion increase in the GDP. Every one of you is contributing to that. Every skilled worker and construction worker and nurse and school teacher and entrepreneur is driving that economy. So get the debt the right way around for infrastructure. Grow your economy faster than your debt. Our debt to GDP is going down. Our interest expense is the lowest, as I said, since 1985 relative to revenue. And why does it matter? It goes back to what's in the windshield. Uncertainty. Trade challenges. A contracting economy. That's why it's so critical to position yourself to look around corners and not just think about today and the votes today. think about not just today but think about tomorrow the next generation when you're all rolling together be it first nations municipalities provinces federal government and everyone in this room and the 41 million people in this country I like our chances so thank you very much and I look forward to the questions. As you just heard the minister then sat down with our president and CEO Giles Gerson for a Q&A. It was a chance to step back from the numbers and talk about what the government's plan will mean for Toronto region businesses. Minister, thank you for that. You know, the reason this conversation is so timely, I think, is because we're at this inflection point, particularly in sectors like auto, steel, wood products, and steel derivatives, which have become a real problem because, you know, now you've got, now you're moving, you're actually narrowing the Kuzma compliant products because they're unfinished steel products. But you also got US OEM saying, we wanna buy American stuff now, we don't really wanna buy Canadian stuff as much. We're hearing a fair bit of that. So just maybe reflecting a little bit about the coming year, what you see your biggest challenge as being?- Well, that's a big question.- I wanted to set that right, because I think people may not realize just what a turning point we may be at. Yeah, and I got a big answer. So we'll go there. That's why we invite you to. Yeah, thank you. Well, first off, you know, I hope for the best, but you've got to plan for the worst. So we start there. So what are the things that you do, given that? I'll go to things like, you touched on it, procurement. I am a 1,000% free trader. You know, there's no question I worked on the 1988 campaign for those who remember that or have read about it in history books is all about free trade. I'm a 1000% supporter of that, but the world economic rules have changed. They're fundamentally changed. So we can live in an old free trade world, which I support completely because it leads to better innovation, competition, better prices. Standard of living goes way up. but we're in a different world. So what are you going to do about it? And I think we have to adjust our mindset to say, we didn't create that, but we're living in that. So how are you going to tip the scales and give Canadian companies and Ontario companies a fair shot at competing in that world? And that adjustment period is tough. You look at British Columbia, well, I'm going to buy Chinese steel fabricated ferries. And I say, no, you know, you're either in Canada or you're not. You've got to think about your domestic suppliers. Yes, you've got costs and project timelines and all that, but we can deal with that. We can deal with that. We've got to adapt to the new world. Second point I would make is that given the situation, interprovincial trade, so we have free trade with every country in the G7 except one. And we don't have a free trade agreement in Canada. Think about that for a second. So it's hard work. All kinds of barriers have been paired up for 150 years. This is an opportunity. If not now, when are we going to say, let's be free traders in Canada? Economists say up to 200 billion of GDP will be unleashed on a $3 trillion economy, that's about 6-7%. Maybe it doesn't hit that much. And so we've all said we've signed MOUs with 10 of the 13 provinces and territories entering into bilateral. Let me tell you, it's tough. It's tough because everyone has their interests. We're all friends, but provinces have their interests. And so Ontario is taking a leadership and saying, you know what, if not Ontario, then who is going to take leadership, pull the bandaid off, expose our economy to free trade, labor mobility, get rid of the myriad of thousands of pieces of red tape between our provinces that restricts trade. So that would be the second thing. And I think the third thing is, and again, if not now, when are you going to build a transcontinental railway? Oh, we did that in 1867. It took them, I believe five years to build a transcontinental railway. It was the birth of our country in 1867. We've got to keep doing that.- We're building the Eglinton Crosstown. Doing a good job.- You really know how to hurt a guy. We inherited that from a previous government. But in all seriousness, we've got what the world wants. We have to build the infrastructure be able to get those products to market, be they critical minerals, be they oil and gas, be they technology, keep our IP here, build the technology here. We have an opportunity, nuclear, large scale nuclear. I go around the world, everyone wants what we have a nuclear in Canada. And what do we have that they don't have? Public support for nuclear. But there is no path to net zero without a nuclear, without nuclear. Switzerland has nuclear, Sweden has nuclear, Germany is the one country that they went a different way, but every other country in Europe, France, the UK, Romania, Poland, every, the conversation on nuclear is going this way, and guess who's there in nuclear? Ontario and Canada. We lead the world, not just on refurbishing our 16 nuclear reactors, but also building the first SMRs basically in the world, small modular reactors. We're going to open the first one. I believe it's 2029. Already shovels in the ground. It's already being built. We're leading the world in that. But large-scale nuclear, we have public support. We have the technology. But this is an arms race for talent because Rolls-Royce and EDF and Westinghouse and all the other places that have that in the world, they're going to compete for talent. So we got to move fast. We got to move faster than we ever have on nation building. We got to build that transcontinental railway and we got to do it not in 15 years, not in 10 years, but five years and have that vision. So that's the way we think about when we develop policies, do a fall economic statement, do a budget, which I'm already working on for 2026. You're right, my sixth. That's the way we think about it. When you look at the U.S. right now and you see the amount of capital is flooding into the U.S. because of tariffs, yeah, and getting people wanting to get behind the tariff wall, because of significant deregulation. And again, I think a lot of people would have questions around the process, but it's been remarkably fast, particularly in the financial markets, but all across the board. And you're seeing just capital wave into the U.S., from Canada, as well as from around the world. We need to obviously keep a fair bit of that. We need that capital here. What are your thoughts about looking ahead, how we really grow the capital stack here? First off, I'd say we don't have a capital problem. We have some of the largest pension funds, some of the largest insurance companies, the best banks in the world right here. We don't have a capital problem, challenge. We have an opportunity challenge. A deployment challenge, really. What's that? A deployment challenge. A deployment challenge. So what's the opportunity set? What are the, how do you lay the conditions so that capital on behalf of their members and their fiduciary responsibility wants to invest right here? And part of that is when you look at when it takes 15 to 20 years to get a shovel in the ground for a critical mineral project, you know, the rest of the world is going to leave Canada behind. And yet this is what the world needs. It's right here. when it takes many seven years to get a shovel in the ground to build a new condo or a subdivision, that's just unacceptable. So we have to go much faster. And don't forget, it's not just the provincial government, but there's also the federal government. There's the municipal government and First Nations. We all have to be in that economic rowboat for prosperity. I like to think if we're all in that boat together, hopefully we get along, And that two on one side, two on the other. And just keep rowing just at the same pace in the same direction. Because otherwise you've got, you don't go anywhere. And I think more than ever, I'm more optimistic than ever. The First Nations have been terrific. The federal government, I think for the first time in some time, I'll submit, is really all in on being in that rowboat for moving at speed on regulations. Creating the opportunity set for investment here. the nation building projects, and so on and so forth. Municipalities, by and large, but they've got more to do because there's a lot of inertia in that rowboat that wants to slow you down, that has a lot of weights in that boat. That's one of the challenges. So I don't think we have a capital challenge per se. It's there. We have the opportunity set challenge, and that's what we're laser focused on. I'll just end on. We've set up an infrastructure bank here to invest in long-term assets, crowd in other investors, And we've had it up and running. I cheated. I went and took all the people that built the Canadian Infrastructure Bank. I said, what would you have done differently if you had to do it all over again? And they gave me best advice. So we got it up and running very quickly in 13 months. We've already announced a bunch of transactions in long term care. We have a whole bunch more that we're going to announce in very core areas around the things that I just talked about. Just to kind of come back to the tariff issue, because I think, you know, while we're building the infrastructure for the future, which is going to be so critical to the economic performance of the province's economy in, as you say, maybe after our time. But in the here and now, back to the whole, again, the tariff threat. And I guess the real question is, what are your thoughts about how we can stabilize those sectors and hopefully keep them growing? We have to ask ourselves the question. Do we want a steel industry in this country? Is it in our national interest to have steel production that goes into our cars? Do we want to have an auto sector in this country? Do we want to have nuclear energy? Do we want to have a construction industry? It all starts with steel. So if the answer to that, all those questions is yes, which I would submit, I would say yes to all of the above, then we have to get dead serious. So let's come back to buy Canada, buy Ontario. Why are we buying steel from other countries that are producing cheap labor or standards that don't meet environmental standards that are, and we're a dumping ground for the world? So number one, we got to focus on making sure that we're playing on a level playing field. And I would submit today we are not because we're getting dumped with cheap steel right around. Number two, we've got to look inward and say, shouldn't we be buying Canadian steel? You know, and which may also fit into number three, the defense spending. Guess what goes into a lot of the military vehicles? Steel. You can't build vehicles without steel or aluminum and a host of other things. So I think that we have a real shot to transition. It's a bit of a wake-up call with these tariffs. Section 232, 50% tariff on steel and aluminum on the auto sector. And I'm very confident working together that we've already started a plan, whether it's interprovincial trade, working on protecting those couriers that are being attacked, looking at the opportunity is set to get more capital invested here. All these things to boost our productivity. And I'm very confident that we are going to come out much stronger on the other side. Minister, I'm glad you mentioned the support for Algoma, which is critical at this moment. You've also announced, and this is my last question, I know we're running out of time, but you've also announced, I think it's about $4 billion in two different funds for companies that have been affected by tariffs. So one, I think, is about diversification, about $2 billion for that, and $2 billion for innovation. So those could be very, very helpful. I think the question for people in the room who maybe want to access those funds is, will they be large enough per investment? Because significant companies here need to make, I think, large investments to retool, to be able to take advantage of Canadian opportunities where they may be unlocked out of American opportunities. So will they be, you know, often we have funds, but you can only take, you know, $10 million or that kind of thing. We may need larger access. The second one is, can it be flexible and can it be fast acting? So Algoma took 100 million. So that's pretty large, plus 400 million with the feds. That's half a billion. And that's the right thing to do. Yeah, the way I think about it, we got to support the large. And these are section 232, the 50%. We got to support those companies if we want to be in the business, number one. And number two, you know, they're the anchor tenants. They drive a lot of the supply chain. So that, if you can't protect the anchor tenants, the supply chain is not protected. Actually, our Protect Ontario Fund is a billion dollars applications. And we'll be rolling out some announcements really shortly on successful companies to help them bridge in the short run the liquidity challenges they have. I'm looking at David Patterson, our agent general down in Washington, who's doing a remarkable job in Washington. If you don't know David, he spent a big part of his career on the other side of the table from us, always extracting money from taxpayers when he worked for GM. I don't know if I put that delicately. He's gone. But he really understands the industry. And one of the things that we're very concerned about is the part suppliers, the supply chain for the auto. And yeah, the anchor tenants say, well, they're not going anywhere. They've got big plants here. You know, 10 million cars are built in the U.S. every year, and between Mexico and Canada, another five, five and change. You can't just move that five down to the U.S. overnight. But boy, you can move those suppliers down. You can say, I'm staying in Canada. Thank you for the money, Canada and Ontario. But all my parts suppliers are going to come from Tennessee. That doesn't work. So we have to be aggressive on saying, if you're going to build in Canada, you've got to use Canadian. In the nuclear space, for the small modular reactors, 95% has to be from Canadian technology, Canadian workers. And that's fully compliant with trade rules. We're not doing any differently than the UK or the United States on what's going on in the new world. So that's the kind of the way we think of. We acted early, so we really moved a lot of money early to support companies through deferral of taxes, through WSIB rebates, through different provisions. We then acted again with this $5 billion fund, which the money is rolling out right now, the Ontario Together Trade Fund, which is helping support companies pivot to new markets to bridge into the new world. And in partnership with the feds, when one plus one is equal to three. So that's the way we think about it. That's how we're supporting Canada, supporting workers in Ontario, and building a more prosperous economy, given the environment that we're in. Minister, thank you. What a great note to end on. Thank you for your time this morning, and really appreciate the conversation, and your being here with us. Thank you very much. That's all for this episode of Toronto Talks. If you haven't subscribed yet, now's the time. You don't want to miss what's coming next. The Toronto International Film Festival just turned 50 years old. And we've got something special with TIFF CEO Cameron Bailey. Fast forward another 50 years. And what does 50 years look like? I'm going to have to guess. 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