The Ontario government has announced a $3 billion package of tax cuts and spending to help stimulate the province's economy, which has been hurt by a strong loonie and slumping U.S. economy.

Finance Minister Dwight Duncan also said about $500 million from a $1.4 billion "strategic infrastructure" fund will be earmarked to improve public transit projects across the province.

Duncan announced $1.1 billion in business tax cuts over three years to support struggling manufacturers, while $40 million will be offered to retrain and re-employ laid-off workers.

Despite serious challenges in the manufacturing, forestry, agriculture and tourism sectors, Duncan said Ontario's economy has proven resilient.

"In spite of these very real external challenges, growth is up, employment is up and wages continue to improve,'' he said during his fall economic statement in the legislature.

"Stronger than expected growth this year will be followed by continued growth in each of the next two years.''

Business groups were pleased to see the tax relief and other measures.

"The elimination of the capital tax and other provisions are some immediate actions that will benefit companies -- it will have a positive impact,'' Len Crispino, president of the Ontario Chamber of Commerce, told The Canadian Press.

"It'll certainly help deaden the blow, and help to -- as I call it -- stop the bleeding for a while until some other measures can come into place.''

With respect to the infrastructure projects, the minister said some $300 million will be spent to help municipalities repair and replace roads, bridges and water and sewer systems.

Duncan said $150 million will go to help cattle, hog and horticulture farmers, while $30 million will be provided for tourism promotion and marketing.

He also said the province is giving all first-time home buyers a break on the land transfer tax by extending by extending the existing exemption for new homes to include the purchases of resale homes, effective as of midnight. Duncan said the move will save home buyers about $1.4 billion over three years.

Highlights of the fall economic update:

  • Eliminating the capital tax starting Jan. 1, 2008, for manufacturers
  • Retroactively increasing the small-business deduction threshold to $500,000 from $400,000
  • A retroactive 21 per cent capital-tax rate cut for all businesses
  • $50 million for investments in innovation

Duncan said the growth figures for the next two years will be lower than forecast in last spring's budget, but noted the province will have a $750 million surplus this year -- $400 million more than the government estimated earlier this year.

Transit improvements

A large portion of the transit funding will be used to help the cash-strapped Toronto Transit Commission and GO Transit around the Greater Toronto Area.

Toronto Mayor David Miller says he is thrilled the province is stepping up to the plate to fund the TTC. He says the new money will help reduce the city's massive budget shortfall and could result in fewer tax hikes and service cuts.

"For the first time since amalgamation, we're on the right path. The year's been a real turnaround," he told reporters.

"The province has been very helpful today and I think very supportive of Ontario cites."

While Miller isn't exactly sure yet how much money the TTC will get, he predicts it to be between $100 million and $200 million because the funding will be based on ridership and population.

The new money is expected to begin flowing early in the new year.

Meanwhile, $100 million will go to GO Transit immediately for new passenger coaches, new double-decker buses and track expansions.

The cash announcement came just two days after the province's auditor general said delays and cancellations at GO Transit are getting worse. In his annual report, Jim McCarter said the transit system has failed to plan for an increase in ridership.

Opposition critical

Opposition parties criticized Duncan's update, particularly the $40 million assistance package for laid-off workers.

Progressive Conservative Leader John Tory said the figure is not big enough to help the tens of thousands of workers who have lost high-paying jobs.

"If you're trying to bail water out of a boat that has a leak with a thimble, of course that helps a little bit, but I guess you'd be much better off if you had a much bigger bucket," Tory told reporters.

"(Premier Dalton) McGuinty just hasn't demonstrated the sense of urgency or caring that I think goes with the magnitude of what's happened to people across this province."

NDP Leader Howard Hampton said the economic statement doesn't solve the manufacturing sector's woes.

"There is very little, virtually nothing, dealing with manufacturing jobs,'' Hampton told the legislature.

The Conservatives also blasted the government for increasing spending by another $2 billion since the March budget to a total of $93 billion annually.

With reports from CTV's Paul Bliss and Naomi Parness and files from The Canadian Press