On the eve of a Throne Speech outlining Premier Kathleen Wynne's plan for her new majority mandate, Moody's has issued a stark warning on Ontario's growing deficit.

The bond rating agency has changed its outlook on the province to "negative," cautioning its credit rating could be downgraded if it doesn't show progress either cutting spending or hiking revenues. In a note late Wednesday, Moody's said it was concerned by the Liberals' plan to miss interim targets for erasing red ink.

The province is pledging to balance the books in three years, but will run a far larger deficit this year than originally projected.

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"The expected path to balance and stabilization of the debt burden, in our opinion, faces greater challenges than before," Michael Yake, Moody's lead analyst for Ontario, said in a statement.

A senior government source said the Speech – to be delivered by Lieutenant-Governor David Onley but written by Ms. Wynne's office – will provide further details on Treasury Board President Deb Matthews's plan to find savings. It will promise to govern "from the activist centre" and put "evidence before ideology," balancing Ms. Wynne's massive policy agenda with the need to erase the deficit.

The address will also announce a trade mission to China this fall, the source said, Ms. Wynne's first overseas trip since becoming Premier a year and a half ago.

Ms. Wynne won the June 12 election in large part by rallying voters opposed to former Progressive Conservative leader Tim Hudak's plan for aggressive budget cutting, which included a promise to slash 100,000 public-sector jobs.

The budget, expected to be reintroduced in the legislature by Finance Minister Charles Sousa on July 14, banks on a mix of spending restraint, higher income taxes on people making more than $150,000 a year and higher revenues from an improving economy to balance the books. The Liberals have not, however, fully spelled out exactly how they will control spending.

The fiscal plan also contains no new money for labour settlements.

MPPs gathered Wednesday for the first time since the vote. They re-elected Liberal Dave Levac as Speaker over four other candidates – fellow Liberal Shafiq Qaadri, PC Rick Nicholls, and New Democrats Paul Miller and Cheri DiNovo – after three ballots.

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He promised to take an even-handed approach in the often-fractious assembly: "It's like a steam pipe: If you squeeze it too much, it blows up. So you let off a little at a time."

The PCs, meanwhile, chose veteran MPP Jim Wilson as interim leader. In a disarmingly frank scrum with reporters, he said the party must break from the divisive policies of the past.

"Let's not be attacking people. We've been attacking people for a decade," Mr. Wilson said. "There's no need to pick on particular groups."

He also promised a more collegial leadership style. The 100,000 job cut plan, he said, was foisted on caucus with no consultation.

"We shot ourselves in the foot in the last election and we've got to stop doing that," he said. "We've had a period, about a decade, where caucus has felt badly disenfranchised."

Mr. Wilson, a former health and energy minister under premier Mike Harris, defeated Chief Whip John Yakabuski and maverick MPP Randy Hillier for the interim post. He will stay in place until a permanent leader is chosen.

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The legislature, on the whole, had an unusually relaxed, collegial feel Wednesday. MPPs from all sides walked across the floor to mingle while ballots were counted in the race for Speaker. Ms. Wynne made the rounds of newly elected members, introducing herself and greeting each personally. At one point, Mr. Yakabuski even sat down on the Liberal front bench as he chatted amiably with a group of cabinet ministers.