Ontario has shown “steady progress” on reaching wage-freeze deals with public sector workers and is the lone province ahead of its budget targets so far this fiscal year, says a major credit rating agency.

While its rating of Ontario’s finances did not change from AA (low), Dominion Bond Rating Service said Monday that revenues are expected to come in at $445 million higher than expected thanks to higher corporate and personal income tax.

“What stands out is Ontario is the only province tracking somewhat ahead of their budget targets,” said Travis Shaw, vice-president of public finance with Dominion.

Given Ontario’s projected $14.4 billion deficit, those increased revenues are “quite modest” and there are still some “considerable challenges,” Shaw added.

Premier Dalton McGuinty’s minority Liberal government got a pat on the back for negotiating wage-freeze labour deals with a number of public sector workers such as doctors and well as unions, such as the Ontario Public Service Employees Union, CUPE and Ontario English Catholic Teachers Association — some of which are yet to be ratified by union members.

The rating agency noted it had identified the labour deals as a “significant implementation risk.”

“It’s certainly been encouraging that there have been agreements reached,” said Shaw, saying that with wages forming the bulk of the province’s costs that the deals “increase the likelihood that spending targets can be achieved.”

Dominion did not refer to the turmoil caused by imposing contracts on public elementary and secondary school teachers under the controversial Bill 115, which froze wages at the top end of the grid but allowed junior teachers to move up the salary ladder while limiting their collective bargaining rights.

Progressive Conservative Leader Tim Hudak, who has been critical of the government for not imposing an across-the-board wage freeze, said Monday that the province has a long way to go, with an unemployment rate higher than other provinces and more than 600,000 people jobless.

The rating agency is now waiting for the Liberal leadership convention the week after next and a budget, which will set a direction for the government moving forward.