Spin aside, Ontario’s economy not out of the woods
On Monday, Ontario’s provincial government issued a news release celebrating the province’s economic performance, boasting that Ontario’s economic growth rate is currently higher than the Canadian average and forecasting that Ontario will be “one of the fastest growing” provinces over the next two years.
Unfortunately, the condition of Ontario’s economy is much less rosy than the government suggests. The reality is the province’s economic record is nothing to brag about.
Ontario’s recent spurt of stronger growth must be considered in the context of the province’s dismal economic performance over the past decade.
Consider that between 2003 and 2014, after adjusting for population increase and price changes, Ontario’s economy grew at an average annual rate of just 0.4 per cent. That’s approximately one-third the growth rate in the rest of Canada during those years.
In other words, Ontario is coming off a decade when per-person economic output barely increased at all.
Weak growth isn’t just a matter of academic concern, it determines the pace wages are likely to grow. Consider that in the late 1990s real disposable income per person in Ontario was 14 per cent higher than in the rest of Canada. By 2014, Ontario’s sluggish economic performance had caused living standards to fall below the Canadian average.
These facts put this year’s numbers in perspective. Sure it’s good news Ontario’s growth has ticked up; but it will take many years of strong growth to repair the economic damage that’s been done.
And even this year’s somewhat stronger numbers aren’t impressive enough to pop champagne over.
The government notes Ontario’s growth rate is now beating the national average, but that’s partly because several provinces including Alberta, Saskatchewan, British Columbia and Newfoundland are struggling in the face of low commodity prices.
These provinces have been major contributors to Canada’s economic growth and their slump has driven Canada’s national growth rate lower. The fact Ontario now outpaces the national average is partly a function of weakness elsewhere.
But the most amazing feature of the government’s news release is that it actually boasts about the government’s management of public finances, stating that Ontario will meet its “deficit target” this year and is expected to finally balance its operating budget next year.
What it doesn’t mention is that Ontario’s public finances have deteriorated badly over the past decade, and that the province is on track to add billions more in new debt.
Consider that since 2003, Ontario has added substantially more public debt than all of the other provinces combined and added far more debt per person than any other province.
The government says it will finally stop the bleeding by balancing its operating budget next year, but its own financial accountability office projects the province will return immediately to deficit spending.
In fact, Ontario is on track to rack up $50 billion in new debt between now and 2020/21. This would bring the province’s net debt load (a measure that adjusts for financial assets) to a record $350 billion, or $25, 000 per Ontarian.
Ontario’s economy has struggled for so long that it’s understandable to want to celebrate any good news. However, it’s important to recognize that a brief uptick in economic growth does not mean the province’s problems have been solved.
Instead, the difficult tasks of repairing Ontario’s damaged finances and restoring the province as a reliable driver of economic growth in Canada remain undone.
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