Rosy rhetoric can’t hide Ontario’s dreary fiscal outlook
Today, Ontario Finance Minister Charles Sousa (pictured above) will deliver Ontario’s fall economic update. It will no doubt be an upbeat narrative on how Ontario is on the road to economic growth and that the province’s finances are on track to a balanced budget in the not too distant future, despite the external economic slings and arrows of an ever-changing world.
This of course will fly in the face of Ontario’s Financial Accountability Office, whose recent economic and fiscal outlook projected Ontario will not balance its budget by 2017-18 and that indeed the budget deficit will continue to 2020-21 in the absence of additional action.
Also missing from the cheerful rhetoric will be the long-term picture on how Ontario has spent a quarter-century losing its place within the Canadian economy as a result of slower economic growth and growing budget deficits. Indeed, Ontario’s economy has been growing more slowly than the rest of Canada for some time and the provincial government has been accumulating net debt at a faster rate than the other provinces.
Ontario’s share of Canada’s GDP was 42 per cent in 1990 and despite some fluctuations averaged 41 per cent over the period 1990 to 2000. Since 2001, Ontario’s share of the country’s GDP has fallen going from 42 per cent in 2001 to 36 per cent by 2013 and rising only slightly to 38 per cent recently, given the growth slowdown in the energy producing provinces.
Despite slowing economic growth after 2007, Ontario’s government continued to spend generously and in excess of revenues and added debt to the province’s books at a faster rate than the other provinces. As a result, Ontario’s share of provincial net debt has also grown over time. Whereas, in 1990, Ontario had 37 per cent of Canada’s population and 35 per cent of provincial net debt, by 2015 it had 39 per cent of Canada’s population and 51 per cent of provincial net debt.
Ontario’s slower economic growth and growing population means stagnant per capita incomes. There’s indeed a productivity problem given that output per capita and per employee is not growing robustly. Moreover, the province needs more business capital investment that will deepen capital stock, raise productivity and bring future economic growth opportunities, but that too has been lagging. The result is an economically weaker and more indebted province.
Rather than focus on the province’s economic and fiscal future in a more determined manner, the Minister Sousa plans to unveil yet more regulations and interventions in the province’s economy. These regulations will chew up more government resources in their implementation and do little to directly boost economic activity. Perhaps, Ontario’s education minister should also be directing the efforts underway to boost financial and economic literacy in Ontario’s Grade 10 curriculum to the members of Ontario’s cabinet—before it’s too late.
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