This report provides an updated Economic and Fiscal Outlook for Ontario based on developments since the release of the FAO’s spring outlook on May 31, 2017.
The FAO’s Long Term Budget Outlook assesses the budget implications of maintaining Ontario’s current fiscal structure through three decades of demographic transition.
As part of the Fair Workplaces, Better Jobs Act, the government proposes to raise Ontario’s general minimum wage from its current rate of $11.40 per hour to $14 per hour on January 1, 2018 and $15 per hour the following year. While almost 1.6 million workers will benefit from the increase, a significant number of lower wage workers will lose their jobs and some businesses will struggle to cover higher payroll costs.
In the 2017 Budget, the government restated its commitment to reduce the net debt-to-GDP ratio to its pre-recession level of 27 per cent. The Province’s commitment is based on three unlikely assumptions. If any of these assumptions fall short of expectations, the government’s debt-to-GDP target would not be achieved.
The 2017 Ontario Budget projects balanced budgets beginning in 2017-18 and continuing over the next two years. Given the government’s spending plans, maintaining a balanced budget relies critically on an optimistic revenue forecast – and in particular, on very strong growth in tax revenues. However, there appears to be significant downside risk to the government’s forecast.
The FAO’s Economic and Fiscal Outlook provides an assessment of Ontario’s current economic outlook and the state of the provincial government’s finances.
The Impact of a Housing Market Correction on Ontario’s Fiscal Position provides the FAO’s assessment of risk to Ontario’s finances from a potential housing market correction.
Ontario posted a relatively strong job gain of 76,400 net new jobs in 2016, as the unemployment rate declined to 6.5 per cent. However, looking beyond the headline results reveals a labour market that is undergoing both structural and behavioural changes as well as continuing challenges for some workers.
This report analyzes the fiscal impact of cap and trade, i.e. how cap and trade will impact the Province’s projected surplus/deficit. Under cap and trade, the Province would sell allowances to emit greenhouse gases. It would then spend the funds raised on initiatives to further reduce greenhouse gas emissions.
This report provides an updated Economic and Fiscal Outlook for Ontario based on developments since the release of the FAO’s spring outlook on May 18, 2016.
Home energy spending, how much Ontarians pay to heat and cool their homes and power their appliances, is a frequent topic of debate in Ontario’s Legislative Assembly. Average household spending on home energy varies significantly by region. Households in Toronto and Hamilton-Niagara spend the least, while households in Northern Ontario on average spend the most. Household home energy spending in Ontario rises with income, but is a greater burden for lower income households. In 2014 households in the bottom 20% of the income distribution spent on average 5.9% of income on home energy, while those in the top 20% spent only 1.7% of their much larger incomes. A variety of provincial programs exists to assist households with paying for home energy.
The Financial Accountability Office of Ontario (FAO) expects the Province’s net debt to rise by over $50 billion by 2020-21 to $350 billion. Understanding the nature of the risks of debt to the Province’s fiscal plan can help Members of Provincial Parliament in assessing any debt management and/or reduction strategy.
The Province’s debt burden is one of the highest among provincial governments in Canada. Ontario’s net debt increased significantly during the 2008-09 recession, and grew by $139 billion between 2007-08 and 2015-16. Ontario’s liabilities include non-market and market debt, which consists mainly of publicly held bonds, treasury bills, and US commercial paper issued in Canadian dollars and foreign currencies. Given the characteristics of Ontario’s debt (composition, interest rates, when it is due to be repaid and currency in which it is issued), interest rate risk is the most important risk associated with the Province’s debt. There is uncertainty surrounding the future level of interest rates due to market fluctuations and Ontario’s credit risk. All else equal, an increase in interest rates would lead to higher interest payments, which would reduce the Province’s fiscal flexibility.
The Province forecasts that it will collect $2.74 billion in service fee revenue in 2016-17. This backgrounder provides a partial list of changes to Provincial service fee rates planned for 2016-17 and includes a discussion of the growth rate of service fee revenue. Service fee revenue has increased by an average of 6.8% a year since 2011-12, largely due to the increase in revenue from vehicle and driver registration fees.
Statistics Canada’s recent survey of investment intentions revealed that total investment by Ontario businesses and public sector institutions is expected to edge down by 0.1% to $69.5 billion in 2016. This follows two strong consecutive increases of 11.5% and 9.6% in 2014 and 2015.
The FAO’s Economic and Fiscal Outlook is released each spring and fall, providing an assessment of Ontario’s medium-term economic and fiscal outlook.
On February 5, Statistics Canada released international merchandise trade data for December 2015, which included annual Ontario exports and imports by trade category and country. According to Statistics Canada’s report, Ontario finished 2015 with a seemingly strong 10.5% increase in the value of its international exports, which followed an equally strong 8.0% gain in 2014.
On January 15, the Ministry of Finance released its quarterly Ontario Economic Accounts (OEA) report, showing that the province’s economy posted relatively strong economic growth in the third (July to September) quarter of 2015. Ontario real GDP increased 3.5% (annualized) in Q3, the strongest gain in a year.
This report is the FAO’s first review of the current economic outlook and the state of the provincial government’s finances.