Economic Outlook and Fiscal Review 2005 - English Statement

At the midway point of our first mandate, we are confident about Ontario's future.

Ontario's economy is performing solidly: a number of sectors are doing well, employment is up and growth is better than expected.

Since we have taken office, Ontario businesses have created more than 193,000 net new jobs.

The current consensus of private-sector forecasts for Ontario's real growth in 2005 has increased from 2.3 per cent at the time of the 2005 Budget to 2.5 per cent.

We anticipate continued solid growth in 2006 and 2007.

We are confident, as well, that our plan is the right plan to secure Ontario's future prosperity.

We are working with the people of this province to enhance Ontario's economic advantage by:

• strengthening the education and skills of our people;
  
  
• improving their health;
  
  
• fostering innovation and leveraging diversity;
  
  
• and ensuring we get the fundamentals — including energy and infrastructure — right.

We are making these investments in our future prosperity at the same time as we are reducing the province's deficit.

We are providing strong and prudent financial management.

Economic Outlook

Winston Churchill once said, "However beautiful the strategy, you should occasionally look at the results."

Mr. Speaker, Premier McGuinty and his government are all about results — and the results in Ontario are good.

Our economic foundations are firm and the outlook is positive, though challenges lie ahead.

This year, there has been strong job growth in information and culture, wholesale and retail trade, education, finance, insurance, real estate and construction.

Unemployment is expected to average 6.7 per cent — the lowest annual rate since 2001.

Retail spending is up; the housing market remains robust; and overall real consumer spending is also on the rise.

Ontario's auto sector continues to be a top producer in North America. $4.5 billion in new investments — including a new Toyota plant — have secured over 19,000 jobs and are creating 1,800 new jobs.

Ontario is also North America's second-largest employer of information and communications technology workers.

It is the business and head-office capital of Canada. The province's financial and business services sectors are performing well.

With some of the world's best theatre and cultural attractions, this is the national hub for the arts. Employment in film and media is on the rise.

Turning to our resources, the mining sector has a promising future, with strong global demand generating high mineral prices.

On the other hand, forestry faces enormous challenges. In response, our government has committed an unprecedented $680 million in support to help the sector compete globally.

The agri-food industry has seen improved market prices, though farmers have needed support through marketing, innovation and income safety nets.

Mr. Speaker, overall the Ontario economy is doing well.

In light of the growth in the economy this year, we have increased our own projection for real GDP growth from 2.0 per cent to 2.2 per cent.

This government is working hard to ensure that Ontario is prepared to weather any challenges that may lie ahead by bolstering the foundations of economic growth.

We are investing in the education and skills of our people, from the early years to our historic $6.2 billion investment in universities, colleges and training programs.

To win the innovation race, we are making strategic investments in research and development through the newly created Ontario Research Fund.

Ontario should be the first to discover new ideas, the first to turn them into new products and services, and the first to market these products and services to the world.

We are working to leverage one of our greatest strengths — our diversity — by attracting the best and brightest from around the world and fully integrating them into our society and economy.

We are working to get the fundamentals right.

New electricity generation capacity is on the way: currently there are more than 9,000 megawatts at various stages of development — enough power for 4.1 million homes.

We're on target to meet our goal of five per cent renewable generation by 2007; we're taking action to ensure prices are competitive; and new smart meters will eventually help everyone conserve energy.

In the 2005 Budget, we announced our five-year, $30 billion infrastructure investment plan.

Since then, we have announced new road upgrades to highways across Ontario and we've announced or broken ground at affordable housing projects in Waterloo, Guelph, Hamilton, Brantford, Vaughan, Peterborough and Kingston.

To help speed up the movement of people and goods, we've announced improvements to border crossings at Windsor, Sarnia and Niagara.

To date, the Ontario Strategic Infrastructure Financing Authority (OSIFA) has committed to provide up to $2.1 billion in low-cost financing to more than 170 Ontario municipalities for 1,100 local infrastructure projects.

We've also begun hospital expansions or renovations in Sudbury, London, Oakville, Barrie, Almonte, Ottawa, Belleville, Mississauga and Toronto, as well as announcing a new hospital in St. Catharines/Niagara.

At the same time, we are improving the health of our people by reducing wait times for key medical procedures and expanding access to doctors, nurses and other health care professionals.

Fiscal Update

Turning now to our fiscal plan, Mr. Speaker, I would like to update you on our progress.

We are on track to eliminate the deficit we inherited.

Higher than anticipated revenues allow us to project the 2005-06 deficit to be $2.4 billion.

That's a $427 million improvement from our 2005 Budget projection.

If the reserve is not required, the deficit is projected to be $1.4 billion.

Although we are slightly ahead of the plan this year, in light of what we know about the risks that our economy faces, we are not revising our deficit-elimination target.

As was stated in the 2005 Budget, the deficit will be eliminated no later than 2008-09, or a year earlier, in 2007-08, if the reserve is not required.

Our balanced, responsible approach to eliminating the deficit, while continuing to make essential investments in education, health and the economy, is working for Ontarians.

We must continue, however, to manage the Province's finances prudently.

Overall, our expenditures are on target and our plan is disciplined.

Our prudent approach to expenditures will be even more important now to help ensure that we are equally prepared for the challenges ahead.

Risks and Challenges

Mr. Speaker, we are optimistic about economic growth, but it is important to remember that there are clouds on the horizon. There are risks beyond our control.

The Canadian dollar hit a 13-year high in September of this year; oil prices have increased dramatically; and the U.S. economic outlook faces challenges.

As a result, private-sector forecasters have decreased their estimates for Ontario's GDP growth in 2006 from an average of 2.9 per cent to 2.6 per cent. We have also reduced our projection from 2.8 per cent to 2.6 per cent. The forecast is still positive for Ontario; we still anticipate solid economic growth.

The U.S. economy has continued to grow at a strong pace, remaining close to our projections in the 2005 Budget. The devastation caused by Hurricanes Katrina, Rita and Wilma has disrupted the U.S. economy, although rebuilding efforts will likely stimulate activity in the final months of 2005 and early 2006. While the U.S. economy also faces risks, forecasters are, on balance, optimistic that growth will continue at a healthy pace.

The most significant change this year has been the price of oil. At the time of our 2005 Budget, forecasters projected crude prices would average $49.10 US a barrel in 2005. Since then, prices and projections have risen sharply.

The average forecast for the Canadian dollar is over 84 cents US in 2006 — two cents higher than projected earlier this year. For Ontarians visiting the United States, this is positive. For Ontario companies making capital machinery investments to improve productivity, it is good news.

It does, however, make it harder for Ontario exporters to compete. We've seen that exporters are responding to the challenge by increasing productivity, lowering costs and shifting towards higher value-added products. As a result, in the short term, export volumes are expected to increase marginally.

There is considerable difference of opinion about the future path of the dollar, but it is unlikely that the dollar will decline significantly in value in the short term, and overall the economy will have to adjust.

Another challenge to the economy is the $23 billion gap between what Ontarians contribute to the federal government and what they receive in return.

We will continue to seek a full and effective partnership with the federal government to address the issue of the gap.

Transparency

Mr. Speaker, this year, in accordance with the Fiscal Transparency and Accountability Act, 2004 , we have added some new features to this fall report.

These include an estimate of tax expenditures as well as information on how Ontarians can contribute their ideas as we prepare our next budget.

We are committed to accountability and transparency, Mr. Speaker, because they contribute to a stronger, more informed democracy.

Conclusion

Mr. Speaker, we are proud of the progress Ontario is making.

We are realistic about the challenges we will face.

And we are optimistic that, with our plan, Ontarians can and will succeed.

Working together, we can and we will seize the almost limitless opportunities of the 21^st century.

We can and we will build a quality of life second to none.

We can and we will fulfil the aspirations that all Ontarians share — for our province and our country, and, most importantly, for our children and our children's children.

Thank you, Mr. Speaker.