2007 Ontario Economic Outlook and Fiscal Review

• Foreword

ANNEX I: A STRONGER ONTARIO

• Introduction

• Investments for a Stronger Ontario
  1. Enhancing Competitiveness Through Immediate Tax Reductions
     Investing in Tourism and Film
     Encouraging Innovation
  2. Investing in People and Communities
     Helping Workers and Communities Adjust to Competitive Challenges
     Ontario's Skilled and Highly Educated Workforce: A Key Advantage
  3. Investing in Infrastructure

• Federal Government Has a Role to Play
  • Supporting Business Investment in Ontario
  • Supporting Ontario's Workers
  • Supporting Municipal Investment in Infrastructure and Public Transit
  • Fulfilling Ontario's Fair Share

ANNEX II: ENHANCING ONTARIO'S TAX COMPETITIVENESS

• Enhancing Ontario's Business Tax Competitiveness
  • New Measures to Further Reduce and Eliminate Capital Tax
  • Expanding Eligibility for the Small Business Corporate Income Tax Rate
  • Labour-Sponsored Investment Funds (LSIFs)
  • Enhancing Tax Support for Ontario's Film and Television Industry
  • Land Transfer Tax (LTT) Refund for All First-Time Homebuyers

ANNEX III: ECONOMIC AND FISCAL OUTLOOK

Section A: Introduction

• Introduction

Section B: Economic Outlook

• Outlook for Strengthening Ontario Economic Growth
  • Private-Sector Forecasts
  • Ontario's Resilience in the Face of Global Economic Challenges
  • Comparison to the 2007 Ontario Budget

• Challenging External Economic Environment
  • U.S. Sub-Prime Mortgage Defaults Challenge Financial Market Liquidity
  • Interest Rates to Trend Modestly Higher
  • United States Set to Overcome Setbacks
  • Oil Prices Are Expected to Remain High
  • Stronger Canadian Dollar Challenges Business
  • High Dollar Will Challenge Ontario's Trade Performance
  • Inflation Will Remain Stable

• Continued Strong and Resilient Domestic Economy
  • Strong Investment Spending to Continue
  • More Jobs Will Be Created
  • Incomes Will Continue to Grow
  • Employment and Income Gains Will Fuel Household Spending
  • Housing Market Remains Healthy
  • Details of the Ontario Economic Outlook

Section C: Ontario's Fiscal Plan

• Ontario's Fiscal Plan
  • Key Elements of Ontario's Medium-Term Fiscal Plan
  • 2007–08 Fiscal Outlook
  • Medium-Term Fiscal Outlook
  • Fiscal Prudence
  • Risks and the Fiscal Outlook
  • Maintaining a Prudent Debt-to-GDP Ratio

Section D: Ontario's Revenue Outlook

• Ontario's Revenue Outlook
  • Inherent Uncertainty in Forecasting Revenues
  • Sources of 2007–08 Revenue Change Since 2007 Ontario Budget
  • Medium-Term Revenue Changes Since 2007 Ontario Budget
  • Sources of Medium-Term Revenue Change Since 2007 Ontario Budget
  • Potential Risks to Provincial Revenue

Section E: Ontario's Expense Outlook

• 2007–08 In-Year Expense Changes
  • Investing in Infrastructure and Transportation
  • Agriculture Sector Support
  • Education Investments
  • Initiatives to Enhance Competitiveness
  • Investing in People and Communities
  • Health Sector Investments
  • Children's and Social Services Investments
  • Justice Sector Investments
  • Northern and Rural Investments
  • Other Investments
• Medium-Term Expense Outlook
• Expense Risks and Sensitivities
• Contingent Liabilities
  • Ontario Nuclear Funds Agreement
  • Obligations Guaranteed by the Province
  • Social Housing — Loan Insurance Agreements
  • Claims Against the Crown
  • Canadian Blood Services

Section F: Details on Ontario's Finances

• Details on Ontario's Finances

ANNEX IV: BORROWING AND DEBT MANAGEMENT

• Long-Term Public Borrowing
  • Debt
  • Total Debt Composition
  • Debt Management
  • Debt Maturities
  • Cost of Debt
  • Net Debt-to-GDP

• Glossary of Financial Terms Used in Annex IV

ANNEX V: TRANSPARENCY IN TAXATION

• Structure of the Report
• Scope
• Method
• Personal Income Tax
• Personal Income Tax — Description of Tax Provisions
  • Ontario Non-Refundable Tax Credits
  • Other Ontario Tax Credits
  • Exemptions, Deductions, Deferrals and Other Measures Shared with the Federal Government
• Corporate Tax
• Corporate Tax — Description of Tax Provisions
  • Corporate Income Tax
  • Exemptions, Deductions, Deferrals and Other Measures Shared with the Federal Government
• Sales and Commodity Tax
• Sales and Commodity Tax — Description of Tax Provisions
  • Gasoline Tax
  • Retail Sales Tax
• Education Property Tax
• Employer Health Tax
• Estate Administration Tax
• Gross Revenue Charge

ANNEX VI: Economic Data Tables

• Economic Data Tables

ANNEX VII: How to Participate in the 2008 Pre-Budget Consultations

• How to Participate in the 2008 Pre-Budget Consultations

List of Tables

ANNEX II: ENHANCING ONTARIO'S TAX COMPETITIVENESS

• Table 1: Ontario's Accelerated Capital Tax Elimination Plan with Proposed New Initiatives
• Table 2: Fiscal Impact Summary of Proposed Tax Measures

ANNEX III: ECONOMIC AND FISCAL OUTLOOK

Section B: Ontario's Economic Outlook

• Table 1: Ontario Economic Outlook
• Table 2: Private-Sector Forecasts for Ontario Real GDP Growth
• Table 3: Impacts of Changes in Key Assumptions on Ontario Real GDP Growth
• Table 4: Key External Factors Affecting Ontario's Economy
• Table 5: The Ontario Economy in 2007
• Table 6: Canadian Interest Rate Outlook
• Table 7: The Ontario Economy, 2005 to 2010

Section C: Ontario's Fiscal Plan

• Table 8: 2007–08 Fiscal Outlook — In-Year Change
• Table 9: Medium-Term Fiscal Plan and Outlook

Section D: Ontario's Revenue Outlook

• Table 10: Summary of 2007–08 In-Year Revenue Change Since 2007 Ontario Budget
• Table 11: Summary of Medium-Term Outlook
• Table 12: Summary of Medium-Term Personal Income Tax Outlook
• Table 13: Summary of Medium-Term Corporations Tax Outlook
• Table 14: Summary of Medium-Term Revenue Change Since Budget
• Table 15: Selected Economic and Revenue Risks and Sensitivities

Section E: Ontario's Expense Outlook

• Table 16: Summary of In-Year Expense Changes Since Budget
• Table 17: Selected Expense Risks and Sensitivities
• Table 18: Selected Compensation Costs

Section F: Details on Ontario's Finances

• Table 19: Medium-Term Fiscal Plan and Outlook
• Table 20: 2007–08 Fiscal Outlook — In-Year Change
• Table 21: Revenue
• Table 22: Total Expense
• Table 23: 2007–08 Infrastructure Expenditures
• Table 24: Ten-Year Review of Selected Financial and Economic Statistics

ANNEX IV: BORROWING AND DEBT MANAGEMENT

• Table 1: 2007–08 Borrowing Program
• Table 2: Medium-Term Borrowing Outlook

ANNEX V: TRANSPARENCY IN TAXATION

• Table 1: Personal Income Tax
• Table 2: Amounts on Which Indexed Non-Refundable Tax Credits Are Based
• Table 3: Corporate Tax
• Table 4: Sales and Commodity Tax
• Table 5: Education Property Tax
• Table 6: Employer Health Tax (EHT)
• Table 7: Estate Administration Tax
• Table 8: Gross Revenue Charge (GRC)

ANNEX VI: ECONOMIC DATA TABLES

• Table 1: Ontario, Gross Domestic Product, 1993–2006
• Table 2: Ontario, Growth in Gross Domestic Product, 1993–2006
• Table 3: Ontario, Selected Economic Indicators, 1993–2006
• Table 4: Ontario, Selected Economic Indicators, Annual Change, 1993–2006
• Table 5: Ontario, Real Gross Domestic Product by Industry at Basic Prices, 2003–2006.. 133
• Table 6: Ontario, Growth in Real Gross Domestic Product by Industry at Basic Prices, 2003–2006
• Table 7: Ontario, Real Gross Domestic Product at Basic Prices in Selected Manufacturing Industries, 2003–2006
• Table 8: Ontario, Growth in Real Gross Domestic Product at Basic Prices in Selected Manufacturing Industries, 2003–2006
• Table 9: Ontario, Housing Market Indicators, 2003–2006
• Table 10: Selected Financial Indicators, 1993–2006
• Table 11: Ontario and the G7, Real Gross Domestic Product Growth, 1993–2006
• Table 12: Ontario and the G7, Employment Growth, 1993–2006
• Table 13: Ontario and the G7, Unemployment Rates, 1993–2006
• Table 14: Ontario and the G7, CPI Inflation Rates, 1993–2006
• Table 15: G7, Exchange Rates, 1993–2006
• Table 16: Ontario, International Merchandise Exports by Major Commodity, 2006
• Table 17: Ontario, International Merchandise Imports by Major Commodity, 2006
• Table 18: Ontario, International Merchandise Trade by Major Region, 2006
• Table 19: Canada, International Merchandise Trade by Major Region, 2006
• Table 20: Ontario, Selected Demographic Characteristics, 1991–2007
• Table 21: Ontario, Components of Population Growth, 1997–98 to 2006–07
• Table 22: Ontario, Labour Force, 1993–2006
• Table 23: Ontario, Employment, 1993–2006
• Table 24: Ontario, Unemployment, 1993–2006
• Table 25: Ontario, Employment Insurance (EI) and Social Assistance, 1993–2006
• Table 26: Ontario, Labour Compensation, 1993–2006
• Table 27: Ontario, Employment by Occupation, 1995–2006
• Table 28: Ontario, Distribution of Employment by Occupation, 1995–2006
• Table 29: Ontario, Employment by Industry, 1997–2006
• Table 30: Ontario, Growth in Employment by Industry, 1997–2006
• Table 31: Ontario, Employment Level by Economic Regions, 1996–2006
• Table 32: Ontario, Employment Level by Industry for Economic Regions, 200
• Table 33: Ontario Economic Regions

List of Charts

ANNEX I: A STRONGER ONTARIO

• Chart 1: Ontario's Combined CIT Rates Are Falling
• Chart 2: Structure of Ontario's Economy, 2006
• Chart 3: EI Funding Per Unemployed Person in Ontario and the Rest of Canada, 2006

ANNEX II: ENHANCING ONTARIO'S TAX COMPETITIVENESS

• Chart 1: Eliminating Capital Tax for Manufacturing and Resource Activities

ANNEX III: ONTARIO'S ECONOMIC AND FISCAL OUTLOOK

Section B: Ontario's Economic Outlook

• Chart 1: Private-Sector Forecasts
• Chart 2: U.S. Sub-Prime Fallout
• Chart 3: 10-Year Government of Canada Bond Rate
• Chart 4: U.S. Real GDP Growth
• Chart 5: Crude Oil Prices
• Chart 6: Canadian Dollar
• Chart 7: Ontario CPI Inflation Rate
• Chart 8: Real Business Investment
• Chart 9: Employment
• Chart 10: Real After-Tax Income
• Chart 11: Real Consumer Spending
• Chart 12: Ontario Housing Starts

Section C: Ontario's Fiscal Plan

• Chart 13: Ontario's Strong Fiscal Performance
• Chart 14: Continual Improvement in Ontario's Debt-to-GDP Ratio

Section D: Ontario's Revenue Outlook

• Chart 15: 2006–07 Tax Revenue

Section F: Details on Ontario's Finances

• Chart 16: Composition of Revenue Outlook. 2007–08
• Chart 17: Composition of Total Expense Outlook, 2007–08
• Chart 18: Composition of Program Expense Outlook, 2007–08

ANNEX IV: BORROWING AND DEBT MANAGEMENT

• Chart 1: Borrowing — All Markets
• Chart 2: Borrowing — Domestic Market
• Chart 3: Debt
• Chart 4: Total Debt Composition
• Chart 5: Interest Rate Reset Exposure
• Chart 6: Foreign Exchange Exposure
• Chart 7: Debt Maturities
• Chart 8: Effective Interest Rate (Weighted Average) of Debt
• Chart 9: Net Debt-to-GDP