: 2009 Ontario Economic Outlook and Fiscal Review

Backgrounder
HELPING ONTARIANS CONFRONT THE GLOBAL ECONOMIC CHALLENGES

October 22, 2009

Like most other jurisdictions around the world, Ontario has been hard-hit by the global recession and financial crisis. Since signs of the economic downturn became apparent, the McGuinty government has been working to lessen the impact of the recession and position Ontario for future economic growth.

The McGuinty government is helping Ontarians through the recession by:

• Investing $32.5 billion over two years in infrastructure to stimulate economic growth and help preserve and create jobs across the province
• Investing in skills and training initiatives that are helping unemployed workers retrain for new careers
• Investing in the auto industry to help achieve long-term viability and competitiveness and to keep Ontarians working in communities across the province
• Accelerating the Ontario Child Benefit phase-in and increasing social assistance rates to help those most vulnerable to the downturn.

In addition, the government is investing in measures that would increase Ontario’s competitiveness and support stronger growth over the long term.  These include significant investments in green initiatives, support for the knowledge-based economy and a progressive package of proposed tax cuts, including the Harmonized Sales Tax, to help Ontario meet the growing challenges of a competitive global economy.

INFRASTRUCTURE INVESTMENTS

Since 2003, investing in infrastructure has been a priority for the government.  The 2009 Budget allocated $32.5 billion for infrastructure investments over two years to stimulate economic growth, create short- and long-term jobs and help Ontario families.  Infrastructure investments are being made in all key sectors — including highways, roads and transit projects, water and environmental projects, health, education, culture, tourism, sports and recreation, and social and affordable housing.

The 2009 Budget committed $780 million in capital funding for Ontario’s colleges and universities. Colleges and universities plan to create over 36,000 new spaces by 2011, including 2,300 new apprenticeship spaces.

These investments are in addition to the $30 billion ReNew Ontario infrastructure investment plan, which was completed a full year ahead of schedule in 2008–09.

SUPPORTING THE AUTO SECTOR

The auto sector is important to the province. It accounted for 3.7 per cent of Ontario’s gross domestic product (GDP) in 2008 and directly or indirectly supports one in 20 Ontario jobs. The government’s investment in the auto sector is helping to strengthen manufacturing in the province, and is keeping Ontarians working in communities such as Oshawa, Brampton, Ingersoll and Windsor.

INVESTING IN SKILLS AND TRAINING

Skills training is key to responding to the short-term challenges posed by the global economic recession, while preparing the province’s workforce for the new economy.  That is why the government is investing more than $750 million over two years for new skills and enhanced training and literacy initiatives.

• ¹ Based on the most recent data available.
• ² Employment Assistance Services and Job Connect help clients prepare for, find, get and keep jobs. Ontario Job Creation Partnership provides work experience through local employers and community groups. Ontario Targeted Wage Subsidies are used to encourage employers to permanently hire eligible unemployed workers.
• Source: Ontario Ministry of Training, Colleges and Universities.

REDUCING POVERTY

The McGuinty government is making investments that will improve the quality of life for Ontarians, especially those most affected by the global economic recession. The government is committed to reducing poverty and passed the Poverty Reduction Act, 2009, which will help ensure future governments keep poverty reduction as a priority.

The government is working to improve the lives of Ontario’s most vulnerable by:

• Initiating the Poverty Reduction Strategy, a comprehensive and long-term plan to provide children and their families with the necessary supports to succeed in life
• Providing more than $400 million in additional children’s benefits between 2009–10 and 2011–12 by phasing in the Ontario Child Benefit two years ahead of schedule, to reach the maximum of $1,100 annually per child by July 2009
• Increasing by two per cent the adult basic needs allowances and maximum shelter allowances for recipients of the Ontario Disability Support Program and Ontario Works — with this increase and with compounding, social assistance benefits will be 11.5 per cent higher than in 2003.

SUPPORTING SENIORS

The government is supporting Ontario seniors by:

• Providing grants of up to $250 to help low- to middle-income senior homeowners pay their 2009 property taxes through the Ontario Senior Homeowners’ Property Tax Grant.  Starting in 2010, the maximum grant amount will double to $500.  Over the next five years, the grant will provide about $1 billion in property tax relief to over 600,000 Ontario seniors.
• Improving the Ontario Property and Sales Tax Credits since 2003 to ensure they better reflect circumstances facing low-income seniors.  The 2009 Budget proposed to further increase the threshold at which senior couples’ benefits begin to be reduced, to ensure that senior couples receiving the guaranteed minimum level of income from governments receive the full benefit from these credits.  Starting in 2010, the Ontario Property and Sales Tax Credits would be replaced with separate and enhanced tax credits.
• Providing seniors with greater access to locked-in funds by increasing to 50 per cent from 25 per cent the unlocking of new Life Income Funds.

INVESTING IN A GREEN ECONOMY

Through the Green Energy and Green Economy Act and the more than $300 million in environmental initiatives announced in the 2009 Budget, the Ontario government is taking steps to address climate change and establish the foundation for a green economy.

Ontario Power Generation is preparing to close four coal-fuelled power units.  This will help move the province to electricity generated from greener sources, which will increase investment and opportunities in Ontario’s green economy.

The province is also introducing legislation that would give the government authority to set up a greenhouse-gas emissions trading system in Ontario, enabling Ontario to link to other North American and international cap-and-trade systems.  Companies participating in this linked-in cap-and-trade system would have increased carbon trading opportunities and reduced costs.

SUPPORTING THE KNOWLEDGE-BASED ECONOMY

Through proposed enhancements to two key refundable tax credits, the government is helping to strengthen the competitiveness of Ontario’s entertainment and creative industries, which are important components of the new knowledge-based economy.

The Ontario Interactive Digital Media Tax Credit is available to qualifying corporations for expenditures related to the creation, marketing and distribution of eligible interactive digital media products.  The 2009 Budget proposed to significantly enhance the tax credit rates and extend the tax credit to more digital media game developers.  The government is also proposing to streamline support for large, specialized game developers and strengthen Ontario’s competitiveness for investment in this sector.

The Ontario Production Services Tax Credit is a 25 per cent refundable tax credit for qualifying labour expenditures available to corporations for qualifying foreign and domestic film and television production services in Ontario.  This credit would be expanded to include additional qualifying production expenditures incurred in Ontario after June 30, 2009, including eligible service contracts as well as the purchase or rental of qualifying tangible properties, such as equipment and studios.

TAX CHANGES TO ENHANCE PROSPERITY

For details about how the proposed new tax package would improve Ontario’s competitiveness, see Creating a More Competitive Tax System.