March 22, 2007
RESPONSIBLE FISCAL MANAGEMENT
Putting Ontario's Fiscal House in Order
When the government came to office in 2003, an independent review of Ontario’s finances concluded that the Province was on track to post a significant deficit in 2003-04 – since confirmed to have been $5.5 billion.
This fiscal year, despite weaker-than-expected economic growth, the Province is projected to post its second consecutive surplus. The government has been able to accomplish this while investing in key priority areas such as health, education, infrastructure and postsecondary education.
Ontario has made progress to eliminate the structural deficit through prudent and disciplined fiscal management, while taking a balanced approach to investing in key priority areas. The government has exceeded its planned deficit targets in each fiscal year since 2003-04. In 2004-05, the deficit was reduced to $1.6 billion, and in 2005-06 the Province posted a surplus of $0.3 billion.
On Track to Post Five Consecutive Balanced Budgets
The medium-term fiscal outlook now projects surpluses of $0.4 billion in 2007-08, $1.3 billion
in 2008-09 and $1.6 billion in 2009-10, if the reserve is not required. This considerable improvement in the Province’s fiscal position means that, if the reserve is not required in 2007-08, the Province is on track to post five consecutive surpluses between 2005-06 and 2009-10.
This Province’s debt-to-GDP ratio is projected to continue to improve to 17.4 per cent by 2009-10, compared to 25.2 per cent in 2003-04.
Medium-Term Expense Outlook
The medium-term expense outlook reflects the new investments announced in this Budget, as well as those made in the last three budgets, mainly in priority areas such as health, education, postsecondary education and training, infrastructure and programs for the vulnerable.
The medium-term expense outlook continues to maintain the government’s commitment to align growth in expense with revenue growth. Over the medium term, total expense is projected to rise from $91.2 billion in 2007-08 to $96.2 billion to 2009-10 – an increase of $5.0 billion. Annual growth in total expense is expected to average 2.7 per cent over the medium term, which is less than the 3.4 per cent average annual growth in revenue forecast over this period.
Ontario was able to find more than $800 million in savings, and is now the second lowest among provinces in per-capita spending on administration.
| Interim 2006–07 |
Plan 2007–08 |
Outlook | ||
|---|---|---|---|---|
| 2008–09 | 2009–10 | |||
| Total Revenue | 89.1 | 91.5 | 94.7 | 97.8 |
| Expense | ||||
| Programs | ||||
| Health Sector | 36.1 | 37.9 | 39.8 | 41.5 |
| Education Sector 1 | 11.7 | 12.4 | 12.8 | 12.9 |
| Postsecondary Education and Training Sector | 5.4 | 5.9 | 6.0 | 6.1 |
| Children’s and Social Services Sector | 10.5 | 10.9 | 11.2 | 11.3 |
| Justice Sector | 3.3 | 3.3 | 3.4 | 3.4 |
| Other Programs | 12.9 | 11.6 | 11.2 | 11.6 |
| Total Programs | 80.0 | 82.0 | 84.2 | 86.8 |
| Interest on Debt | 8.8 | 9.1 | 9.2 | 9.4 |
| Total Expense | 88.8 | 91.2 | 93.4 | 96.2 |
| Surplus/(Deficit) Before Reserve | 0.3 | 0.4 | 1.3 | 1.6 |
| Reserve | – | 0.8 | 1.0 | 1.3 |
| Surplus/(Deficit) | 0.3 | (0.4) | 0.3 | 0.4 |
| 1 Education sector excludes Teachers’ Pension Plan (TPP). Including TPP, total education sector expense is projected at $12.1 billion in 2006–07, $12.8 billion in 2007–08, $12.8 billion in 2008–09 and $12.6 billion in 2009–10. Note: Numbers may not add due to rounding. |
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Ontario’s Economic Outlook
The Ministry of Finance is projecting Ontario real GDP growth of 1.6 per cent in 2007, up from an estimated 1.3 per cent in 2006. Ontario’s growth rebounded in the fourth quarter of 2006 and is expected to strengthen through 2007 as U.S. demand picks up steam and the lower Canadian dollar and oil prices stimulate economic activity.
Real GDP growth is expected to improve over the medium term, with the Ministry of Finance projecting growth of 2.8 per cent in 2008 and 3.1 per cent in 2009. Improving growth over the medium term reflects a more favourable global economic environment along with Ontario’s strong fundamentals.
usiness investment spending is expected to lead growth as firms invest to improve their competitive position. Strong income gains, low interest rates, and increasing wealth will support growing household spending. Ontario’s trade is expected to turn around as U.S. auto demand picks up and new auto product lines come on stream.
Private-sector Economic Forecasts
Private-sector forecasters generally expect Ontario real GDP growth to strengthen over the next three years. The average of private sector forecasts for Ontario real GDP growth is 1.7 per cent in 2007, 2.9 per cent in 2008 and 3.2 per cent in 2009. Ministry of Finance planning assumptions used to develop the fiscal plan are deliberately prudent, below the private-sector average in every year.
270,000 More Jobs Expected Over Next Three Years
Ontario’s job creation is expected to continue as the economy grows. Since October 2003, 327,000 net new jobs have been created, with full-time positions accounting for almost three-quarters of the increase. Over the 2007 to 2009 period, 270,000 net new jobs are projected, consistent with private sector forecasts. The unemployment rate is expected to fall as job gains exceed the projected increase in labour force.
Ontario is expected to create an additional 71,000 jobs this year, an increase of 1.1 per cent. Employment growth is expected to pick up to 1.4 per cent or 90,000 jobs in 2008 and 1.6 per cent or 109,000 jobs in 2009.
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Contact:
Scott Blodgett
Ministry of Finance
416-325-0324