: Ontario's Long-Term Report on the Economy
Introduction

In accordance with the Fiscal Transparency and Accountability Act, 2004, this report presents a long-range assessment of Ontario’s economic and fiscal environment.

Since the government’s first report, much has changed. Ontario’s population has risen from 12.5 million to 13 million people. The number of Ontario seniors (those over 65) has gone from 1.6 million to 1.8 million. At the same time, we’ve seen many Ontario industries face significant challenges. The slowing U.S. economy, rising oil prices and a higher-than-anticipated Canadian dollar affected growth — particularly in the manufacturing and resource sectors. The auto sector has seen a dramatic shift in employment.

In the fall of 2008, Ontario, like most other jurisdictions, began to experience the impacts of a global economic crisis. The effect on Ontario individuals, families and businesses was, and continues to be, profound.

While no jurisdiction, including Ontario, was able to predict this crisis, it dramatically underlined the importance of being able to adapt to challenging times. Governments have a responsibility to lead and to respond to broader forces. While the government cannot reverse the flow of globalization, undo the recession or stop population aging, it can take the necessary steps towards improving Ontario’s prospects.

This report both outlines and underlines the importance of adapting to a new economic reality. To ensure that Ontario’s productivity and competitiveness continue to improve, the McGuinty government has taken significant steps to lead the province forward. In 2009, the government announced a comprehensive tax package that will help create jobs and make Ontario more competitive. The government is also modernizing the province’s infrastructure and building a stronger workforce with full-day learning for four- and five-year-olds.

The goal of this report is to better understand what Ontario will be facing in the coming years. It outlines Ontario’s anticipated demographic changes, economic projections and the implications for public services. Finally, it summarizes the government’s efforts to improve public infrastructure and to position Ontario for a prosperous and sustainable future.

This report has six chapters including an overview of the major challenges and issues that Ontario may face as well as the actions the government is taking now to prepare the province for the future.

Chapter 1: Demographic Trends and Projections

Demographic change has a significant impact on Ontario’s long-term economic and fiscal outlook. This chapter highlights demographic trends over the past two decades. It also provides population projections for the next 20 years and discusses some of the implications of those projections. This chapter identifies five key trends:

• population growth will be healthy but the pace will moderate;
• immigration will account for a predominant and rising share of population growth;
• seniors will make up a much larger share of the population;
• working-age population growth will slow; and
• large urban centres will experience the fastest rate of population growth.

Chapter 2: Long-Term Ontario Economic Projection

This chapter provides a projection of Ontario’s macroeconomic growth over the 2010 to 2030 period.

The chapter discusses:

• the fundamental determinants of long-term economic capacity — the supply of labour, the stock of capital and productivity;
• the key external factors that affect economic performance, including the performance of the economy in other jurisdictions, commodity prices, the Canadian dollar exchange rate and interest rates;
• details of the long-term economic projection for Ontario;
• risks to the economic projection; and
• the perspective of other jurisdictions regarding long-term economic growth.

Chapter 3: Long-Term Sustainability of Ontario Public Services

Chapter 3 looks at the implications of the economic and demographic projections discussed in previous chapters on the demand for public services. It examines:

• demand for health care, education and training, children’s and social services, and other government programs;
• the implications of an aging population for government revenues;
• other jurisdictions’ long-term perspectives; and
• fiscal sustainability.

Chapter 4: Modernizing Ontario’s Tax System for Jobs and Growth

The McGuinty government has taken action to help better prepare Ontario for a changing economy both now and for the long term. The comprehensive tax package announced in the 2009 Budget creates a more modern tax system that will better support long-term economic growth, create more jobs, raise incomes and help sustain the public services Ontarians rely on.

Chapter 4 discusses how the comprehensive tax package promotes jobs and growth through:

• sales tax harmonization;
• tax relief for people; and
• tax relief for business.

Chapter 5: Addressing Ontario’s Infrastructure Gap

Good public infrastructure can boost Ontario’s productivity, encourage investment, lower business costs and improve travel times. Growing urban populations, an expanding economy and climate change will increase the demand for infrastructure. This chapter outlines the Province’s response to these infrastructure challenges by discussing:

• how infrastructure stimulus investments, ReNew Ontario and other measures are laying a foundation for future productivity and economic growth; and
• how key provincial investments now will better prepare Ontario for its future infrastructure needs.

Chapter 6: Towards a Prosperous and Sustainable Future

This chapter outlines some of the government’s policies aimed at improving Ontario’s productivity and economic growth over the long term. These include:

• modernizing the tax system to strengthen the long-term competitiveness of Ontario’s economy by lessening the tax burden on income and investment;
• reducing regulatory barriers to innovation and economic growth by looking at ways to simplify and modernize the government’s relationship with business;
• investing in infrastructure to create jobs today while increasing Ontario’s productive capacity for the future;
• investing in knowledge and skills as building blocks to competitiveness;
• building environmental sustainability into Ontario’s economic growth;
  
• fostering innovation and a knowledge-based economy, particularly in advanced manufacturing, information and communications technology, business and financial services, entertainment and creative industries, and life sciences; and
• partnering with key sectors for economic diversity.

While this paper is a summary of work and analysis on the major issues that face Ontario, it is not a fiscal plan or an economic prediction. It is a guide to what might happen; a considered list of what to pay attention to in the long term. The non-historical and forward-looking statements here are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. Actual future results and trends may differ from what is presented.

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