: 2012 Ontario Economic Outlook and Fiscal Review

Foreword

Ontario is not immune to a changing global economy and the uncertainty that comes with change. Many Ontario families are still feeling the effects of the worldwide recession.

Before the recession, Ontarians rebuilt their public services, after years of neglect, by working together. When the recession hit, the Province invested in short-term economic stimulus to protect and create jobs and to protect public services: education, health care and modern infrastructure.

The McGuinty government’s economic plan has confronted the challenges facing Ontario leading up to and through the global recession. The plan is also making smart investments that create jobs and protect the gains Ontario has made in public services.

The plan is working.

Economic and Job Growth

Ontario’s economy is growing steadily — but modestly. Since the end of the recession in the second quarter of 2009, Ontario is experiencing both economic and job growth. The province’s real gross domestic product (GDP) has increased by 8.1 per cent while over 350,000 net new jobs have been created.

The Tax Plan for Jobs and Growth, including the Harmonized Sales Tax (HST), has made Ontario one of the most attractive places in North America for businesses to invest. Business investment in machinery and equipment, which increased 18.7 per cent in 2011, is a key driver of Ontario’s economic growth.

Despite making progress, Ontario is in a period of restrained growth. Moderate economic growth is expected to continue over the next three years. The provincial economy is projected to grow by 2.0 per cent in 2012, 1.9 per cent in 2013, 2.3 per cent in 2014 and 2.4 per cent in 2015.

Managing Spending

In order to meet the Province’s fiscal targets, the McGuinty government is managing spending prudently. Ontario has been working hard to follow a plan to reduce growth in spending. Last year, growth in program spending was less than one per cent — the second lowest rate of growth in Ontario in a decade.

The 2012 Budget included four dollars in savings and cost-containment measures for each additional dollar in proposed new revenue measures, including nearly $18 billion in savings and cost avoidance over three years.

The plan is working, yet there is more work still to do.

Protecting Jobs and Public Services

Everyone has a role to play in helping Ontario eliminate the deficit. That is why the McGuinty government is taking strong action to restrain compensation costs in the public and broader public sectors to ensure it continues to meet fiscal targets and protect jobs and public services.

Over the past nine years, the Ontario government has provided fair pay and benefit increases to public-sector workers because the work they do for Ontario families is highly valued.

More than half of what government spends — over $55 billion — goes to wages and benefits for employees in the broader public sector. Ontario is facing a clear choice: restrain wages, or lay off thousands of hard-working Ontarians — people who provide the public services relied on by Ontario families.

The McGuinty government respects the collective bargaining process. In order to meet its deficit elimination targets, Ontario is not providing funding for incremental compensation increases for new collective agreements. The government is committed to consultation and negotiation with its partners across the broader public sector. With the Putting Students First Act, 2012, Ontario is protecting 20,000 jobs in education and would support savings to taxpayers of $2 billion over two years.

In September 2012, the government shared proposed draft legislation, which outlines the government’s balanced approach to restraining broader public sector wages. The proposed Protecting Jobs and Public Services Act would help ensure future collective agreements protect jobs and public services and would also help eliminate the deficit. The draft legislation would continue to respect the collective bargaining process through a framework that protects jobs and public services while managing costs. The proposed draft legislation would protect the jobs of 55,000 Ontarians and avoid increased spending in the broader public sector of $2.8 billion over three years.

Other places are facing the same challenges as Ontario and are responding differently — without fairness and without balance. California has laid off more than 126,000 public-sector workers. In Michigan, 35,000 public-sector workers have lost their jobs. In Ottawa, the federal government is eliminating about 20,000 jobs in its civil service over the next three years. These cuts affect livelihoods, public services and the families that receive them. Given the choice between protecting jobs and public services or cutting jobs — which would mean fewer services — the McGuinty government will choose protecting jobs and public services.

Eliminating the Deficit

The plan to eliminate the deficit is working. For the fourth year in a row, Ontario is ahead of its targets in lowering the deficit. The Province’s deficit for 2012–13 is projected to be $14.4 billion, an improvement of $0.4 billion from the 2012 Budget forecast.

Conclusion

Ontario is a strong province with a proud tradition of economic and job growth. Throughout its history, Ontarians have worked together to build a bright future. Through strong, determined action, Ontario is doing that again.

The McGuinty government eliminated the hidden deficit it inherited from the previous government and then balanced three budgets in a row. It protected and created jobs when the global recession hit Ontario. For the fourth year in a row, it is ahead of plan in lowering the deficit.

Eliminating the deficit is the single most important step the Province can take to grow the economy and create jobs. A strong economy is the means to continue delivering the best education and health care in the world.