: 2015 Ontario Economic Outlook and Fiscal Review
Foreword

Introduction

Ontario is in the midst of fundamental change. Change is being driven in part by rising global competition and a wave of new technologies. Ontario is doing more than rising to the challenge presented by this change. We are embracing it, and leading it.

Against this backdrop, we have devised a detailed plan for Ontario. We are committed to building Ontario up by making historic investments in public infrastructure; creating an innovative and dynamic business environment; investing in people’s skills and talents; and strengthening retirement security.

Already, Ontario is seeing positive results that position the province for greater prosperity.

Ontario’s economy has been growing in an increasingly competitive global economic environment. We continue to attract investment and create jobs, while creating opportunity for all.

Our government remains committed to balancing the budget by 2017–18 and will do so in a way that is fair and responsible and supports the vital services on which Ontarians depend. Should slower-than-expected revenue growth occur, the government will need to consider other tools to ensure that balance is achieved.

The 2015 Ontario Economic Outlook and Fiscal Review updates the economic assumptions from the recent Budget and reports on the progress of our fiscal plan against the current economic background.

Ontario Continues to Be a Leader in Canada on Economic Growth

We are making progress in growing Ontario’s economy.

Ontario employers continue to hire, with 559,600 jobs created since the recessionary low in June 2009. The majority of these new jobs are in full-time positions and in industries that pay above-average wages.

Additionally, the unemployment rate in Ontario has improved steadily over the past six years and reached 6.8 per cent in October 2015 — below the national average.

The economy has fully recovered from the global recession, with key economic indicators such as employment and real gross domestic product (GDP) per capita now above their pre-recession levels.

Ontario has become one of the strongest-growing provincial economies in Canada, and economists expect that growth to continue over the next two years. On average, private-sector economists expect Ontario real GDP to rise 2.0 per cent in 2015, strengthening to 2.3 per cent annually on average over the 2016 to 2018 period.

Helping Ontario Businesses Succeed

Building Ontario up means doing everything possible to help businesses and individuals succeed.

When our businesses flourish, they create rewarding, high-paying jobs that contribute to our province’s economic stability and prosperity.

That is why this government is committed to supporting Ontario businesses by addressing a number of challenges, including international competition, access to capital and embracing new technologies.

We have responded by lowering Ontario’s general Corporate Income Tax rate so that the combined federal­–provincial rate is lower than the comparable rate in any U.S. state. By supporting alternative financing and procurement practices to better partner with the private sector, we can leverage greater investment and promote industry–academic collaboration. By strategically promoting Ontario businesses internationally through our trade missions and by fostering innovation, we strive to be more competitive.

All of this has made Ontario the top destination in North America for foreign direct investment. But we know we need to do more.

Improving our competitiveness also means improving corporate governance. It is encouraging that 15 per cent of companies listed on the Toronto Stock Exchange have this year added more women to their boards of directors following Ontario Securities Commission rule changes. To continue promoting greater representation of women on boards and in senior executive positions, we are establishing a steering committee, which I will co-chair with Tracy MacCharles, Minister Responsible for Women’s Issues.

Ontario is also embracing the sharing economy because of its potential to foster economic growth and innovation. We have established the Sharing Economy Advisory Committee to oversee the development and coordination of the government’s approach to supporting this sector, while protecting consumers and promoting a level playing field for businesses.

We are proposing to provide certainty to businesses by removing the Debt Retirement Charge for commercial, industrial and other non-residential electricity users on April 1, 2018, nine months earlier than previously estimated. This will save a typical large industrial company about seven per cent, a large northern industrial company more than eight per cent, and a small business about four per cent on their electricity bills.

Going forward, the government will be even more business-focused and is developing a bold plan to accelerate Ontario’s economic growth by focusing on scaling up and growing successful firms; spurring innovation-driven business strategies that promote a knowledge-based economy; and modernizing the regulatory system.

The Largest Investment in Public Infrastructure in Ontario’s History

In leading change, it is essential that we build and revitalize our public infrastructure to strengthen Ontario’s economy and competitiveness. Building safe and reliable public infrastructure attracts investment, supports industry, creates jobs and allows people and goods to move more freely throughout Ontario.

Our government is making the largest investment in public infrastructure in the province’s history by investing more than $134 billion over 10 years in priorities such as roads, bridges, public transit, hospitals and schools.

Since April, we have supported more than 200 projects that will create jobs and connect communities. Recent progress includes:

  • In the Greater Toronto and Hamilton Area, building the Eglinton Crosstown light rail transit (LRT) line, where the Province is investing $5.3 billion in capital costs;
  • In southwestern Ontario, widening Highway 7 in Kitchener from Fischer Hallman Road to Courtland Avenue;
  • In eastern Ontario, continuing work on the Confederation Line, Ottawa’s 12.5-kilometre LRT project;
  • In northern Ontario, expanding Highway 69 between Sudbury and Parry Sound; and
  • All across Ontario, investing $25 million over three years to improve routes for cyclists.

Unlocking the Value of Provincial Assets

Ontario continues to unlock the value of certain provincial assets, including Hydro One, the Liquor Control Board of Ontario (LCBO) head office lands, Ontario Power Generation’s head office building, and the Seaton and Lakeview lands, to help fund infrastructure investments.

Net revenue gains achieved will help the government generate billions to invest in roads, bridges, transit and other priority infrastructure throughout the province. We are on track to achieve our target for asset optimization, which will help fund large infrastructure projects and reduce reliance on new borrowing.

Ontario is proceeding with broadening the ownership of Hydro One. In November 2015, the Province completed the initial public offering for approximately 15 per cent of Hydro One. Over time, the Province expects to generate $4 billion in net revenue gains that would be dedicated to the Trillium Trust for Moving Ontario Forward infrastructure projects, and $5 billion for debt repayment. 

Ontario has also made significant progress on creating more convenience and choice in the province’s beer distribution and retailing system. This includes introducing the sale of beer in grocery stores, and negotiating a new series of agreements that level the playing field for brewers while retaining the efficiencies of the existing system. This is the largest shake-up in beverage alcohol distribution since the end of Prohibition in Ontario.

Investing in Tomorrow’s Workforce

In this era of global change, Ontario’s economic success depends on knowledge, innovation and creativity. From the early years through to postsecondary education, Ontario is helping people get the education and skills required to flourish in the province’s evolving economy.

Our government is meeting its 2015 Budget commitments to continually improve its world-class education system.

This includes investing $120 million over three years to create approximately 4,000 new licensed child care spaces in schools; helping more high school students turn their passions into career opportunities by expanding the Specialist High Skills Major program; and launching Experience Ontario, a two-year, $20 million pilot program that in its first year is helping up to 600 high school students identify and work towards their future goals.

It includes increasing access to postsecondary education by expanding online learning, increasing financial assistance for students, and helping to establish a York University–Markham Centre campus in partnership with Seneca College so that about 4,000 more students can attend a postsecondary institution closer to home.

And it also includes integrating and transforming employment and training programs and services to improve access and provide more targeted services to those who need them.

Building a Fair Society

As we build Ontario up, we are providing supports so all Ontarians can reach their full potential and participate in the economy. The government is promoting conditions that support people in a changing labour market and help those in poverty, so all Ontarians can lead healthy and prosperous lives.

The government has increased social assistance benefits, indexed the minimum wage to inflation, increased funding to support children through indexing the Ontario Child Benefit, and enhanced inclusion of people with disabilities in the workforce.

In addition, the government is taking steps to help close the wage gap between men and women by hosting consultations on this issue to develop a strategy.

We are also transforming our universal public health care system to ensure all Ontarians have access to better and more coordinated care now and in the future.

We are taking action to combat sexual violence and harassment and improve supports for survivors. It’s Never Okay: An Action Plan to Stop Sexual Violence and Harassment will help build a province where everyone is free from the threat of sexual violence and harassment.

Strengthening Retirement Security

Today in Ontario, only one-third of workers have a workplace pension plan. Low savings rates, worker mobility and increasing longevity make it harder for Ontarians to save enough for retirement.

The government has taken a leadership role to strengthen the retirement income system for working Ontarians. It is creating a new provincial pension plan — the Ontario Retirement Pension Plan (ORPP) — that will provide a predictable stream of income for life for Ontario workers who do not have a comparable workplace plan. Our goal is to ensure that, by 2020, every eligible Ontario employee would be covered by the ORPP or a comparable workplace pension plan.

Since 2010, Ontario has played a leadership role in advocating for a Canada Pension Plan (CPP) enhancement and the government welcomes the opportunity to resume discussions with our federal and provincial partners. Ontario will support a CPP enhancement that is consistent with the ORPP’s objectives regarding adequacy and coverage. However, implementing a CPP enhancement would take considerable time and requires the agreement of governments across the country. In light of these circumstances and the pressing need to address retirement security, Ontario is moving forward with implementing the ORPP in 2017.

Addressing Climate Change

The government recognizes that good environmental policy is good economic policy.

As such, we have moved forward on our commitment in the 2015 Budget to implement a cap-and-trade program as part of Ontario’s comprehensive climate change strategy.

Addressing climate change now will also allow Ontario to take advantage of the enormous economic opportunities that emerge from clean technologies. We are home to most of Canada’s environmental and clean technology businesses. For the second consecutive year, Ontario is the top jurisdiction in North America for green investment, according to fDi Intelligence.1

The progress Ontario has made towards its long-term climate goals is not only creating a greener Ontario, but it is also creating more prosperity.

As a next step, the government proposes a down payment of $325 million in 2015–16 through a Green Investment Fund that will be targeted at reducing greenhouse gas emissions while strengthening the economy. Through this initial investment, the fund will support energy retrofits in homes (including affordable housing), energy-efficiency investments in small and medium-sized businesses and industry, support for Aboriginal communities, and new investments in electric vehicle infrastructure.

Further details regarding the fund and options for future investments will be provided in the 2016 Budget.

A Track Record of Strong Fiscal Management

This government continues its record of strong fiscal management.

The government’s success is due to an ongoing focus on managing and controlling growth in spending and delivering the best possible value for every dollar spent. In fact, Ontario consistently has the lowest per capita program spending among all Canadian provinces. The government has done this while continuing to invest in priority programs and services like health care and education.

Looking forward, the government is now projecting a lower deficit of $7.5 billion in 2015–16 and $4.5 billion in 2016–17, and a balanced budget in 2017–18. This reflects an improvement of $1.0 billion in 2015–16 and $0.3 billion in 2016–17, compared to the targets outlined in the 2015 Budget.

Meeting Fiscal Targets

Ontario is committed to eliminating the deficit by 2017–18. To do so, we will continue to implement our plan that centres on:

  • Program Review, Renewal and Transformation;
  • Managing compensation costs; and
  • Addressing the underground economy and maintaining tax fairness.

We will help ensure everyone pays their fair share of taxes by taking measures to address the underground economy, such as introducing legislation to combat electronic sales suppression technology. To date, the Province’s achievements in combating the underground economy have generated a $225 million revenue increase above what was reported in the 2015 Budget. Our public-sector partners are also doing their part by achieving net-zero compensation agreements. The government will continue to conduct a line-by-line review of major program areas and we will be disciplined in our focus on keeping costs down.

Building Partnerships for a Stronger Canada

Building Ontario up requires a new era of intergovernmental collaboration. These challenges cannot be tackled by one order of government alone.

We are ready to work with the federal government to build a stronger economic union. We are eager to make progress on shared priorities, such as building infrastructure, strengthening retirement security, tackling climate change, sustaining health care, and creating economic growth and jobs.

We look forward to being a collaborative partner working constructively with the federal government — and with all provinces, territories and Aboriginal partners — to deliver better results for Ontarians and all Canadians.

Conclusion

We are meeting the challenge of a changing global economy. We are helping to strengthen our economy and encourage it to diversify. Ontario continues to create an innovative and dynamic business environment; build modern public infrastructure, such as roads, bridges and transit; invest in people’s skills and talents; and strengthen retirement security.

We remain committed to balancing the budget by 2017–18 and doing so in a way that is fair and responsible and supports the vital services on which Ontarians rely.

Original signed by

The Honourable Charles Sousa
Minister of Finance

[1]   fDi Intelligence, “The fDi Report 2015: Global Greenfield Investment Trends,” (2015).