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Ontario is a drag on the economy: study

Poor growth and spiralling public debt is holding Canada back.

April 14, 2014   by PLANT STAFF

VANCOUVER — Ontario’s poor economic performance and its status as a have-not province is dragging down Canada’s economy, says a study by the Fraser Institute.

The public policy think-tank examines Ontario’s shift from the economic engine to “have not” in Can Canada Prosper without a Prosperous Ontario?, noting the province received $3.2 billion in equalization payments from Canadian taxpayers in 2013/14.

“Because of Ontario’s immense size and population, and because the Canadian economy is highly integrated, what happens in Ontario significantly affects Canada’s national economy. An economically stronger Ontario means an economically stronger Canada,” said Livio Di Matteo, study co-author who is a Fraser Institute senior fellow and economics professor at Lakehead University.

The study tracks Ontario’s performance, showing that over the past decade, and particularly since the recession of 2008/09 it has not performed on par with the rest of Canada, due in part to its slow economic growth and spiralling public debt.

For example, from 1981 to 2004, Ontario’s per person GDP was either above or equal to the rest of Canada. However, by 2012 Ontario’s per person GDP ($45,933) was 5.6% lower than the rest of Canada ($48,643). If Ontario data were excluded, Canada’s per person GDP would be 2.2% higher.

In terms of job creation, Ontario has recorded the third lowest rate since 2000, ahead of only Nova Scotia and New Brunswick. Employment growth between 2000 and 2013 totalled 14.1% compared to Alberta’s 42.1% or the national rate of 19%.

From 2009 to 2013, the national unemployment rate (averaging 7.6%) would have been 7.3% if Ontario was excluded.

From 2003 to 2012, Ontario’s average annual growth of business investment in things such as buildings, machinery and equipment was 3% compared to 5.3% for the rest of Canada.

The study notes Ontario could change course with a less interventionist approach that would unleash the power of the private sector by improving tax and regulatory competitiveness, boosting its capital investment, reform energy and industrial policies, and making better use of Ontario’s vast natural resources in forestry and mining.

Click here for a download of the study.


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