Event date: 11/6/2019 3:00 PM - 4:00 PM Export event
TORONTO, ONTARIO - November 3, 2019 (LSN) Ontario’s Fall Economic Statement will be released next week and will set the stage for the Ford government’s second budget and policy direction. This will come after last year’s retreat from a mishandled program of expenditure restraint. The tone of the resumed legislature last week already seems more diplomatic, perhaps indicating that the government’s handling of fiscal and economic issues will be better thought out. The government will certainly need to do a better job of selling restraint if that’s its goal.
Ontario’s economy is doing well with employment generation up substantially in 2019. While the economy added more than 114,000 jobs in 2018, according to September labour force data, year-over-year employment growth is more than 250,000, making it the best year since 2000. This buoyant employment performance will likely impact government revenues making the 2019-20 deficit estimate somewhat of an overstatement. Ontario Finance Minister Rod Phillips already hinted that the deficit will be below the projected $10.3 billion—in fact, the first quarter update already suggests a deficit down to $9.3 billion.
However, given a deficit of $3.7 billion in 2017-18 and $7.435 billion in 2018-19, it appears that no real progress has been made, unless you measure progress against the more imaginative deficit figure of $15 billion used when the government was first elected. A deficit of $9.3 billion is actually the highest since 2014-15 when it stood at $11.3 billion.
So there’s definitely work needed here especially given that debt-service costs in 2019-20 are expected to be $700 million more than last year, bringing the total to $13.1 billion. And of course, there’s that pesky provincial net debt, which is pushing $360 billion.
Along with the pressing issue of the deficit, the other key concern should be the rise in housing costs—not just in the GTA but across much of the province. Low interest rates and growing population and employment have stoked demand, which combined with restricted supply growth have caused housing prices and rents to rise much faster than wages and incomes.
Ontarians fortunately placed to own property in the GTA are enjoying the benefits of an asset-based rentier economy with prospects of living off the proceeds of their growing home values and second property rentals. However, as the cost of housing rises, the long-term implications for labour mobility, standard of living and economic growth remains a concern especially for younger people.
Total housing starts in 2018 in Ontario were down from 79,123 units in 2017 to 78,742 units, with the biggest drop for single detached units, which fell from 30,079 in 2016 to 29,713 in 2017 to 23,786 by 2018. While multiple unit starts have risen dramatically as single detached have fallen, these are very often tiny and expensive condominium units suited to singles rather than more moderately-priced and larger condo or apartment rental suites that families in larger urban centres might want.
Between 2017 and 2018, total housing starts in Ontario fell by 0.5 per cent with single detached home starts falling by 20 per cent. Over the same period, Ontario’s population grew by nearly 1 per cent (adding 125,000 people) and employment by 1.6 per cent (adding 114,00 jobs).
Basically, the stock of housing cannot keep up.
In summary, the Ford government should implement forward-looking policies to deal with two pressing issues. First, the provincial deficit and the debt must be dealt with in a more determined fashion to bring about budget balance. Second, it should act to incentivize and harness the private sector to increase the growth of housing supply faster than the growth of housing demand, to help make housing more affordable. Failure to do so will burden future generations with higher taxes and reductions in services to meet a higher debt problem while they spend even more for increasingly tiny living spaces.
Author: Livio Di Matteo
The Fraser Institute.
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