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The Fraser Institute: Ontario's Poor Economy Hurts the Rest of Canada

VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 04/14/14 -- Ontario's poor economic performance is dragging down Canada's economy, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

The study, Can Canada Prosper without a Prosperous Ontario?, examines Ontario's shift from the economic engine of Canada to a "have not" province that 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, Fraser Institute senior fellow and economics professor at Lakehead University.

So what's happening in Ontario?

Over the past decade, but particularly since the recession of 2008/09, Ontario's economy 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 per cent lower than the rest of Canada ($48,643). And if data for Ontario were excluded, notes the study, Canada's per person GDP would be 2.2 per cent higher.

Additionally, since 2000, Ontario has recorded the third lowest rate of private sector job creation in the country, ahead of only Nova Scotia and New Brunswick. Specifically, Ontario's private sector employment growth between 2000 and 2013 totalled 14.1 per cent compared to first-place Alberta's 42.1 per cent or the 19 per cent national rate.

Moreover, from 2009 to 2013, the national unemployment rate, which averaged 7.6 per cent during that period, would have been 7.3 per cent if Ontario was excluded.

When measuring the level of business investment, the study finds that from 2003 to 2012, Ontario's average annual growth of business investment in things such as buildings, machinery and equipment was 3.0 per cent compared to 5.3 per cent for the rest of Canada.

Meanwhile, outside of Ontario, Canada has seen decent rates of economic growth in per person GDP and employment, particularly in resource-producing provinces.

"Ontario's poor record on GDP growth, employment and business investment reflects a damaged provincial economy that's dragging down the national economy," Di Matteo said.

So how can Ontario right its financial ship and lighten the load on the rest of Canada?

The study notes that Ontario could improve tax and regulatory competitiveness, boost its capital investment, reform energy and industrial policies, and make better use of Ontario's vast natural resources in forestry and mining.

"If Ontario adopts smarter policies focused on competitiveness and economic growth rather than interventionist government, it could unleash its private sector and improve Ontario's economy for the benefit of taxpayers in Ontario and across Canada," Di Matteo said.

Livio Di Matteo is in Toronto and available to media.

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org

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