Ontario's Long-Term Report on the Economy
Ontario's Long-Term Report on the Economy presents a long-range assessment of the province's economic and fiscal environment.
The report highlights the long-term challenges and opportunities the province may face over the next 20 years and outlines measures the McGuinty government is taking now to prepare Ontario for the future.
DEMOGRAPHIC TRENDS AND IMPLICATIONS
Demographic change has a significant impact on Ontario's long-term economic and fiscal outlook. Ontario's population projections to 2030 include five key trends:
- Ontario is projected to see healthy population growth of 28 per cent, a gain of almost 3.7 million people - for a population total of 16.7 million by 2030.
- Immigration will continue to drive population growth.
- The most significant trend is the aging of Ontario's population - seniors will account for
- 21.9 per cent of Ontario's population by 2030, higher than the current 13.7 per cent share.
- Working-age population growth (ages 15-64) has slowed, and this age group is expected to reach 10.3 million by 2030 - 61.5 per cent of the population, down from 69.4 per cent in 2009.
- The Greater Toronto Area is expected to be the fastest-growing region, with the population increasing by almost 38 per cent - over half of Ontario's population will live in the GTA by 2030.
Retirement Income System
As the population ages, Canada's retirement income system faces important challenges. Ontario is responding to these challenges by reforming its pension system and engaging in a pan-Canadian review of the national retirement income system. As part of this national effort, the Ontario Ministry of Finance asked Bob Baldwin, an expert on pension issues, to review the system and its capacity to provide secure retirement incomes for current and future generations of Canadian seniors. Read the highlights of Baldwin's Research Study on the Canadian Retirement Income System.
ONTARIO'S LONG-TERM ECONOMIC PROJECTION
Slower population growth and an aging population, alone, would suggest the potential for a future with slower economic growth than Ontarians have experienced in the past. Therefore, capital investment and productivity growth will be even more important for prosperity in the future.
The Ontario government has already taken significant measures to improve future investment and productivity growth, as outlined in the 2009 Budget, such as:
- Introducing a comprehensive tax package that will significantly improve Ontario's competitiveness for new business investment through the Harmonized Sales Tax and corporate tax cuts, and that provides tax cuts for people.
- Investments in infrastructure that will not only support the economy today but also support Ontario's productive capacity in the future.
- Initiatives to support the auto manufacturing sector and attract investment in the broader economy that will improve future capital stock and prosperity in the Ontario economy.
- Investing in education, training and innovation.
Key external factors that affect the economic projection include the performance of the economy in other jurisdictions, commodity prices, the Canadian dollar exchange rates and interest rates. Key projections in the report:
- Expanding productive capacity, increased tax competitiveness and global and domestic demand are expected to result in average real GDP growth of 2.6 per cent in Ontario from 2010-2030.
- Ontario's real GDP is expected to advance at a pace comparable to the past, notwithstanding slower labour force growth and increased global competition.
- Trade will remain an important factor for Ontario's prosperity and the United States will continue as the province's largest trading partner, but the share of Ontario's exports destined for the rest of the world is projected to almost double by 2030.
- High-skill occupations increased by an average annual rate of 1.9 per cent between 1987 and 2008. These trends are expected to continue in the long term.
SUSTAINING ONTARIO'S PUBLIC SERVICES FOR THE LONG TERM
The economic and demographic projections presented in this report have a number of implications on the demand for and delivery of public services.
- Health care costs for seniors are about three times higher than the average for the overall population of Ontario. The province's population aged 65 and over will more than double to 3.7 million by 2030.
- Other factors that will drive the demand for and the cost of health care services include changes in population health status, patients' expectations, inflation, technology and medical practice.
Education and Training
- The number of elementary school-age children has been declining recently in Ontario. However, from 2011 to 2030, the number of elementary school-aged children is expected to increase by about
1.3 per cent annually.
- The secondary school-age group (14-17) is projected to decline by about nine per cent by 2016 before resuming growth and rising to slightly higher than today's level by 2030.
- Increased emphasis on lifelong learning and services for underrepresented groups, including new immigrants, will continue to contribute to demand for government training programs and other employment services.
The province is currently projecting a deficit of $24.7 billion in 2009-10, decreasing to $19.4 billion by 2011-12 as outlined in the 2009 Ontario Economic Outlook and Fiscal Review. These projections reflect lower revenues due to the deep global economic recession as well as stimulus spending and funding of key priority areas such as health care. Over the long term, Ontario, like other major economies, must continue providing key public services in the context of growing demographic pressures.
The Ontario government will ensure that the province returns to a firm and sustainable fiscal footing. The Treasury Board/Management Board of Cabinet is conducting a comprehensive expenditure review and the government will deliver its plan in the 2010 Budget.
MOVING TOWARDS A PROSPEROUS AND SUSTAINABLE FUTURE
The McGuinty government is planning ahead to prepare Ontario for the challenges of the coming decades and ensuring the province will be ready to capitalize on opportunities emerging from the new economy.
Modernizing Ontario's Tax System to Create Jobs and Economic Growth
Since 2004, the McGuinty government has implemented a wide range of measures to improve Ontario's competitiveness, including:
- Strategic tax cuts, such as Capital Tax elimination and reductions in Business Education Tax rates.
- Streamlining the cost of doing business in Ontario through initiatives such as the implementation of a single corporate tax administration.
Ontario's Tax Plan for More Jobs and Growth Act, 2009 modernizes the tax system to better position Ontario for long-term prosperity as the economy emerges from the recession. The comprehensive tax package will:
- Replace the eight per cent Retail Sales Tax (RST) with a more modern, value-added tax that will be combined with the five per cent federal Goods and Services Tax (GST) to create a 13 per cent Harmonized Sales Tax (HST), boosting Ontario's tax competitiveness to create jobs and growth, while not changing the taxable status for 83 per cent of total consumer purchases.
- Cut personal income tax for 93 per cent of income tax payers.
- Provide direct payments to people and businesses to assist in the transition to the HST.
- Reduce corporate income tax rates for large and small businesses.
- Eliminate the small business deduction surtax.
A recent study, "Ontario's Bold Move to Create Jobs and Growth", by economist and tax expert Jack Mintz, predicts that, within 10 years, the comprehensive tax package, together with other recent tax changes, will increase business investment by $47 billion, create 591,000 net new jobs and raise annual incomes by as much as 8.8 per cent.
Addressing the Infrastructure Gap
Improving public infrastructure can boost Ontario's productivity, encourage investment, lower business costs and improve travel times. The McGuinty government is laying the foundation for future productivity and economic growth by investing $32.5 billion for public infrastructure investments over two years in all key sectors - including health, education, culture, tourism, sports and recreation, social and affordable housing, and water and environmental projects. These investments build on the $30 billion ReNew Ontario infrastructure investment plan, which was completed in 2008-09, one year ahead of schedule.
Opportunities in the Green Economy
Greening the economy and promoting the transition to a low-carbon future are central to Ontario's long-term economic prosperity and sustainability.
- The Green Energy and Green Economy Act, 2009 is helping build Ontario's green economy infrastructure by attracting new investment in renewable energy products and promoting conservation.
- Legislation was passed on December 3, 2009 that will allow for the design and implementation of a cap-and-trade system in Ontario that can link to emerging North American and international systems. Cap-and-trade is a flexible, market-based mechanism that can be used to reduce greenhouse gas emissions and assist in the transition to a green economy.
- The broader environmental technology and services sector in Ontario is already a $7 billion market, with more than 2,400 companies employing 62,500 professionals.