What will it take to be known as a successful Ontario Premier?

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Ontario Politics

NANOS Poll Canadian PoliticsTHUNDER BAY – OPINION – Ontario is in the midst of an election whose outcome could decide whether Ontario will ever rebound from what has been, so far, a rather dismal 21st century economic performance.

Two very explicit visions of the province’s economic future are being articulated, with the Liberals and New Democrats proposing an activist and interventionist government economic agenda and the Conservatives one less so. Nevertheless, the ideological rhetoric and fury of the Ontario election campaign must eventually yield to the reality of governing the day after June 12th.

The new premier will need to deal with three basic areas of challenge – economic, fiscal and political – whose whole will be more than simply the sum of its parts. The economic doldrums of the Ontario economy are inevitably linked to its fiscal situation and successful fiscal and economic policy will require a political solution that unites Ontario’s electoral divides.

The last decade has seen Ontario demonstrate the lowest growth rate in real per capita GDP of the 10 provinces and the third lowest growth in private sector employment. Ontario needs a burst of private sector investment to complement what has already been substantial public sector spending. Any public sector infrastructure investment in transportation or resource development will only generate long-term growth if accompanied by private sector investment in plant, machinery and equipment. Those who think that more public sector spending alone will jump start the economy need only look at the huge provincial deficits accumulated since 2009 to see that more public spending alone has not been enough to ignite the economy.

It is these deficits, and the subsequent accumulated net debt closing in on $300 billion, that now represent important obstacles to renewed private sector investment. Ontario’s traditional manufacturing economy has been battered by the recession and new investment in manufacturing and other sectors requires private sector confidence in the future. Despite the recent reduction in corporate tax rates and the consumption tax reforms of the HST, it could be argued that private companies are still reluctant to invest given the alarming size of Ontario’s debt. The anticipation that debt service costs may rise and further erode the province’s finances raises the fear of new tax increases down the road.

The best reassurance the next Ontario premier can offer the business community is a credible and effective plan to balance the budget. This will send a strong signal that Ontario is serious about its public finances and will not repeat the scandal-plagued spending excesses that have marked its energy sector. There may be some fear that poorly thought out or rushed public-sector investments in transport infrastructure and resource development in the name of job creation may lay the groundwork for yet another billion dollar boondoggle.

Ultimately, given the divisions of Ontario’s electorate, political skill will be required to achieve Ontario’s fiscal and economic objectives. The somewhat erratic poll results across the three parties are marked by one consistent feature – the Liberals appear to dominate the Toronto region while the other two parties are relatively stronger outside it. There are major economic divisions in Ontario between the knowledge and service intensive Toronto region economy and the rest of the province. South western Ontario has been particularly hurt by the manufacturing decline while the northern and eastern portions of the province, especially outside major urban areas, have also seen much slower growth.

Increasingly, Ontario is marked by an urban-rural split, with larger and densely populated urban areas seeing greater benefits from increased public sector spending. Meanwhile, rural remote areas and smaller towns have been ravaged by private sector job losses without the hope of large scale government funded urban transit or energy projects to create new jobs.

Professor Livio Di Matteo
Professor Livio Di Matteo

One exception to this could be resource development in northern Ontario’s Ring of Fire but this project has yet to reach the take-off stage as the provincial government has taken an exceptionally long time in moving it forward. Moreover, private sector partnerships are crucial here and the last year has seen a cooling of interest by major mining companies.

It is these political divisions and their competing economic interests that pose the greatest challenge to Ontario’s next premier when it comes to implementing policies that will both balance the budget and foster private sector job creation. Implementing a vision that unites an increasingly diverse province will be the defining characteristic of a successful Ontario premier after June 12th.

Livio Di Matteo

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