Budget Outlook Assessing Ontarios Budget Plan Spring 2019 Overview - - PowerPoint PPT Presentation

Economic and Budget Outlook

Assessing Ontario’s Budget Plan Spring 2019

Financial Accountability Office of Ontario | fao-on.org 2

Overview

• Ontario released the 2019 Budget
• n April 11th.
• The FAO’s Economic and Budget

Outlook (EBO) provides an independent assessment of Ontario’s economic performance and budget outlook.

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Financial Accountability Office of Ontario | fao-on.org 3

Ontario’s economic growth slowing

• Economic growth expected to moderate, reflecting

weaker gains in household spending, residential investment and government spending

Source: Statistics Canada, Ontario Economic Accounts and FAO.

2.5 1.6 4.2 3.4 0.0 1.0 2.0 3.0 4.0 5.0 2014-2018 2019-2023 Historical FAO Outlook Ontario Average Annual GDP Growth (Per Cent) Real Nominal

Financial Accountability Office of Ontario | fao-on.org 4

Economic risks are elevated

• Significant domestic and foreign risks could impact

Ontario’s growth outlook, including:

• Heavily indebted households; and
• An uncertain trade and investment climate

162 189 171 180 150 160 170 180 190 200 2010 2011 2012 2013 2014 2015 2016 2017 Household Debt to Disposable Income Ratio (Per Cent) Ontario Rest of Canada Source: Statistics Canada and FAO. Source: Statistics Canada, Ontario Economic Accounts and FAO. 3.8% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 1997 2004 2011 2018 Share of Machinery and Equipment Investment in Nominal GDP (Per Cent)

Household debt-to-income ratio continues to rise in Ontario Share of machinery and equipment investment in Ontario has declined

Financial Accountability Office of Ontario | fao-on.org 5

FAO’s Fiscal Projection

• Slower economic growth will dampen increase in tax

revenues

• Government committed to balancing budget by 2023-24
• Given slow revenue growth, government’s plan relies on

significant spending restraint to balance budget

5.3 5.3 5.7 6.4 3.3 4.6 2.6 2.6

• 1.0

2.0 3.0 4.0 5.0 6.0 7.0 Taxation Revenue Personal Income Tax Corporations Tax Harmonized Sales Tax Per Cent 2013-14 to 2018-19 2018-19 to 2023-24

Financial Accountability Office of Ontario | fao-on.org 6

FAO projects large budget surplus by 2022-23

• Government’s budget plan includes provisions for unannounced

revenue reductions and spending measures

• Province still achieves a balanced budget by 2023-24 due to plan to

significantly restrain spending

Source: Ontario Public Accounts, 2019 Ontario Budget and FAO. Note: Budget balance is presented before the reserve.

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Slowest pace of program spending growth since the mid-1990s

• 2019 budget plan holds program spending growth to 1.0 per

cent per year over the next five years

Source: Statistics Canada, 2019 Ontario Budget and FAO.

• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14% 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Ontario Program Spending, Annual Average Growth (per cent) 1989-90 to 1992-93 Average: 10.2 per cent 1992-93 to 1998-99 Average: 0.3 per cent 1998-99 to 2010-11 Average: 6.2 per cent 2010-11 to 2016-17 Average: 1.4 per cent 2016-17 to 2018-19 Average: 6.8 per cent 2019 Budget Plan (2018-19 to 2023-24 Average): 1.0 per cent Financial Accountability Office of Ontario | fao-on.org

Financial Accountability Office of Ontario | fao-on.org 8

2019 budget plan reduces spending per person by $1,100 by 2023-24

Source: Ontario Public Accounts, 2019 Ontario Budget and FAO.

10,494 9,391 8,000 8,500 9,000 9,500 10,000 10,500 11,000

2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Historical Medium - Term Outlook Recovery Plan

Program Spending Per Capita (2018 dollars ) Historical 2019 Budget Plan

$1100 00 Spendi nding ng Decre crease se per r Onta tarian rian

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5.9 153.8 150.0 165.3 145 150 155 160 165 170 2018-19 2019-20 2020-21 2021-22 Medium-Term Outlook Total Program Expenses ($ Billions) Additional Cost Reductions Savings Initiatives 2019 Budget FAO Status Quo Projection

Achieving 2019 budget’s spending plan will be a significant challenge

• The FAO’s analysis suggests the 2019 budget includes

sufficient savings and cost avoidance measures to achieve spending plan over next two years.

• However, by 2021-22, the FAO estimates that $6 billion in

additional actions would need to be identified to achieve budget’s spending projection.

Source: FAO analysis of data from TBS. Financial Accountability Office of Ontario | fao-on.org

2 Bloor Street West Suite 900 Toronto, Ontario M4W 3E2 416.644.0702 fao-on.org info@fao-on.org

Thank you