Economic and Budget Outlook Assessing Ontario’s Budget Plan Spring 2019
Overview Ontario released the 2019 Budget • on April 11 th . The FAO’s Economic and Budget • Outlook (EBO) provides an independent assessment of Ontario’s economic performance and budget outlook. Financial Accountability Office of Ontario | fao-on.org 2 2
Ontario’s economic growth slowing Economic growth expected to moderate, reflecting • weaker gains in household spending, residential investment and government spending 5.0 Ontario Average Annual GDP Growth 4.2 4.0 3.4 3.0 (Per Cent) 2.0 2.5 1.0 1.6 0.0 2014-2018 2019-2023 Historical FAO Outlook Real Nominal Source: Statistics Canada, Ontario Economic Accounts and FAO. Financial Accountability Office of Ontario | fao-on.org 3
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 Share of machinery and equipment Household debt-to-income ratio investment in Ontario has declined continues to rise in Ontario 8.0% 200 Household Debt to Disposable Equipment Investment in Nominal 189 Income Ratio (Per Cent) 7.0% 190 Share of Machinery and 6.0% 180 GDP (Per Cent) 180 5.0% 171 3.8% 170 4.0% 162 160 3.0% 2.0% 150 1997 2004 2011 2018 2010 2011 2012 2013 2014 2015 2016 2017 Ontario Rest of Canada Source: Statistics Canada, Ontario Economic Accounts and FAO. Source: Statistics Canada and FAO. Financial Accountability Office of Ontario | fao-on.org 4
FAO’s Fiscal Projection Slower economic growth will dampen increase in tax • revenues 2013-14 to 2018-19 2018-19 to 2023-24 7.0 6.4 5.7 6.0 5.3 5.3 Per Cent 4.6 5.0 4.0 3.3 2.6 2.6 3.0 2.0 1.0 - Taxation Revenue Personal Income Tax Corporations Tax Harmonized Sales Tax Government committed to balancing budget by 2023-24 • Given slow revenue growth, government’s plan relies on • significant spending restraint to balance budget Financial Accountability Office of Ontario | fao-on.org 5
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. 6 Financial Accountability Office of Ontario | fao-on.org
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 14% 1989-90 to 1992-93 Average: 10.2 per cent 2016-17 to 2018-19 Average : Ontario Program Spending, Annual Average Growth 12% 1998-99 to 2010-11 Average: 6.8 per cent 6.2 per cent 10% 2019 Budget 8% Plan (2018-19 2010-11 to 2016-17 1992-93 to 1998-99 to 2023-24 Average: Average: 6% Average): 1.4 per cent 0.3 per cent 1.0 per cent (per cent) 4% 2% 0% -2% -4% -6% 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 Source: Statistics Canada, 2019 Ontario Budget and FAO. 7 Financial Accountability Office of Ontario | fao-on.org
2019 budget plan reduces spending per person by $1,100 by 2023-24 11,000 Historical 2019 Budget Plan Program Spending Per Capita (2018 dollars ) 10,494 10,500 10,000 9,391 9,500 $1100 00 Spendi nding ng Decre crease se per r Onta tarian rian 9,000 8,500 8,000 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 Source: Ontario Public Accounts, 2019 Ontario Budget and FAO. Financial Accountability Office of Ontario | fao-on.org 8
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 $6 billion in • additional actions would need to be identified to achieve budget’s spending projection. 170 165.3 Total Program Expenses ($ Billions) 165 160 5.9 155 153.8 150 150.0 145 2018-19 2019-20 2020-21 2021-22 Medium-Term Outlook Additional Cost Reductions Savings Initiatives 2019 Budget FAO Status Quo Projection 9 Source: FAO analysis of data from TBS. Financial Accountability Office of Ontario | fao-on.org
Thank you 2 Bloor Street West Suite 900 Toronto, Ontario M4W 3E2 416.644.0702 fao-on.org info@fao-on.org
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