Surly Hamilton follows the Ontario GDP reports from the finance ministry quite carefully. We were quite skeptical when the current budget document predicted GDP growth of 2.7% for Ontario in 2015. For the first two quarters of 2015, Ontario posted 0% growth in the first quarter and 1.4% in the second quarter (annualized).
So that's roughly 0.7% for the first half, which would require growth in the second half of 4.7% in order to reach the 2.7% prediction. In November, that seems very unlikely.
Now Ontario's financial accountability officer (sort of like the federal PBO) is predicting that the Ontario Liberal promise of balancing the provincial budget in 2017-2018 is unlikely. Part of this reason is that the officer is predicting growth of 2.0% for 2015. Which strikes me as also optimistic as it would require growth of 3.3% in the second half to reach. Given the weakness in Ontario employment growth lately and in the US economy, Ontario's principal export market, good GDP growth in Ontario seems extremely unlikely. The 2015 budget document also predicts GDP growth of 2.2% in 2016, which while more plausible, also seems unlikely to be reached.
Ontario has population growth of around 0.9% per year, so any economic growth beyond this requires productivity growth that Ontario has been unable to generate as it shifts to a service based economy from a manufacturing based economy.
Showing posts with label 2015-2016. Show all posts
Showing posts with label 2015-2016. Show all posts
Thursday, November 19, 2015
Wednesday, April 22, 2015
Quebec Balances 2015-2016 Budget, Ontario Obviously No
We won't know the Ontario numbers for 2015-2016 until the budget is released, but I wanted to note that Quebec has plans to balance their budget in 2015-2016. Ontario's certainly won't be balanced, although the Liberals have been planning for many years to do it in 2017-2018.
Quebec's 2014-2015 deficit was only $2.35 billion, way less than Ontario's $10.9 billion deficit adjusting for population and GDP. Ontario's 2014-2015 is also significantly higher than the federal deficit.
Obviously Quebec has controlled expenses to a much greater extent over the past few years (Ontario's 2014-2015 is actually bigger than the 2013-2014 deficit which in turn was bigger than the 2012-2013 deficit).
Quebec's debt to GDP ratio will peak at 54.9% this March and start to decline with this budget. Ontario's will continue to rise although I'm skeptical it will ever match Quebec's. According to Wikipedia, Ontario's debt to GDP ratio was 37.4% in 2013, although that's obviously higher now.
Quebec's 2014-2015 deficit was only $2.35 billion, way less than Ontario's $10.9 billion deficit adjusting for population and GDP. Ontario's 2014-2015 is also significantly higher than the federal deficit.
Obviously Quebec has controlled expenses to a much greater extent over the past few years (Ontario's 2014-2015 is actually bigger than the 2013-2014 deficit which in turn was bigger than the 2012-2013 deficit).
Quebec's debt to GDP ratio will peak at 54.9% this March and start to decline with this budget. Ontario's will continue to rise although I'm skeptical it will ever match Quebec's. According to Wikipedia, Ontario's debt to GDP ratio was 37.4% in 2013, although that's obviously higher now.
Sunday, February 8, 2015
Livio di Matteo: "Ontario Can't Balance Its Budget"
Lakehead University's Livio di Matteo has a great article on the Ontario deficit which is well worth reading. Considering the claim by the Liberal Ontario government that the provincial budge will be balanced by 2017-2018, Matteo goes through what the latest Ontario budget numbers are:
"According to the review, between 2013-14 and 2017-18, total expenditures (including the reserve) are expected to rise from $126.4 to $134.5 billion - an increase of 6.4 per cent. Meanwhile, revenues are expected to rise from $115.9 to $134.5 billion - an increase of 16 per cent.
For Ontario, the heavy lifting needed to balance the budget was obviously expected to come from the revenue side, with expenditure restraint playing a minor role. Over a four-year period, this translates into average annual expenditure and revenue growth of about 1.6 and 4 per cent respectively. These figures can also help us assess the performance to date. Between the actual results for 2013-14 and the current outlook for 2014-15, are expenditures up by 1.6 per cent or less? Are revenues up by 4 per cent or more?"
Those are some interesting numbers and considering recent government actions and economic numbers it is good that someone has taken the trouble to look at the up to date numbers:
"Let’s look at the spending picture first. Despite some savings that have apparently been found in terms of program review and year-end savings totalling about $1.3 billion, total expenditures are still up by 3 per cent - rising from $126.4 to $130.2 billion. If spending continues to grow at 3 per cent, it will reach $142 billion dollars by 2017-18, substantially above the current budget plan.
Spending has grown at about double the rate needed for Ontario to be on track to meet its deficit target. Across the vast pantheon of ministry expenditure categories, only three have seen a decline - Tourism, Culture and Sport (-7.6 per cent), Natural Resources (-0.9 per cent) and the Attorney General (-2.1 per cent). The remainder all grew, with rates ranging from a low of 0.6 per cent for Citizenship and Immigration to a high of 83.9 per cent for Infrastructure. Even the Ministry of Government Services will see an increase from $728 million to just over $1 billion in spending — an increase of 31 per cent!
Of course, the key categories are the big-ticket items of Health, Education and Social Services, which together account for two-thirds of provincial government spending. Over the course of a year, Health grew at 2.3 per cent, Education at 5.1 per cent and Social Services at 7.9 per cent. On the expenditure side, it would appear the first year of moving towards a balanced budget by 2017-18 has missed the expenditure growth target by a fair amount."
I think the most salient information here is that the big ticket Health and Education budgets have increased a lot compared to what is required to balance the budget. Although I am impressed that Health only increased by 2.3%. I think it is a little odd that Education increased by so much. Perhaps that has something to do with the rollout of full day junior kindergarten. On the revenue side things aren't looking great either:
"How about revenues? Between 2013-14 and 2014-15, total revenues rose from $115.9 billion to $118.4 billion - an increase of only 2.1 per cent. Overall, revenues have grown at about half the average rate Ontario needs to meets its goal of a balanced budget by 2017-18."
I'll be curious to see what the final numbers are on the 2014-2015 deficit. The province has a pretty big reserve baked in, so perhaps they can claim that they made their numbers, but with these big spending increases things aren't looking good. Maybe they will include the recent GM share sale proceeds into the budget as revenue.
The 2015-2016 budget isn't looking great either. Don't expect the Toronto Star or Martin Regg Cohn to point out these numbers
"According to the review, between 2013-14 and 2017-18, total expenditures (including the reserve) are expected to rise from $126.4 to $134.5 billion - an increase of 6.4 per cent. Meanwhile, revenues are expected to rise from $115.9 to $134.5 billion - an increase of 16 per cent.
For Ontario, the heavy lifting needed to balance the budget was obviously expected to come from the revenue side, with expenditure restraint playing a minor role. Over a four-year period, this translates into average annual expenditure and revenue growth of about 1.6 and 4 per cent respectively. These figures can also help us assess the performance to date. Between the actual results for 2013-14 and the current outlook for 2014-15, are expenditures up by 1.6 per cent or less? Are revenues up by 4 per cent or more?"
Those are some interesting numbers and considering recent government actions and economic numbers it is good that someone has taken the trouble to look at the up to date numbers:
"Let’s look at the spending picture first. Despite some savings that have apparently been found in terms of program review and year-end savings totalling about $1.3 billion, total expenditures are still up by 3 per cent - rising from $126.4 to $130.2 billion. If spending continues to grow at 3 per cent, it will reach $142 billion dollars by 2017-18, substantially above the current budget plan.
Spending has grown at about double the rate needed for Ontario to be on track to meet its deficit target. Across the vast pantheon of ministry expenditure categories, only three have seen a decline - Tourism, Culture and Sport (-7.6 per cent), Natural Resources (-0.9 per cent) and the Attorney General (-2.1 per cent). The remainder all grew, with rates ranging from a low of 0.6 per cent for Citizenship and Immigration to a high of 83.9 per cent for Infrastructure. Even the Ministry of Government Services will see an increase from $728 million to just over $1 billion in spending — an increase of 31 per cent!
Of course, the key categories are the big-ticket items of Health, Education and Social Services, which together account for two-thirds of provincial government spending. Over the course of a year, Health grew at 2.3 per cent, Education at 5.1 per cent and Social Services at 7.9 per cent. On the expenditure side, it would appear the first year of moving towards a balanced budget by 2017-18 has missed the expenditure growth target by a fair amount."
I think the most salient information here is that the big ticket Health and Education budgets have increased a lot compared to what is required to balance the budget. Although I am impressed that Health only increased by 2.3%. I think it is a little odd that Education increased by so much. Perhaps that has something to do with the rollout of full day junior kindergarten. On the revenue side things aren't looking great either:
"How about revenues? Between 2013-14 and 2014-15, total revenues rose from $115.9 billion to $118.4 billion - an increase of only 2.1 per cent. Overall, revenues have grown at about half the average rate Ontario needs to meets its goal of a balanced budget by 2017-18."
I'll be curious to see what the final numbers are on the 2014-2015 deficit. The province has a pretty big reserve baked in, so perhaps they can claim that they made their numbers, but with these big spending increases things aren't looking good. Maybe they will include the recent GM share sale proceeds into the budget as revenue.
The 2015-2016 budget isn't looking great either. Don't expect the Toronto Star or Martin Regg Cohn to point out these numbers
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