Ontario Finance Minister Sousa to Balance Budget in 2017-2018? Some Skepticism

Is Ontario going to balance its budget in 2017-2018 like they promised? In the Ottawa Citizen, reporting on Sousa speaking to the Empire Club:

"Ontario’s economy is doing so well, thanks to our wise and prudent Liberal government, that our provincial government is going to balance its budget by next year and, er, delay its signature pension plan, Finance Minister Charles Sousa said Tuesday."

I'm a little skeptical of this considering without counting sales of Hydro One shares, Ontario's 2015-2016 budget deficit was around 8.5 billion. Now it is possible that the province could sell more shares in the 2017-2018 budget year to get to balance, although I would find that quite dubious.

On the other hand, the dollar being totally in the tank (with its effects on a moribund manufacturing sector and helping with reducing the tourism deficit) and gasoline prices being by modern levels, incredibly low has a strong stimulus effect on Ontario. Plus if the federal Liberals dole out a lot of stimulus spending in the 2017-2018 fiscal year that can only help provincial GDP.

However US GDP growth of late hasn't looked strong of late (and below 1% in the fourth quarter of last year) and any recession there between now and the 2017-2018 fiscal year would likely torpedo any chance of a balanced budget in Ontario. So wait and see.

Ontario's September 2015 Employment Numbers. Not Good.

So the jobs numbers for September came out from Statscan. For all of Canada, employment went up a mediocre 12,100 jobs. Unfortunately for Ontario, employment went down by a relatively massive 33,800 jobs (oddly Alberta gained 12,300 jobs in September). That follows a smaller loss of 3,900 jobs in August. July's employment numbers were unchanged. So by any measure, that's a pretty stagnant three month period for jobs in Ontario.

One wonders how that will end up showing up in the third quarter GDP numbers. By comparison, for the January, February and March period, jobs went up by 17,100 even though the GDP number was negative for the first quarter. That suggests to me that the third quarter GDP number for Ontario could also be negative (note that the Atlanta Fed's GDPNow model is predicting only 1% GDP growth in the third quarter for the US, Ontario's primary export market).

Obviously the monthly and three months numbers, aren't good for Ontario, what about the entire year's? Since the start of the year, Ontario's jobs numbers are up 23,000, which isn't terrible, but certainly not particularly good either. However, Canada's number is 126,600 since the start of the year, so Ontario's portion is way below its share of Canada's population.

There was also some bad news in terms of the composition of the jobs in Ontario in September. Full-time jobs were down by 67,700 compared to an increase of 34,000 part-time jobs. I'm not sure if there's a statistical aberration with the full-time versus part-time numbers or what. Over the full year, the full-time number is much better, a gain of 67,800 jobs versus a loss of 44,800 part-time jobs.

US First Quarter 2015 GDP Disappoints at 0.2%, Portent for Ontario? Comparison Between 2014 US and Ontario Quarterly GDP Growth

Some had been predicting the weak US GDP growth number of 0.2% (like the Atlanta Fed GDP Model) although at the start of the year predictions were considerably more rosy. Note this is the earliest estimate for US GDP.

What does this mean for Ontario's GDP for the first quarter of 2015? In 2014 first quarter GDP growth in Ontario was 0.6%, 3.2% in the second, 4.0% in the third and 2.5% in the fourth (all annualized).

For comparison in the US for 2014, first quarter growth was -2.1%, second quarter growth was 4.6%, third quarter  5.0% and 2.2% in the fourth quarter. Obviously there is a large amount of correlation there although the US decreased quite massively in the first quarter of 2014 while in Ontario, growth was only weak. Nonetheless the US first quarter of 2015 GDP of 0.2% isn't a good number for Ontario which depends on the US to a much greater extent for exports than other Canadian provinces.

Expect an Ontario number below 2.0% annualized at the least.

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.

Ontario Removes the Clean Energy Benefit and Removes Debt Retirement Charge, Adds Electricity Subsidy for Poor

So Ontario has plans to remove the Clean Energy Benefit, that reduced electricity prices for Ontarians ("by providing a 10 per cent rebate on applicable electricity charges and taxes") at the end of this year. In a sense the taxpayer was paying for that as it pretty much came out of the provincial budget so in some sense it is better since ratepayers should be responsible for all electricity costs. That will be better for the provincial budget, starting in the 2015-2016 fiscal year however obviously worse for a lot of Ontarians since they will be pay more for electricity.

The Clean Energy Benefit was always ironically named, considering the province's Green Energy program certainly didn't make electricity cheaper. Orwell would be rolling in his grave.

At the same time, the provincial government is getting rid of the debt elimination charge, however that is a lot smaller than the Clean Energy Benefit. According to this Star article, the energy minister Bob Chiarelli says the average Ontario hydro bill will increase by $120 per year due to the changes.

The province also announced a program to subsidize the electricity costs of the poor. From the same article:

"Chiarelli said the proposed Ontario Electricity Support Program will slash the monthly electricity rate for a low-income family by $20 to $50 a month.

Under the plan, a family of four with an annual income of less than $28,000 would be eligible for a $38 monthly ‎credit for a total of $456 per year.

“For many low-income Ontarians paying their monthly electricity bill is a real challenge. In comparison to other residential consumers in the province, low-income Ontarians spend a proportionally higher percentage of their income on electricity per month,” Chiarelli said.

“Families and households should not have to choose between turning on the lights and putting food on the table,” he said.

The minister said the Ontario Electricity Support Program is expected take effect Jan. 1, 2016."

So the middle class (lower middle class for that matter) gets the boot. I'm not opposed to helping the poor, however this is another means tested program that incentivizes staying poor and effectively raises their marginal tax rates. However high electricity prices (caused by the province's Green Energy programs) does obviously affect the poor quite substantially.

Basically the province is subsidizing the poor and also subsidizing the rich investors in sun and wind projects. Fantastic.

Ontario January 2015 Employment Numbers

I've meant to get around to looking at the latest employment numbers for Ontario. Canada added a decent 35.4K jobs in January compared to the month before. Ontario not so much.

Ontario added a meager 1300 jobs in January, although that was an improvement over the last two months where Ontario actually lost jobs. That means over the last three months Ontario actually lost 43.4 thousand jobs, which makes for a pretty poor three month period. Employment numbers can jump a lot from month to month, but this poor performance over three months has to be taken seriously and detracts from the narrative that Ontario is growing well (and can't be great for the fourth quarter of 2014 GDP number).

The composition of the jobs also changed detrimentally last month. Ontario lost 23.2 thousand full time jobs while gaining 24.4 thousand part-time jobs. This would seem to be continuing a trend where in Ontario the proportion of jobs that are part-time is increasing.

Interestingly, over four months Ontario has actually lost 19.1 thousand full-time jobs, while the working age population increased by 31.9 thousand. Part-time jobs did increase by 24.4 thousand over that period.

One has to think that these low job numbers are going to have an effect on GDP, and income and sales tax revenue for the province. RBC is predicting Ontario will have 3.1% GDP growth in this PDF. I'm skeptical. Considering the low dollar hasn't done a lot to stimulate job growth over the past four months, I don't see a lot of job growth in 2015. That report is also predicting employment growth of 1.4% in 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

Steve Paikin's Blog Post "Are The Liberals Really Promising No Layoffs?"

Steve Paikin of TVO's the Agenda made what I thought was a very good blog post about the Liberals and layoffs. Certainly they haven't been campaigning like they will be making layoffs although they've claimed that they will follow through on balancing the budget in the 2017-2018 fiscal year.

Paikin has does a good job of scoping out the financial realities of Ontario's fiscal situation:

"From the beginning of the Great Recession (2008-09) to the current fiscal year (2014-15), revenues into Ontario’s treasury have increased by more than $21 billion.

That sounds good if you're trying to pay for programs people want.
However, program spending has increased by $24 billion.

And our annual interest payments on the debt have increased by almost $2.5 billion.

That sounds bad. That sounds unsustainable.

Astonishingly, the net debt under the Liberals during that six-year period has increased from $170 billion to $290 billion. As a percentage of our economy, it’s gone from 28 per cent to 40 per cent. That’s not Greece (155 per cent), but clearly it’s alarming."

The one thing I would say about comparing to Greece in this manner is that we still have a quite sizable federal debt (albeit as a percentage of GDP we're close to an inflection point where it starts to decrease) that should be included in some manner when comparisons to Greece are made.

Paikin also lays out the Ontario deficits since the 2009-2010 fiscal year.

"The Liberals primed the pump to the tune of an all-time high $19 billion deficit in 2009-10, and then started to whittle that deficit down:

• $14 billion in 2010-11
•  $13 billion in 2011-12
• $9.2 billion in 2012-13

However, the following year, the deficit went back up:

• to $11.3 billion in 2013-14
• to $12.5 billion in 2014-15 (in the second Wynne budget which didn’t pass)."

Personally I don't think enough has been made of the fact that the deficit has now risen (or would have) for two years in a row. Also I'm not sure I would agree with the phrase "primed the pump." The big 2009-2010 deficit was mainly due to revenues totally collapsing due to the recession. However this also leaves Ontario vulnerable if another recession were to occur in the next few years. Ontario's economic growth has been weak since basically since the Harris years, so pushing Ontario into the technical definition of a recession (two consecutive quarters of negative growth wouldn't take much).

Ontario Budget 2014-2015, Predicted Revenue Down $3.5 Billion, 2013-2014 Deficit Down, Sort Of

It took me a while, but I've finally got around to some info Finance Minister Charles Sousa gave about Ontario's budgets. The media reported the fact the 2013-2014 budget that just finished is coming in at $400 million under the original $11.7 billion prediction. However there's some caveats with this. For the first time ever, the ministry added a reserve of $1 billion to the deficit prediction (similar to the feds). So the actual deficit prediction was $10.7 billion, so coming in at $11.3 billion isn't actually good in my opinion and means either the revenue or expenses were off. Less reported was that the revenue prediction for 2014-2015 was going to be off by $3.5 billion. Originally the prediction was $120.5 billion, so being off $3.5 billion isn't good and can't be good for the 2014-2015 deficit. It was predicted at at 8.9 billion with a 1.2 billion reserve to get 10.1 billion. So revenue will hurt it and I'm wondering if there will be problems with program expenses as well.

Ontario Finance Minister Sousa: Ontario's GDP Growth Next 20 Years Sucky, Deficit Slightly Down?

Ontario Finance minsiter Charles Sousa (any relation to John Philip?) spoke today about Ontario's finances. The Star has a recount of the event here. Noteworthy was this:

"It cites an aging population and slower expansion of the workforce, which “may restrain future economic growth in the absence of significant productivity improvements.”

“The report indicates the need for consistency, predictability and steady hands,” said Sousa, who is to table a budget in May that could trigger a June election.

The economic outlook calls for an average of 2.1 per cent annual growth in real GDP through 2035."

As I've previously posted, I'm shocked that anyone is shocked that Ontario is going to have low GDP growth in the future. Historically, Ontario hasn't had good GDP growth since the Harris years and this prediction is more of the same. I was a little surprised by this quote:

"Despite a growth prediction that barely exceeds inflation, Sousa maintained that the provincial budget will be balanced by 2017-18.

He is to deliver a revised deficit figure on Thursday that will be slightly lower than the $11.7 billion forecast."

Getting to zero deficit by 2017-2018 to me seems very difficult at this point in time, with stagnant GDP growth and rising health costs. Sousa most likely isn't going to be around for that budget so I guess he can say what he wants. I'm assuming that the $11.7 deficit figure refers to the fiscal year that just finished a couple of days ago. I'm a little surprised it doesn't come in higher than predicted, although lately the provincial government has been giving worse predictions for the budget and then beating them slightly, which would appear to be the case here. 

This finance ministry document has some relevant data which shouldn't disappear into the memory hole. The 2012-2013 interim deficit was 9.8 billion, with the 2013-2014 deficit estimated at 11.7 billion, with further predictions of 10.1 for the 2014-1015 fiscal year and then predicted deficits of7.2, 3.5 in future years and a surplus of 0.5 billion in the 2017-2018 fiscal year.

One interesting thing about those deficit predictions is that a reserve was introduced in the 2013-2014 fiscal year prediction. For 2013-2014 year the reserve was 1.0 billion with reserves of 1.2, 1.2, 1.5,  and 1.5 in future years. So in actuality the predicted deficit for 2013-2014 is really 10.7 billion. So if the 2013-2014 deficit is announced at more than 10.7 billion it is actually worse than predicted. For 2014-2015 the actual predicted deficit is 8.9 billion, followed by 6.0 billion, 2.0 billion and then a surplus of 2 billion in 2017-2018.

Other data is provided in the finance ministry document. Program spending interim for 2012-2013 is 113 billion, and estimated at 117.0 billion for 2013-2014. Future years have program spending estimates of 118.3, 118.8, 118.8 and 118 billion in 2017-2018. You'll notice that for four years in a row spending is predicted to be flat. That seems incredibly unlikely, especially considering recent spending increases like the OPP's 8.5% pay increase effective January 1st 2014.

Income information is also specified. For 2012-2013 the income was 114.2 billion and then estimated at 116.8 billion for 2013-2014. For following years the income estimates are 120.5, 124.9, 130.1 and 134.4 billion in 2017-2018.  It should be interesting to see what program spending ends up coming in at for 2013-2014 and what the prediction is for 2014-2015.

Canada's Economy Grew 0.5% in January 2014, However First Quarter Overall Only 1.2% Prediction

After a bad December, January GDP growth bounced back at 0.5% according to this Globe and Mail article.

"Canada’s economy grew 0.5 per cent in January, reversing the effects of the December ice storm in Eastern Canada.

The bounce-back was anticipated by economists after a 0.5 per cent contraction in gross domestic product in December, when a winter storm knocked out power to hundreds of thousands of homes and businesses."

"The goods-producing sector led the way in January with gains of 2 per cent for manufacturing and 1.2 per cent for the mining and oil-and-gas sectors, according to a report released Monday by Statistics Canada."

So the fact that manufacturing increased, even more than energy extraction is good news for Ontario which possibly could have had a greater than 0.5% increase in January. Then again the January and February employment numbers for Ontario were totally stagnant which isn't good for GDP growth so who knows. However for the entirety of the first quarter 2014, growth isn't predicted to be good:

"Economists still expect the first quarter to be relatively weak – perhaps a 1.2 per cent annual pace.

That’s well below the Bank of Canada’s official call of a 2.5 per cent GDP gain in the first quarter. And it could force governor Stephen Poloz to lower the banks forecasts in the next monetary policy report, due out April 16."

Considering that Ontario's population growth is around 1% per year, 1.2% GDP growth would be pretty piss poor for Ontario, as that means that GDP growth per capita would be near zero. It is also bad for the current 2013-2014 budget, as the fiscal year ends at the end of the first quarter. With expenses rising and little GDP growth, expect the previous deficit prediction for Ontario for the ongoing fiscal year to rise. Also if growth is only 1.2% in Ontario in the first quarter, one would have to think the mandarins at the Ontario Finance Ministry would have to ratchet down predictions of GDP growth and tax revenues for this coming year's budget and future years. An already interesting budget is going to become more interesting.

Ontario Tories Release Documents Showing the Liberals Will Miss Deficit Targets

There's still no sign of a Liberal budget date. I've heard rumours that this budgets numbers wouldn't be good and that the Liberals plan to balance the budget in 2017-2018 would be pretty much impossible to achieve.

Now according to this Globe article, the Tories have released documents stating that:

The Ontario government is set to miss its deficit reduction targets for the next two years and must either dramatically cut spending or hike revenue to make up the shortfall.

That’s the message in a series of internal government documents prepared early last year. The papers, primarily briefing notes written by senior bureaucrats for Premier Kathleen Wynne, were obtained by a legislative committee and released by the Progressive Conservative opposition Monday.

 I can't say I'm very surprised. To meet those budget targets, the Liberals would have had to take some draconian measures. However news like the OPP getting a 8.5% raise on January 1st this year after two years of freezes and various other expenditures means that there's no way those targets can be met (amusingly, the OPP raise will apply to the last three months of the 2013-2014 budget). 

I'm assuming that the Liberals will take their time releasing the 2014-2015 budget but it will be interesting.

Flaherty Warns of Revenue Hit, But What About Ontario?

In this Globe article, federal Finance Minister Jim Flaherty warns of lower revenue for the 2013-2014 budget:

On Friday the minister met in Ottawa with private sector economists to discuss expectations for economic growth that will underpin the 2013 budget. Economists said they have lowered their forecasts since they last met with Mr. Flaherty in November, however their average forecast will be kept secret by the finance department until the budget is released.

 “How much of a kick are we going to take on the revenue side because of lower nominal GDP? Significant. It’s significant,” said Mr. Flaherty Friday as he spoke with reporters following the meeting.

Obviously that's problematic for the feds. We already know that growth was almost non-existent during the second half of 2012 which will affect revenue, plus this year's growth looks to underperform the earlier prognostications.

What I'm wondering is what it means for Ontario? Ontario's growth was poor just like the overall federal numbers in the second half of 2012. That has to hurt, the Ontario portion of the HST, corporate taxes and personal income taxes. However due to low prices for Alberta crude versus benchmarks like WTI, federal revenues are also hurt, whereas this affects Ontario significantly less if at all. Which taxes dominate the lower fed revenues? We should know more when the Ontario 2013-2014 budget is presented by Kathleen Wynne's Liberals, however given the weak growth in the second half of 2012 and potentially going forward, expect lower revenues for Ontario too.

Low Growth Makes Eliminating Federal Deficit Harder

Here's a Financial Post article on how lower GDP growth is making it hard for the feds to return their budget to balance, mainly due to lower commodity prices.

"Flaherty, seeking to return the country to surpluses while ensuring the economy isn’t hurt by fiscal tightening, already scaled back revenue projections in a November budget update by $7-billion for the next fiscal year and by $36-billion over five years, citing lower commodity prices."

"In that update, growth projections for 2013 were cut to 2% from a March forecast of 2.4% when the budget for the fiscal year beginning in April was released. That 2% now looks optimistic.

Growth in 2013 will probably be closer to 1.7%, according to the median of the forecasts of economists at six Canadian banks: Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Nova Scotia, BMO Capital Markets, Royal Bank of Canada and HSBC Canada."

How will this affect Ontario's revenues? Ontario obviously is not affected as much by high commodity prices (and considering the amount of gasoline Ontario uses and produces almost none, maybe lower commodity prices are a good thing) however low growth may spill over into Ontario. This would lower government revenues needed to balance Ontario's large deficit. GDP growth numbers for Ontario and tax revenue numbers will be critical for forecasting where the deficit is going.

Third Quarter Canadian GDP Growth Not Good, Not Good At All

With news that the Canadian GDP growth in the third quarter only increased at 0.6% on an annualized basis, one has to wonder what the number was for Ontario. We won't get the provincial number for a while, however assuming it is close to the federal one, that means with population growth of around 1.2% per year in Ontario, Ontario probably had negative GDP growth per capita, which isn't good for tax revenues or for the deficit.

From the above linked CBC article:

"Statistics Canada said Friday the country's gross domestic product expanded at a 0.6 per cent annualized pace, down from 0.8 per cent during the second quarter because of less investment by businesses and slumping exports.
For comparison purposes, the U.S. economy is currently expanding at a 2.7 per cent annual pace.
Canadian exports shrank by two per cent during the period, the largest decline since the second quarter of 2009."

So the previous quarter also likely had negative GDP growth for Ontario, so it's not a one off. For Ontario, was the decline in exports from manufacturing or petroleum products or a mixture of both? If it is from a decline in petroleum products, Ontario's third quarter performance may not be that bad, if not then Ontario's growth could be the same or worse than the federal number. 

Good National Post Info Graphic on Federal and Provincial Debt

The National Post often has good info graphics and this one, detailing Canada's federal and provincial debts is another good one. Quebec, has the most debt per capita ($21,420) followed by Ontario ($17,626). However Quebec looks to be on track to eliminating its deficit in the next couple of years, whereas Ontario is nowhere near eliminating its deficit. Could Ontario pass Quebec soon as the most indebted per capita? It is entirely possible considering the province is adding around $1,000 in debt per capita per year.

Ontario Deficit Down Significantly2011-2012

The Ontario deficit for the 2011-2012 fiscal year actually ended up at $13 billion down significantly from some early projections. This is important news that isn't getting a lot of play, probably because the deficit is still relatively massive. According to the Star article linked, the 2012-2013 deficit is predicted at $14.8 billion which would be larger than the preceding year.

It's a good question where exactly this fiscal year's budget will end up. The province is really starting to cut or freeze, although for the teachers, the freeze only starts this September, when the fiscal year starts significantly earlier. Where revenue ends up will be important and largely will depend on GDP growth this year for Ontario, which let's face it looks pretty tepid. High gas prices in recent weeks can't help much either if they continue.

If the budget deficit remains at $14.8 billion for this fiscal year despite various cuts and freezes, what happens to the province the next year? Even more freezes and cuts? I predict yes and for some years to come. The era of slow growth, especially per capita is here in Ontario (and has been here for a while) and the consequences are depressing.

Bad Quebec First Quarter GDP Growth

Here's a National Post article reporting Quebec's GDP growth in the first quarter:

The province’s gross domestic product grew by 0.2% in the first quarter of 2012, the same as the two quarters before, according to data released Thursday by Quebec’s government statistical agency. Its 0.6% annualized growth rate for the first three months of the year compares to 1.9% for Canada as a whole.

Wikipedia's reports Quebec's population growth rate at 0.7% a year in 2006. So for the last three quarters, GDP growth per capita in Quebec has been basically zero. Considering the student disruptions recently I can't see the second quarter number being that great either. Quebec has actually done a reasonable job in reducing their deficit, mainly by raising taxes. I'm wondering if this has been impacting GDP growth of late.

Hopefully Ontario's number for the first quarter will be out soon. I'm very curious to see that. Quebec's bad number is clearly dragging the Canadian number down. I doubt Ontario's number will be as bad as Quebec's, but you never know.

Ontario 2010/2011 Budget Deficit Lower Than Expected

The Star has an article about the Ontario budget deficit situation. Good news that the deficit for the fiscal year ending at the end of March is only 14 billion, lower than expected. I'd be curious to see the breakdown in terms of where the smaller deficit came from? Lower spending or more revenue including more HST revenue.

An ominous quote about this fiscal year's deficit: "But Duncan said in an interview that this fiscal year's deficit is still projected to come in at $16 billion, slightly higher than the actual figure for last year."

Considering that the first quarter of this fiscal year (this past April to June period) is looking weak, judging by the federal number and the fact that the US is looking especially weak going forward (which is more important for Ontario than for other provinces), could Ontario's deficit go up? Very possible, although with the election, whoever wins will have a bit of control over it, but not much. If Hudak wins, expect him to stuff whatever he can in this year's budget to make subsequent budget deficits look better.