While Ontario premiers have boasted for decades that the province is the engine that drives the Canadian economy, a new report by the fiscally conservative Fraser Institute says the claim is nonsense and Ontario today is an economic laggard compared to the rest of Canada.
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“While Quebec at the start of the 21st century had some of the worst economic results and poor public finances in the country, that distinction now belongs to Ontario,” Lakehead University economics professor Livio Di Matteo asserts in “A Tale of Two Provinces: Economic and Fiscal Performance of Ontario and Quebec in the 21st Century.”
“Both Quebec and Ontario continue to face significant challenges when it comes to economic performance and fiscal management but Ontario — not Quebec — is now Canada’s economic laggard.”
Among Di Matteo’s findings:
From 2000 to 2022, Ontario ranked dead last among the provinces in average annual real per-capita GDP growth — a key measure of living standards — averaging just 0.7%, below both the Canadian average of 1.3% and Quebec’s average of 1.2%.
During that same time, Ontario’s GDP-per-person fell from second-highest among the provinces to fifth place.
(The period under study includes the last three years of the Mike Harris/Ernie Eves Progressive Conservative government in Ontario from 2000 to 2003, the Dalton McGuinty/Kathleen Wynne Liberal governments from 2003 to 2018 and the Doug Ford Progressive Conservative government of 2018 up to the present day.)
Over the past 24 years, Ontario has run annual deficits 19 times or for almost 80% of the period under study, while Quebec ran annual deficits 14 times, or less than 60% of the time.
From 2013 to 2022, Quebec lowered its net-government-debt-to-GDP ratio — a common measure of a provinces’s overall economic health — from 51.5% to 35.2% — while Ontario’s increased from 25.6% in 2005 to 36.5% in 2022 — higher than Quebec’s.
Di Matteo also warns that while Quebec’s economic performance has been better compared to Ontario’s over the past two decades, that’s largely because of Ontario’s poor performance.
The bigger concern, he says, is that Ontario and Quebec have lagged behind the rest of Canada in productivity and growth-enhancing business investment.
Given that Ontario and Quebec combined account for two-thirds of the Canadian economy and over 60% of its population, Di Matteo warns that when economic growth is near the bottom of the pack in Canada’s two largest provinces, all Canadians suffer.
Low productivity doesn’t mean Canadian workers are lazy. It means they aren’t being given access to the education, training and technologies they need to work more efficiently.
That results in a lower standard of living for all Canadians.
Senior Deputy Bank of Canada Governor Carolyn Rogers described low productivity as a “break the glass” emergency in a recent speech, noting that “in 1984 the Canadian economy was producing 88% of the value generated by the U.S. economy per hour … by 2022, Canadian productivity had fallen to just 71% of that of the U.S.”
The Trudeau government has acknowledged low productivity is a serious and long-term problem within Canada.
In her 2022 budget, Finance Minister Chrystia Freeland described it as “the Achilles heel of the Canadian economy, noting, “We are falling behind when it comes to economic productivity.”
That budget projected Canada was in danger of experiencing the lowest annual economic growth in real GDP per capita between 2020 and 2060 among the world’s developed countries including every other member of the G7 — U.S., U.K., Germany, France, Italy and Japan.