Rocco Rossi is president and CEO, Ontario Chamber of Commerce
Premier Doug Ford and his cabinet have some tough choices to make when it comes to their first budget and driving forward Ontario’s competitiveness.
Discourse surrounding Ontario’s debt is a contentious topic, with views ranging from its characterization as a “crisis” requiring immediate action, to suggestion that deficit spending is necessary to spur economic growth.
The Ontario Chamber of Commerce’s 2019 Business Confidence Survey found that nearly 80 per cent of respondent businesses are concerned about the impact the provincial debt could have on Ontario’s economy. Businesses believe the province’s fiscal health directly affects the ability of businesses to be competitive and capitalize on opportunities in growing industrial sectors. At more than $348-billion, or approximately 41 per cent of provincial GDP, Ontario’s debt is considerable and often difficult to contextualize. This is largely owing to Ontario’s many significant responsibilities as a province and considerable size within the Canadian federation.
Such a high debt can weigh heavily on economic growth as future generations may struggle to meet financing payments they had little influence over. Conversely, failing to make critical investments in infrastructure and services now may have significant costs, as Ontario’s future economy may struggle to compete with others that are replete with robust public infrastructure and services.
Faced with a slowing economy and the possibility of interest rates lifting off from historically low levels, the Ontario government is placed at a critical juncture that will affect generations to come: Does it embark on a debt repayment schedule that could hinder future economic growth, or does it continue making investments in the hope that economic growth will outpace growing debt financing costs?
The government of Ontario will need to strike the right balance. This means paying down the debt, focusing on competitive taxation and carefully choosing strategic investments that contribute to Ontario’s long-term economic growth. Strong, steady economic growth will not only improve long-term business competitiveness, it has the potential to turn a worrisome debt level into a manageable one, as a growing economy means more money in government coffers. Though it may not have access to the monetary tools and trade policies reserved for sovereign states, Ontario’s economic prowess within both the national and the global theatre begets substantial economic privilege and monetary influence.
It is important the Ontario government ensures its businesses have as many opportunities as possible to compete on the global stage. Deficit spending when targeted toward critical investment is an indispensable tool used by economies throughout the world to drive economic prosperity. When assessing investment in needed infrastructure and services – whether transportation infrastructure, broadband internet, or skills development – the government must consider the value that current and future Ontarians could gain.
Public debt is not merely a concern for large companies with sophisticated financial operations. Small businesses are often small in name only. More than 95 per cent of businesses within Canada are small – the majority of which operate entirely within Ontario. These businesses are most vulnerable to the tax burden imposed by poor debt management. Small businesses are often stretched by extremely thin profit margins and are unable to shoulder additional costs. In an increasingly globalized world, small business must contend with a growing number of firms against which they must compete, many of which benefit from government investment and subsidy. These local companies tend to derive value from government initiatives that aim to develop Canadian and provincial economic opportunities both domestically and internationally, such as skills development and export programs. Implementing opportunistic austerity measures to reduce Ontario’s debt may, in turn, have the unintended effect of squandering current opportunity to expand Ontario’s economy.
As the Ontario government faces an era of uncertain economic growth, it must demonstrate good debt stewardship – avoiding the siren song of austerity and instead run an efficient government with the capacity to invest for growth and development. Ontarians must understand that there is no concrete or tested method by which to value or assess what constitutes an “appropriate” amount of spending or borrowing. In discussing the best course of action on how to account for Ontario’s debt, both government and the public must engage in a frank conversation where we earnestly consider the consequences of various actions. One thing is certain: Government decisions in Budget 2019 regarding Ontario’s debt will have profound effects on industry and communities now and into the future.