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People hold signs ahead of the Ontario Elections Leaders debate at the CBC building in Toronto, Sunday May 27, 2018.

Mark Blinch/The Canadian Press

Don Drummond thinks that regardless of the political stripes colouring the platforms of the two parties still in the fight in the Ontario election campaign, they share a fundamental flaw: Both are based on overly rosy assumptions about where Ontario’s economy is headed.

Mr. Drummond, the Queen’s University economist who famously chaired a government commission on Ontario’s fiscal sustainability in 2011-12, says the plans of all three major parties – the incumbent Liberals, who have essentially conceded defeat, as well as the contending Progressive Conservatives and New Democrats – are premised on long-used assumptions that the province’s real gross domestic product growth will average about 2 per cent over the medium to longer term. The reality, Mr. Drummond says, will probably be more like 1.5 per cent, given the economic headwinds that Ontario faces over the next several years.

“The longer-run economic growth rate that all the plans are based upon are bogus – they’re far too high,” he said.

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This substantially lower growth trajectory is the bottom-line evidence of the big-picture economic challenges the next Ontario government will face. It raises questions of fiscal capacity – to fund the ambitious social programs that the NDP wants, perhaps, or to deliver the tax cuts and balanced budgets the PCs have touted – but it goes much deeper than that.

At the root of it is the fact that Ontario, like every other Western economy, is staring down the barrel of a demographic crunch. An aging population means slower growth in the labour force, which will significantly limit the economy’s capacity to grow.

If the next government wants any hope of leaning against this economic trend and sustaining growth closer to 2 per cent, it will have to find ways to increase labour force participation; stimulate investment in training, research and technology; improve competitiveness; and generally set the stage for better productivity growth to offset the labour slowdown. (Thankfully, one productivity-building initiative the apparently outgoing Liberal government championed – infrastructure investment – looks to be largely intact regardless of whether the PCs or NDP take power.)

On the labour force front, the NDP’s proposals for affordable child-care present the most promise. Neighbouring Quebec has proven an excellent model for how province-wide low-cost child care can free up more working-age people – especially women – to enter and remain in the labour market. With Ontario’s female participation rate eight percentage points lower than that of men, this could go a long way toward tapping into an underutilized supply of labour. The PCs are offering a child-care tax credit, but it’s a tiny fraction of the major investment NDP Leader Andrea Horwath has proposed.

But on another potential source of labour force growth – immigration – both parties have precious little to say. While other provinces have stepped up their focus on immigration as a strategy to fill key skills shortages – an issue for productivity growth and competitiveness, especially with exponential advances in technology – the lack of a coherent immigration strategy is disheartening.

Neither party has much to say in its official platform about enhancing competitiveness and stimulating capital investment, even though both have become critical concerns for Ontario’s private sector in the wake of this year’s U.S. tax reforms. But on an important factor affecting competitiveness and investment attractiveness – corporate taxes – the PCs and NDP are at opposite poles.

There’s no reason to think that PC Leader Doug Ford’s pledged one-percentage-point cut to the corporate tax rate (to 10.5 per cent from 11.5 per cent) would be some magic bullet to keep Ontario in the game against U.S. competition; years of corporate tax cuts at the federal level in this country have done precious little to boost business investment. But Mr. Drummond argues that it probably can’t hurt; the NDP’s plan to raise the corporate tax rate to 13 per cent, on the other hand, can. It is deeply unhelpful to a business community that already feels, justifiably, that its access to trade markets and its ability to compete globally are under threat.

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In all, the major planks of the NDP and PC economic platforms offer some glimmers of the biggest obstacles facing Ontario’s economy – but only glimmers. Neither party seems ready to fully confront the broader challenges that will make or break the province’s economy over the next decade.

Whoever wins Thursday’s election will need to catch on quickly. Because once these half-measures start leading the province down the road to 1.5 per cent growth, the government will lose the fiscal flexibility to do anything about it.

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