These are stories Report on Business is following Wednesday, March 28, 2012. Get the top business stories through the day on BlackBerry or iPhone by our mobile-friendly webpage.
A place to stand, a place to grow Chapter 2 of the Ontario budget illustrates just how miserable life is going to be in the once-mighty Canadian province. One need only look at the outlook for jobs and the fact that 557,000 people can't find work now.
The document released yesterday by Finance Minister Dwight Duncan outlines piddling economic growth and high unemployment for as far as the eye can see, which in this case is through to 2015, and many cutbacks meant to bring the province's swollen deficit into line.
The Liberal government has erred on the side of caution, which economists say is the right thing to do, pegging economic growth in Canada's most populous province at 1.7 per cent this year, followed by 2.2 per cent, 2.4 per cent and 2.5 per cent in the three years that follow.
The province acknowledged this, citing "the new economic reality" in its document.
"Ontario is facing an increasingly challenging economic environment that is expected to persist over the foreseeable future," its outlook for the economy said, though it added it's ready to meet the challenges.
"Corresponding to the increased industrial output of emerging economies, particularly China, there has been a significant increase in demand for a broad range of commodities, resulting in substantial price increases," it added.
"Most notably, oil prices have risen significantly in recent years. High oil prices are a challenge for Ontario as they drive up costs for businesses and households. Rising oil prices have also led to a strengthening Canadian dollar, posing a further competitive challenge for Ontario businesses. But Ontario's diversified economy is well positioned to meet these challenges."
It's the forecast for jobs that's particularly depressing: The budget projects the unemployment rate won't dip below 7 per cent until 2015. It projects a jobless rate of 7.7 per cent for this year, 7.4 per cent for 2013 and 7 per cent for 2014. For 2015, it's expected to be 6.7 per cent.
And as The Globe and Mail's Tavia Grant reports, the jobless rate among young people is now at an unbearable 17 per cent.
Employment growth is, in turn, forecast to be soft, just 0.9 per cent this year, followed by 1.3 per cent, 1.5 per cent and 1.6 per cent. That equates to about 360,000 jobs over four years.
Then there's the plan to "moderate growth in social assistance expense," starting this year, which will hurt the most vulnerable.
There's a lot to like in this budget, and of course Ontario has to get its fiscal act in gear. And it's moving that way.
External developments roiling the economy are, obviously, out of the province's hands. Still, you've got to question how much thought the government of Premier Dalton McGuinty has put into job creation.
The budget spends far too much time discussing where we've been - job creation has led the country and several Great Lake states - and not enough on where we're going. It's heavy on that old standard, a commission.
Rather than determining how it will create jobs, the government instead plans to strike a Jobs and Prosperity Council to advise on how to create jobs.
Compare Ontario to Alberta, whose recent budget projected economic growth of 3.8 per cent this year and next, followed by two years that are lower, at 3 per cent. Its unemployment rate is forecast to fall steadily, from 4.9 per cent this year to 4 per cent in 2015.
That may not be the best comparison, given the changing nature of fortunes in Canada. A look at Quebec might be better, but its jobless rate is forecast through to only 2013, and it's projected to run higher than in Ontario.
What the economists say Over all, Ontario plans to balance its books by 2017-2018 through a series of measures, including scrapping planned corporate tax cuts and going to war with its unions. Here are the views of several observers:
"Finance Minister Duncan said 'for the third year in a row, we have beaten deficit forecasts,' but for the third year in a row, the extended deficit-reduction path has not changed. While the static path to a balanced budget by FY17/18 is now more credible owing to realistic revenue growth assumptions and a detailed spending restraint plan, serious challenges remain. Among these are push-back from public sector unions, the political reality of managing a minority government and the always-present demographic pressures on health care spending. Last year, we said the province was on 'A Slow Boat to Balance.' Today, it’s clear they’re still on the same slow boat, but they now have charts and a compass." Michael Gregory, Robert Kavcic, BMO Nesbitt Burns
"This was supposed to be the Big One. Ontario’s Budget 2012 was built up as one of the toughest budget exercises in the province’s history that would provide the answers to many questions left hanging in the previous two budgets. And, Budget 2012 went some way toward addressing the most important question - ‘how will the Ontario government balance its books by 2017/18?’ - but its focus on the next three years stopped it short of offering a complete answer." Robert Hogue, Kirsten Cornelson, Royal Bank of Canada
"To achieve its stated deficit reduction path from FY13 to FY18, this budget’s central theme is fiscal repair, to protect Ontario’s economic growth and its public services. Moderating global growth prospects have steepened this challenge, and recent estimates by the Conference Board and Ontario’s Commission on Public Services Reform forecast a sharp worsening of Ontario’s fiscal imbalance if the status quo is maintained ... The government faces a challenging balancing act. Across a range of provincial expenditure indicators, Ontario is outstripped by a number of other provinces. As well, Ontario’s economic growth going forward reflects its diversified economic base, but it is not expected to be robust. Nevertheless, the imperative of staying on track for balanced by books by FY18, at the latest, is recognized in this budget." Mary Webb, Nathan Joshua, Bank of Nova Scotia
"Adopting the flavour of the Drummond report, cost-cutting was not done in an across-the-board fashion or narrowly targeted. A budget addendum takes nearly 50 pages to outline the steps to be undertaken. These include reducing costs for drug benefits, making upper income elderly pay for more of their drug costs, trimming dollars going to municipalities in the 'partnership fund,' cutting discretionary grants to schools for 'low impact' programs, closing some inefficient prisons, capping the clean energy benefit for large power users, and so on. For long-term care facilities, the province managed to find the savings in the past year, so it will simply hold costs down by starting at a lower base." Avery Shenfeld, Warren Lovely, CIBC World Markets
"Over all, today’s budget carries with it prudent economic growth assumptions and more details behind the medium-term fiscal plan. In this vein, the budget should be well received by credit rating agencies. Attention will now switch to implementing many of the items announced today. However, the government’s minority status requires the support of at least one Opposition party to help pass the budget. Additional measures and/or a change in some of the items included in today’s documents may have to be put up on the negotiating table for political support." Derek Burleton, Sonya Gulati, Toronto-Dominion Bank
Toyota adds jobs Amid the gloomy outlook, Toyota Motor Corp. is doing its part to add jobs.
The Canadian unit of the Japanese auto maker plans to add 400 positions in Woodstock as it hikes production of its RAV4 crossover utility vehicle, The Globe and Mail's Greg Keenan reports.
The RAV4 is one of Toyota's best-selling models in Canada, though most of the vehicles assembled in Woodstock are shipped to the U.S. market.
Genworth won't pick up all the slack The chief of Genworth MI Canada Inc. says it won't be able to pick up all of the slack as Canada Mortgage and Housing Corp. curtails its own growth, The Globe and Mail's Tara Perkins reports.
Genworth, Canada's second-largest mortgage insurer, is likely to scoop up some market share, but “I don’t see ourselves filling the void that could be in the marketplace [because of]CMHC’s cap,” Brian Hurley told analysts at a conference.
The Canadian government is imposing a cap or ceiling of $600-billion on the amount of mortgage insurance that CMHC can have outstanding.
Countries eye oil reserves France's energy minister says his country, the United States and Britain are studying the idea of releasing oil stocks to ease high crude prices .
Eric Besson didn't exactly spell it out, but did say this when asked by reporters if his government would join with the United States and Britain in a co-cordinated move: It is the United States which has asked and France has welcomed favourably this hypothesis."
Governments are becoming increasingly concerned over the threat to the global economy from high oil prices.
Italy seizes Gadhafi assets Italian authorities have seized more than €1-billion in assets owned by the fallen Gadhafi family, including interests in a major bank and soccer club.
Among the properties seized were a 1.25-per-cent stake in UniCredit, a major Italian financial institution, a 2-per-cent interest in the Finmeccia conglomerate, and holdings in Fiat and Fiat Industrial of one-third of 1 per cent each. Authorities also grabbed a stake of 1.5 per cent of Juventus, according to reports.
There's also a piece of a forest on a Mediterranean island, Pantelleria, Harley Davidson and Yamaha motorcycles, a Rome apartment and bank accounts.
Last, but not least, was an interest just shy of 0.6 per cent in the Eni oil company, a major player in Libya.
The assets were held in Libyan sovereign wealth funds.
Home prices edge up Canadian home prices turned around in January after two months of decline, rising 0.1 per cent, a fresh reading shows.
On a year-over-year basis, prices were up 6.5 per cent, marking slower growth for a second month, according to the Teranet-National Bank house price index released today.
For January alone, prices climbed 0.7 per cent in Halifax, 0.6 per cent in Toronto, 0.4 per cent in Victoria, 0.2 per cent in Winnipeg and 0.3 per cent in Montreal, Hamilton and the Ottawa region. Prices slipped 0.3 per cent in Quebec City, Vancouver and Calgary, and 1.1 per cent in Edmonton.
The annual measure shows prices up 9.9 per cent in Toronto, 9 per cent in Winnipeg, 7.9 per cent in Hamilton, 7.7 per cent in Vancouver, 5.6 per cent in Montreal and Quebec City, 5.4 per cent in the Ottawa area, 1.8 per cent in Halifax, 1.6 per cent in Calgary and 1.2 per cent in Edmonton. Victoria saw a decline of 0.1 per cent.
Pasties and sausages I'm still not entirely sure whether it rhymes with nasty or tasty, but today I learned what a pasty is. And why it's a source of outrage in Britain today.
"I am a pasty eater myself," Prime Minister David Cameron told reporters as the controversy flared.
I'm guessing that's a way of identifying with the common man given the popularity of Cornish pasties, which, The Associated Press reports, is a meat-and-pastry snack enjoyed by workers and students. Not quite Kraft Dinner in Canada where students are concerned, but you get the idea.
It's the source of controversy because Mr. Cameron's government plans to shut down a loophole under which things such as pasties, pies and sausage rolls weren't subject to a hefty sales tax of 20 per cent.
The tabloids have had a field day with it, and, today, Mr. Cameron professed his love for pasties. He'd wanted to hold a press briefing on the Olympics, but somehow it got sidetracked.