Oil lag, plunging dollar aid Sousa
The world has done Ontario’s economy some favours, allowing Finance Minister Charles Sousa to boast about his skilful economic stewardship in a major speech Tuesday.
The date of his Liberal government’s next budget hasn’t been announced but it will come sometime this spring. It will, he told Toronto’s board of trade over lunch at the Hilton, contain the news that the province’s deficit in the current year, the one just ending, has turned out to be $10.9 billion.
That’s good, or at least goodish. At last check, Mr. Sousa was expecting to spend $11.8 billion more than the treasury brought in, once a $700-million contingency fund (money he wasn’t planning to spend but booked as an expense anyway) was accounted for.
“We are taking a thoughtful and fiscally responsible approach that is working,” the finance minister said.
Now, whether Ontario’s budget deficit is $12 billion or $10 billion is not necessarily that important in itself. I mean, $2 billion is more than I’ve got on me right now, but that it’s in the context of the $130-billion budget of Canada’s biggest province matters.
What is important is what the government’s regular updates tell us about how closely real life is matching up to the finance minister’s plan.
By that standard, Mr. Sousa’s new number is … OK. Which is about the best thing it’s been possible to say about the state of Ontario’s treasury in a while.
Allowing for the fudge factor finance ministers always build into their budgets, in this case a $1-billion contingency fund Mr. Sousa didn’t expect to spend, the provincial government is doing $600 million better than it expected to be doing at this time last year. As of November, he expected to chew through $300 million of that contingency fund, so the situation has actually improved by $900 million in just a few months.
Which sounds quite good, until you go back another year and see that in 2013, Mr. Sousa figured the deficit this year would be $10.1 billion. So we’re doing better than his forecast a year ago, but worse than his forecast two years ago.
Still, better this way than the other way around, because the finance minister is out of tricks.
Much of his speech on Tuesday, he could have given during last spring’s election campaign: We’re making education more affordable; we’re funding apprenticeships in the trades; we’ve got a $2.5-billion “Jobs and Prosperity Fund” for business subsidies; perhaps you’ve heard we’re spending $130 billion on infrastructure. The federal government doesn’t give us enough money.
Mr. Sousa and Premier Kathleen Wynne might have been giving the same speech over and over again since last May, just cut up and remixed. If Ms. Wynne ever starts talking about her Portuguese-immigrant father, we’ll know for sure.
The thing is, Mr. Sousa and Ms. Wynne have made plans for spending every dollar they have to spend. The Liberal plan was to goose the economy hard with subsidies and public-works projects, clamp down on social spending and public-service salaries and then hope for the best. Mr. Sousa has done much of the goosing. We’re now in the clampdown.
Public servants have taken strike votes as contract negotiations grind on. The health ministry has cut doctors’ pay. In the past couple of weeks the education ministry has boasted about “stable funding” of $22.5 billion for school boards (which means a cut after inflation) and the housing ministry has pretended a $587-million anti-homelessness program is a big deal when it’s actually spending slightly less on the program this year than it did last year. The clampdown is not pretty.
Meanwhile, the price of oil has crashed thanks to a glut and that’s meant the value of the Canadian dollar has slid. Both of these are generally good for Ontario industry. The U.S. economy has, at last, picked up, which means the Americans are buying things from us again.
In his speech, Mr. Sousa said private-sector economists are predicting Ontario will lead Canada in economic growth in 2015, though that says a lot more about terrible things happening in such provinces as Alberta and Saskatchewan than it does about Ontario. Without the plunge in the price of oil, this province’s economy wouldn’t look nearly as good.
Mr. Sousa acknowledged that nobody saw that coming. “We welcome the breathing room but it may only be temporary,” he said. So the provincial Liberals will keep on as they have, he promised.
Of course they will. Short of making cuts to spending of the kind Ms. Wynne said specifically she wouldn’t make, there’s not much else they can do.