Austerity doing Ontario more harm than good: report

March 18, 2013

TORONTO – Ontario’s experiment with austerity in 2012 is contributing to an economic slowdown that demands a different course of action in 2013, says a report by the Canadian Centre for Policy Alternatives’ Ontario office (CCPA-Ontario).

The report, by CCPA-Ontario Director Trish Hennessy and CAW economist Jim Stanford, shows the province has not returned to pre-recession economic health. Austerity measures are compounding the problem, creating a “fiscal drag” effect that is slowing economic growth and undermining budgetary progress.

“The combination of federal, provincial and municipal program spending cuts is creating a fiscal drag on Ontario’s economy, reducing the province’s GDP growth by three per cent over the next couple of years,” says Stanford, who is also the CCPA-Ontario Advisory Board chairperson.

Stanford pointed out that Canadian GDP growth slowed almost to zero at the end of 2012. More spending cuts, combined with anemic private sector growth, could well create another recession.

Among the report’s findings:

  • The deficit predictions that justified the province’s 2012 shift to austerity were wildly overstated: Instead of hurtling toward a $30 billion deficit, Ontario’s deficit has already fallen to $11.9 billion – barely one-third of the inflated forecast;
  • Despite Ontario’s weak economic recovery, the provincial deficit will continue to gradually disappear without need for public service cuts, layoffs and wage freezes;
  • Key indicators such as Ontario’s employment rate, unemployment, youth unemployment, and involuntary part-time workers have not bounced back to pre-recession levels;
  • The sharp decline in the employment rate, with tepid post-recession recovery, means there are a quarter of a million fewer Ontarians working today than if the employment rate had remained stable, contributing to a $52 billion loss in potential labour income;
  • Ontario’s economy is capable of producing $70 billion more in goods and services. That additional output, given existing provincial revenue streams, would eliminate the deficit.

“Ontario’s economy remains on fragile ground and there is growing evidence that government spending cuts are doing more harm than good,” says CCPA-Ontario Director Trish Hennessy. “It’s time to step down from the austerity ledge and make job creation a top priority.”

– 30 –

Download the report, More Harm Than Good, at

For more information please contact: Trish Hennessy (416) 525-4927.