Fraser Forum

A fiscal tale of two provinces—Ontario and Quebec

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Quebec and Ontario are the two most indebted provinces in Canada. In 2014-15, Ontario’s net provincial government debt was $284.1 billion while Quebec’s was $190.4 billion.

As a share of provincial GDP, Quebec has the more serious fiscal problem with a net debt-to-GDP ratio of 51 per cent compared to Ontario’s 39 per cent. In per capita terms, Quebec’s problem is also worse with $23,000 in net debt for every man, woman and child compared to $21,000 in Ontario.

Yet, given projected balanced budgets, Quebec is poised to begin getting its government debt problem under control while Ontario is still firmly on the road to acquiring more debt.

Government debt is the accumulated sum of deficits plus interest. Since 1990, both Ontario and Quebec have run deficits more than 70 per cent of the time. However, the average annual value of Quebec’s deficit from 1990 to 2014 was $1.742 billion while Ontario’s was $6.114 billion. Moreover, since 2009, Quebec has now brought its expenditure growth rate down below its revenue growth rate and with a projected balanced budget is poised to move into a period of consistent surpluses. Meanwhile, despite bringing its spending growth rate closer to its revenue growth rate, Ontario is having difficulty closing its fiscal gap.

Between 2001 and 2008, expenditures in Quebec grew at an annual average of 4.7 per cent while its revenues only grew at 4.1 per cent. During this same period in Ontario, provincial government spending grew at an average of five per cent annually while revenues only grew four per cent. From 2009 to 2014, Quebec has seen its provincial government revenue grow at 4.6 per cent annually while its expenditure growth has averaged 4.5 per cent. Meanwhile, Ontario’s expenditure growth rate is down to 3.7 per cent but its revenue growth is averaging 3.4 per cent.  

The result is that Quebec’s budget balances are trending towards surplus with a balanced budget anticipated for the current fiscal year. Meanwhile, Ontario expects to see a deficit of $7.5 billion in 2015-16, down from $10.3 billion the previous year. However, if long-term linear trends in the deficit between Ontario and Quebec are compared (see chart below), the claim that Ontario is on the road to a balanced budget by 2017 still seems in the realm of wishful thinking.  

Ontario has a long-term gap between revenues and expenditures that’s not closing in a persistent manner. Its revenues and expenditures are still like two ships sailing parallel to one another.  

Quebec, on the other hand, is seeing revenues and expenditures finally cross paths and its budget balance is trending towards surplus. Moreover, much of this progress has occurred since the serious recession in 2008-09 that battered the economies and manufacturing sectors of both Ontario and Quebec.  

Where there’s a will, there’s a way. Quebec decided to make its public finances a priority and that led to it finding a way to balance the budget. When it comes to restoring its public finances, Ontario seems to have lost both its will and its way.


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