Ontario’s per-person debt burden converging with Quebec’s
Recently released government data points to a major fiscal shift occurring among Canada’s two largest and most indebted provinces. While Ontario continues down its path of deficit spending, Quebec is on track to balance its budget this year. Soon, Ontario’s debt burden on a per-person basis will exceed Quebec’s.
To be sure, neither province is a model of fiscal prudence. But if we take each government’s projections at face value—however optimistic they may be about the future—Ontario will soon overtake Quebec in terms of net debt per person.
As recent as 2009/10, Quebec’s per-person net debt burden was approximately $4,400 higher than Ontario’s. That gap has shrunk considerably and is projected to be just $1,100 this year.
The latest government projections suggest the gap will continue to shrink next year and then, in 2017/18, Ontario’s per-person net debt will finally exceed Quebec’s (see chart below). While Quebec's per-person debt burden remains substantial, Ontario's will be even larger.
Examining the debt burden in each province relative to the size of the economy provides further evidence of Ontario converging quickly with Quebec. Quebec’s net debt as a share of GDP is projected to fall from its current level of 49.7 per cent to 43.0 per cent by 2019/20. Meanwhile, Ontario expects its debt-to-GDP ratio to hover very close to its current 40 per cent level for the near term.
All of this matters because government debt can pose serious economic problems. Several studies find that high levels of government indebtedness hinder long-term economic growth. And growing debt can mean more of tax dollars going to pay interest on servicing past debt rather than important spending programs such as health care and education, or even tax relief.
While Quebec certainly has more work to do to get its fiscal house in order, Ontario is headed on a path that will see its per person debt burden exceed that of La Belle Province.
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