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Ontario debt may trigger a political backlash in 2018

Wednesday, August 3, 2016

Subject

Ontario's public debt.

Significance

Ontario, Canada's most substantial provincial economy, has seen a large and unsustainable increase in its public debt in recent years, with debt levels approaching the highest of any province in Canada save for Quebec. Despite efforts by the governing Liberals to bring the province's finances under control, spending is likely to increase in the medium term. The provincial government is in a precarious financial position that could be exacerbated by any rise in its cost of borrowing.

Impacts

  • Rising electricity rates brought by the need to raise revenue may see manufacturers leave the province for more competitive jurisdictions.
  • An ageing provincial population will drive up health care and pension costs while diminishing the working tax base.
  • A stronger Canadian dollar from an oil price rally would harm Ontario's export-orientated manufacturers and services firms.

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