A new report by the Fraser Institute details how misguided policies have made the Ontario economy dangerously reliant on the overheated housing sector to drive the economy, at the expense of manufacturing.
The report is concerning, especially considering how the Trudeau government is directly emulating Ontario’s failed economic policies.
According to the report, in 2002 manufacturing was 21.7% of the Ontario economy. Yet, that share has fallen to just 12.1% in 2015.
“The paper finds that the high cost of doing business in Ontario is the main drag on growth. These costs include everything from high electricity rates, the rising cost of labour and high income taxes to the indirect cost of a heavy regulatory burden.”
Additionally, “As a result of the high costs in Ontario, the temporary weakness that inevitably accompanied the 2008/09 recession has become chronically weak growth. Sluggish growth has erased Ontario’s historically lower unemployment rate than in neighbouring Quebec, a province long known for extensive government intervention in the economy and large government debts.”
And yet, Justin Trudeau is pushing these very same policies nationwide. The carbon tax – which Canadians are turning against – and increased regulations, will cause increasing damage across the country.
Dangerous reliance on housing
Notes the report, “Chronically weak growth in manufacturing has left Ontario increasingly dependent on housing, which has contributed over 29% of its income growth in the past year, even before a spike in housing starts and prices early in 2016.”
As you can imagine, giving up manufacturing for a housing bubbble is a huge problem. Producing real, tangible items is a far more stable and secure source of prosperity than an ephemeral housing market.
This is part of a dangerous long-term trend. The elites are hollowing out our economy and pushing policies that benefit big banks and the wealthiest investors at the expense of working class and middle income Canadians.
The price of those elitist policies are higher debt and more vulnerability – which is exactly what we are seeing more of in Canada.
As the report makes clear, “With a growing chorus of analysts and the federal government warning that a possible bubble in Toronto’s housing market risks deflating, this leaves Ontario precariously dependent on a potentially unstable and unsustainable source of growth. A correction in the Toronto housing market would leave both Ontario’s economy and government fiscal projections vulnerable to a downward revision.”
The vulnerability of Ontario’s economy, and the growing vulnerability of the national economy, is a direct result of elitist economic policies. We need to get back to common-sense economics that encourages Canadian manufacturing by cutting regulations and scrapping carbon taxes. As the United States learned the hard way, economic growth based on an overheated housing market is not at all sustainable. If we don’t get back to basics quickly, the odds of a serious economic crisis will continue to grow.
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