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While We Were All Paying Attention to Faith Based Funding

October 12th, 2007

From RBC’s quarterly economic report Provincial Outlook (October 2007):

Ontario — Forecast lowered; competitiveness waning

We have shaved our 2008 growth forecast down significantly, but expect that
growth will rebound modestly in 2009 as the U.S. economy accelerates, currency
relief materializes, major capital spending by the provincial government kicks in
and new auto sector investments swing into production. Renewed upward pressures
on the currency, ongoing strength in oil and other commodity inputs,
weaker U.S. growth and the surge in China’s exports as a share of U.S. imports all
mean that central Canada’s manufacturers will face another challenging year.
Also, forestry, Ontario’s second biggest sector, faces at least another year of
weak commodity prices and escalating costs.

While 2009 may bring modestly stronger growth, our chief concern is for the
economy’s long-run competitiveness under the crushing corporate tax burden
that acts as a sharp disincentive to invest. If the province were a country, then,
when properly measured, it would have the second highest tax burden on new
business investment in the world. Much of this goes to funding very rapid
growth in short-term government program spending, with health accounting for
about one-half. Ontario has had the second fastest growth rate on program
spending behind Alberta in recent years, but in a relatively soft economy and
without the Alberta government’s resource royalties backing this spending.
Addressing this high tax burden would be a significant offset to the currency
pressures on the province’s businesses. In fact, much of the incentive to invest
as a result of the 60% currency-induced cheapening in imported capital goods
gets yanked right back by extraordinarily high rates of taxation. (Emphasis mine).

Now that the election is over, can we get around to discussing the economy? What did happen to the CAW and it’s complaints about the manufacturing crisis during the election? How will one more day of pay for one less day of work help businesses in this province be competitive?

Dalton Dalton Dalton, Economic Fundamentalism

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