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Ontario's pre-election economic news bittersweet: Cohn

Right on cue, Finance Minister Charles Sousa walked into Rm. 247 of the legislative building Wednesday to release Ontario’s latest economic forecast.

As predicted.

No, it’s not his economic outlook that’s turning out as predicted, just his scheduled appearances.

Sousa’s news conference Wednesday (and a noon speech Thursday) was telegraphed in advance by a secret cabinet document leaked by the Tory opposition earlier this week. The Liberal government’s “Communications Rollout” — a detailed countdown to next month’s spring budget — flagged Sousa’s scheduled release of Ontario’s Long-Term Report on the Economy.

“Ontario is poised for strong economic growth,” Sousa proclaimed in a prepared statement. The report’s 20-year outlook also “talks about our strengths built up over the last 10 years,” he noted pointedly.

The problem is that even as our province does better, we won’t be doing as well as our American neighbours. Far from it.

As good as Sousa is at sticking to his schedule, his future predictions are preordained by the province’s past performance. The treasurer can talk up the past decade of Liberal rule, but his own report suggests it was an economic downer.

The province invested heavily in education and infrastructure, but failed to gain any dividends in productivity growth. Worse, our productivity growth is destined to falter in future — falling further behind the U.S., which explains why our overall economic growth will also lag.

The good news is that Ontario’s economy is projected to grow by a comfortable 2.5 per cent annually from 2014-17 (compared to 1.3 per cent last year). By comparison, however, the U.S. economy will grow by a more robust 2.9 per cent a year through 2017.

The productivity news is especially problematic: It will remain static at 1 per cent a year through 2017, averaging 1.1. per cent over the next two decades. Meanwhile, U.S. labour productivity will leapfrog ahead at the rate of 1.7 per cent over the same period.

And while Sousa referred to the last decade as a period of strength, his own government’s figures show that productivity growth has been a dismal 0.4 per cent annually since 2001, versus 2.3 per cent a year in the U.S.

In a report released last November — at about the time Sousa’s long overdue report was supposed to be submitted — economist Roger Martin described “a highly disconcerting finding.”

Rather than closing the productivity gap on our American competition, Ontario was lagging further behind, his Task Force on Competitiveness, Productivity and Economic Progress concluded. Ontario tried to do the right thing but it didn’t work out: Corporate taxes were cut to record low levels, yet instead of showing entrepreneurial flair by investing profits in R&D to boost productivity, our companies have been sitting on hoards of cash.

Sousa used his scheduled appearance to boast about Ontario’s “strengths built up over the last 10 years,” but the task force argued the precise opposite:

“Clearly, Ontario is falling behind its competitors,” Martin’s report concluded, “a result of more than a decade of missed opportunities, wasted potential, and complacency on the part of business leaders and policymakers.”

It would be unfair to fault the Liberals alone for the failures of the past decade. Government can create the conditions for investment, but cannot generate growth on its own. Canada’s commercial classes must shoulder much of the responsibility.

But when the blame game begins — in an election that could come as soon as this spring — the Liberal government will face a fresh communications challenge. Here’s one prediction that wasn’t in Sousa’s latest report:

As the economy improves over the short term, the Liberals will try to claim credit for declining unemployment and rising exports — as if it was all their doing.

But as it becomes clear that the economy is lagging further behind a robust American recovery, the Liberals will duck — blaming forces beyond their control.

Such is the predictable intersection between politics and economics.

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