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CANADIAN INDUSTRY ONLINE - MAY 2013
CHAMBER NEWS
in Canada. Spending growth during
recession is normal.
However, in the context of an aging
population and increased demand for
services, the current path is unsustain-
able. The government needs to make
some tough decisions on issues such
as program cuts and public sector ben-
efits such as pensions.
Interest rates are at a historical low and
projected to remain so until 2014. His-
tory teaches us they will inevitably go
up. Ontario is extremely vulnerable to
interest rate increases and must take
greater advantage in this low inter-
est rate period to get its fiscal house in
order.
The OCC firmly believes that, in par-
ticularly in a context of low economic
growth, deficit targets will be achieved
through transforming how govern-
ment does business, including by al-
lowing more private sector delivery of
health and human services. To see the
OCC’s prescription, read our
3)
ONTARIO’S PROJECTED ECO-
NOMIC GROWTH
Budget 2013 projects that Ontario’s
economy will grow moderately over
the next few years. GDP is expected
to increase by 1.5 percent in 2013, 2.3
percent in 2014, and 2.4 percent in both
2015
and 2016.
Business investment and trade are ex-
pected to contribute to growth over the
medium-term, particularly as exports
to the U.S. increases. The government
projects steady gains in motor vehicle
sales-as a result of a strengthening U.S.
recovery.
Continued growth in consumer spend-
ing is projected to move in tandem
with household incomes over the me-
dium-term.
400,000
net new jobs are expected over
the next four years, which according
to the Budget will result in a decline in
the unemployment rate to 6.6 percent
by 2016.
That said, the government notes that
uncertainty in Europe and the U.S. re-
mains a key risk to Ontario’s economic
growth.
OCC ANALYSIS
Government projections on economic
growth are comparable to private sec-
tor forecasts. However, Ontario’s fis-
cal position could be compromised as
interest rates increase in tandem with
growth.
4)
CAPITAL COST ALLOWANCE
FOR MANUFACTURERS
The Province of Ontario will paral-
lel the 2013 federal budget proposal
to extend the accelerated Capital Cost
Allowance to 2015. The allowance en-
ables manufacturers to deduct invest-
ments in new machinery and equip-
ment from their taxes. It is projected
to reduce the tax on manufactures by
$265 million between now and 2015.
OCC ANALYSIS
In a context of (near) parity with the
U.S. dollar and lagging productivity,
the allowance is both welcome and
necessary.
5)
ADJUSTMENTS TO THE EMPLOY-
ER HEALTH TAX
The Budget adjusts the Employer
Health Tax benefit, increasing the ex-
emption from $400,000 to $450,000 of
payroll for small business. Beginning
2014,
the adjustment is cost neutral
because firms with payrolls over $5
million will no longer qualify for the
benefit.
OCC ANALYSIS
The OCC will consult is members on
the implications of this announcement.
6)
POOLED REGISTERED PENSION
PLANS (PRPPs)
The government has announced that
they will consult with interested par-
ties to determine how best to imple-
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