Austerity Harming Ontario Economy, CCPA Report Finds

March 18, 2013, 4:30 PM EST

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Ontario's economy was slowed by the province's experiment with austerity in 2012 and a new course of action is needed, a Canadian Centre for Policy Alternative (CCPA) report says.

The report released March 18 by the CCPA's Ontario office reveals that the province has not returned to pre-recession economic health.

CAW Economist Jim Stanford and CCPA-Ontario Director Trish Hennessy prepared the report, which shows that austerity measures are compounding the problem, creating a "fiscal drag" effect that is slowing economic growth and undermining budgetary progress.

"The combination of federal, provincial and municipal program spending cuts is creating a fiscal drag on Ontario's economy, reducing the province's GDP growth by three per cent over the next couple of years," said Stanford, also the CCPA-Ontario Advisory Board chairperson.

Canadian GDP growth slowed almost to zero at the end of 2012, Stanford said. More spending cuts, combined with anemic private sector growth, could well create another recession, a CCPA media release states.

Here are some findings from the report::

  • The deficit predictions that justified the province's 2012 shift to austerity were wildly overstated. Instead of a $30 billion deficit, Ontario's deficit has already fallen to $11.9 billion - barely one-third of the inflated forecast;
  • Despite Ontario's weak economic recovery, the provincial deficit will continue to gradually disappear without need for public service cuts, layoffs and wage freezes;
  • The sharp decline in the employment rate, with tepid post-recession recovery, means there are a quarter of a million fewer Ontarians working today than if the employment rate had remained stable, contributing to a $52 billion loss in potential labour income.

"Ontario's economy remains on fragile ground and there is growing evidence that government spending cuts are doing more harm than good," said Hennessy. "It's time to step down from the austerity ledge and make job creation a top priority," Hennessy states. 

To read the full report please visit

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