Friday, 30 October 2026

Ontario Fall 2026 Economic and Fiscal Statement: Is This as Good as it Gets?

The Ontario provincial government released its fall economic and fiscal update with its projections for the next few years and the results do not look like smooth sailing. Ontario is of course being hard hit by the ongoing trade and tariff dispute with the United States with its manufacturing sector under a lot of stress. While the Ontario economy is still being forecast to grow over the new few years - demonstrating a surprising amount of resilience - it remains that once inflation and population growth are factored into the analysis, Ontario is looking at continuing anemic per capita income growth. By 2028, if all goes as laid out in this economic statement, Ontario will have a real per capita GDP approximately where it was in 2019. In other words, the third decade of the 21st century will represent a lost decade when it comes to per capita income growth for Ontarians.

In an effort to deal with the effects of a slow growing economy, Ontario is relying on continued large deficits. Figure 1 combines data from the Fiscal Reference Tables and yesterday's economic statement to plot total revenues, total expenditures and the deficit since 1990/91 and up to 2028/29. Needless to say, more often than not, there has been a deficit with the projections calling for a deficit of $16.9 billion in 2026/27 followed by $12.7 billion and $6.7 billion in the two subsequent years. Even if one accounts for the billions of dollars in spending being set aside in contingency funds ($2.2 billion in 2026/27 and $3.6 billion in 2027/28), there are still substantial deficits coming down the road.

By 2028/29, the provincial net debt is expected to surpass the $540 billion dollar mark (see Figure 2) but also growing quickly will be the resources required to service the debt. Annual debt service costs until the 2022-243fiscal year were under $14 billion but are projected to rise substantially to the point that 2028-29 is expected to see debt charges surpass $20 billion dollars. That is about $7 billion more than what the province is expected to spend on post-secondary education in 2028/29 ($12.6 billion) and just under what it is expected to spend on children, community and social services ($21.7 billion). And while we are on the topic of post-secondary education, it should be noted that the economic statement shows spending on the sector at 13.9 billion for 2025-26 meaning that by 2028/29, spending on the sector will have declined by 9.4 percent.

However, the most interesting revelation is for health spending. Figure 3 plots the total amount the provincial government is spending on health as well as adjusted for both population and inflation. Going forward, increases will be about $3 billion annually in total health spending which after factoring in inflation and population growth will result in increases in real per capita spending of 0.5 percent in 2026/27, -0.2 percent in 2027/28 and 0.7 percent in 2028/29. By 2028/29, real per capita provincial government health spending will have essentially been flat since the surge of the pandemic. The pandemic itself saw a substantial bump in real per capita spending followed by a decline and then a slow recovery which flattens out going forward over the next three years. All this in turn comes after a period of essentially flat real per capita health spending since 2008/09. By way of comparison, from 1997/98 to 2008/09, real per capita provincial government health spending growth in Ontario averaged 4.1 percent annually. Since then and projected to 2028/29, the average annual growth rate will be 0.8 percent.

Of course, part of the reason for slow spending growth in important things like health and large deficits at the same time is the anemic performance of the provincial economy and Figure 4 shows where we have been and where it looks like we are going. Much like health spending, projected real per capita GDP by 2028/29 will be where Ontario was just before the pandemic. A slow economy feeds into revenue growth. The result is that while revenues are projected to increase, they are not rising fast enough to both increase spending on key programs, service the debt and balance the budget. Between 2025/26 and 2028/29, total revenue is expected to grow by 11 percent. Program spending is expected to rise by 6 percent. However, debt service costs are going to rise by 32 percent. And with interest rates on the way up, it looks like this is going to be as good as it gets.

Saturday, 10 October 2026

Mayors and City Performance: Thunder Bay, 2000 to 2025

As we head towards the October 26^th municipal election, a retrospective on what has come to pass is always of benefit. The next mayor and council will take Thunder Bay into the next quarter of the 21^st century so it is instructive to review some of what has transpired during the first quarter. Mayors and councils have little control over the ebbs and flows of the provincial, national and global business cycles and their immediate impact on the city. They also have not as much control as you might think over municipal policy given their part-time approach to the job, an established municipal bureaucracy, and provincial regulations and oversight.

The key role of elected municipal officials is to provide assent and legitimization for decisions as well as democratic accountability to the electorate for taxes and expenditures that to a large extent are driven by rules and processes outside their immediate control. They are in essence the shield that deflects attention away from the municipal and provincial bureaucrats who in effect actually govern municipalities. While it is true that particularly persistent, driven and well-informed mayors and councillors can make a difference, for the most part, it is an exhausting process given they are caught between a demanding public and a faceless monolithic set of bureaucratic overlords.

Nevertheless, the mayor and council are the face of public accountability in our system of municipal governance and so their elected terms can be the basis for comparisons. The following figures compare the period of mayors (and by extension their councils) of Thunder Bay from 2000 to 2025. The comparators are three annual municipal indicators and two annual economic indicators. The three municipal indicators are taken from data provided by the annual provincial Financial Information Returns (FIR) filed by each municipality. These are: total own-purpose taxation revenue (which includes both residential and commercial tax revenues), per household total own-purpose taxation revenue and the size of the municipal workforce. The two economic indicators are the total value of building permits issued (from FIR) and total employment (Statistics Canada).

Where necessary, some data from the City of Thunder Bay budgets was also used. It should be noted that the data for the start and end years is sometimes incomplete and in those cases estimated using a simple regression over the 2000 to 2024 period to obtain the 1999 and 2025 figures. As well, these indicators focus on fiscal and economic indicators. Left out are social measures such as crime rates or rates of homelessness. Suffice it to say that over the entire 2000 to 2025 period, crime rates in Thunder Bay declined from 2000 to about 2015 but have since seen an uptick. As for homelessness, that has definitely gotten worse over time and particularly since the pandemic. Both of these trends in Thunder Bay are reflective of what has transpired in other Ontario cities.

Over the 2000 to 2025 period, there are five mayoral terms. Ken Boshcoff (2000 to 2003 though the term starts in 1999), Lynn Peterson (2003 to 2010), Keith Hobbs (2010 to 2018), Bill Mauro (2018 to 2022) and Ken Boshcoff (2022 to 2025 though the term ends in 2026). Boshcoff essentially bookends the entire period and his two terms do offer an interesting comparison both for the two periods he served as well as relative to the others. The eras these mayors served in all posed challenges for the mayor and council of the day and not all of them were politically self-induced.

Lynn Peterson, for example, faced the most serious economic challenges of these mayors serving during the forest sector crisis at the start of her term that essentially eliminated 5,000 jobs in Thunder Bay and then ending her service with the financial crisis of 2008-09. Bill Mauro got to experience the economic and social disruption of the COVID-19 pandemic. Keith Hobbs, whose tenure was marked by a number of interesting high-profile issues, served during an economic period that saw some changes in Thunder Bay’s economy including the development of its knowledge based and resource sectors that served as a transition to the present period of growth. As for Ken Boshcoff, he was truly blessed by serving in the final autumn years of the Thunder Bay forest sector pre 2003 as well as holding office after the worst of the pandemic and during the recent growth upsurge in mining and construction. Timing is often everything.

Figures 1 to 3 summarize the aforementioned indicators for each of these mayoral terms. Figure 1 provides the average annual growth rates by term for total own purpose taxation revenue, per household total own purpose taxation revenue and the municipal workforce (a head count of full, part time and seasonal workers). The growth of taxation revenue (a function of both he rates applied as well as economic growth as reflected by growth in assessments) was highest for Boshcoff from 2022 to 2025 and Lynn Peterson 2003 to 2010). Peterson’s term saw challenging economic conditions but in the pursuit of maintaining city services also saw some of the higher tax levy increases over the entire 2000 to 2025 period. Tax revenue growth was also lowest under Boshcoff during the 2000 to 2003 period. Hobbs (2010 to 2018) saw the second lowest average growth in total taxation revenue.

Figure 1 also takes total tax revenue and divides by the number of households in the city to provide an estimate of the average tax burden per household, but it should be noted that this includes both residential and commercial revenue. However, during the first quarter of the 21^st century, residential came to account for over 70 percent of tax revenues as the burden were shifted more on to residential as a result of provincial rebalancing. These results parallel the previous ones with Boshcoff (Term 2) and Peterson seeing the highest growth while Boshcoff (Term 1) and Hobbs see the lowest growth. Finally, when it comes to municipal employment growth (workers employed by the City of Thunder Bay), growth was both highest and lowest for Boshcoff. Indeed, as a result of early in the term post pandemic downsizing, Boshcoff (2022 to 2025) actually sees a slight shrinking of the municipal workforce average growth rates.

Figures 2 and 3 provide comparisons of the two economic indicators. In terms of construction growth, the highest average annual growth rates in total building permit values were both for Boshcoff given his first term in office spanned the permit issued for the new hospital and his second for the rovincial jail project. All of the others saw much more modest growth rates with the lowest rates under the term of Lynn Peterson. As for employment growth, not surprisingly, it was also highest in both of the Boshcoff terms and lowest – indeed negative – during the Peterson term with more modest growth during the Hobbesian and Mauronian terms.

Much of what transpired during the terms of these mayors and their respective councils was driven by external factors and as one might remark when it comes to Euchre or Poker, you must play the hand you are dealt. One can be dealt a poor hand and manage to eke out a respectable performance. On the other hand, one can be dealt a good hand and still handle it badly though when times are favourable it takes an awful lot of bad decision making to make a pig’s breakfast of it all.

With the exception of Mauro, all of the mayors had a considerable period of time in which to make their mark. Mauro was limited both by the length of his term as well as the onset of the pandemic. Peterson was dealt a particularly poor hand in terms of economic circumstances that saw declining total employment in the city and forced higher than usual tax rate increases to maintain services. At the same time, the period still managed to see some growth in building permit values. The Hobbesian era despite the unfortunate moniker was neither particularly nasty, brutish or short at least in economic terms and saw a middling overall performance compared to the others.

The best performance at least in these charts over the long term appears to have been the quarter century bookend terms of Ken Boshcoff. His two terms coincide with the highest growth rates of both building permit values as well as employment. He managed to oversee both the largest percent expansion of municipal employment as well as the lowest, so he is able to satisfy both those who see municipal employment as a necessary economic driver as well as those who feel there needs to be restraint. His second term also coincides with the largest increases in own purpose municipal tax revenue but not necessarily the highest increases in tax levies. One can either ascribe this relative success to the good fortune of timing or to the ability to play a good hand really well, or some linear combination thereof. One leaves that ultimate assessment and any others they wish to make to the gentle reader.

Monday, 5 October 2026

Trade, Tariffs, Integration and Productivity

This post originally was featured on the Fraser Institute commentary page, September 30th, 2026.

Tariffs, trade, integration and productivity—the Canadian conundrum

As Canada continues in its trade dispute with the United States, its dalliance with the European Union, and its efforts to boost investment, the reality remains that the fundamental issue is not market access but Canada’s long-term productivity malaise as measured by the decline in the growth rate of real per-person GDP. Despite being an open economy with low effective tariff rates and access to and integration with the largest and wealthiest market in the world, Canada’s productivity performance waned in recent decades.

Moreover, Canadian real per-person GDP declined relative to the U.S. in the 21st century. Against the U.S. is how we have always tended to measure ourselves. While Harold Adams Innis maintained that Canada and its institutions are fundamentally a product of Europe, our geography has meant sharing a continent with the U.S. with whom we have both cooperated and competed economically even in the days before Confederation.

The immediate aftermath of Confederation saw Canada mired in stagnation as the Great Depression of the 1870s affected the world. Afterwards, a program of economic nation-building via Prairie settlement and railroad building linked the manufacturers of the east with the resource producers of the west under the protection of the National Policy tariff wall. This saw an investment boom and rapidly growing real per-person GDP (as illustrated below). It’s noteworthy that from 1880 to the eve of the First World War, our real per-person GDP growth exceeded that of the U.S.

The First World War and the Great Depression were periods of poor real per-person GDP growth punctuated by the boom of the 1920s, which again saw Canadian growth rates surpass American. The Second World War saw average annual real per-person GDP growth top 4 per cent and this was followed by the high growth rates of the 1950s and 1960s. Those of the 1950s were muted only by the fact that this was an era of rapid population growth. However, since the 1960s, our average annual real per-person GDP growth has declined steadily with the 2020s the most dismal period since the Great Depression and our real per-person GDP growth eclipsed by the U.S.

While advanced economies saw a slowdown in productivity growth in the wake of the 1970s oil price shock, the Canadian decline is particularly noteworthy in comparison with the U.S. The era of Prairies settlement and the wheat boom saw Canadian real per-person GDP growth outperform the Americans. The 1960s and 1970s also saw Canadian growth outperform the U.S. While both countries saw a productivity decline after the 1960s, since 2000 the Americans appear to have reversed theirs. Despite our economy and export sector being increasingly linked to the American market first via the 1988 free trade agreement and then NAFTA and rising exports, we have generally not performed well when it comes to per-person income growth.

The reasons for weak Canadian productivity performance both current and historical are numerous and extensive. There’s relatively weaker investment in productivity enhancing capital investment, which has worsened during the age of information and communications technology. There’s the generally smaller Canadian market fractured by interprovincial trade barriers, which has restricted economies of scale. Then there’s the combination of large governments, cumbersome regulation, as well as oligopolies in transport, telecoms, agriculture, airlines, banking and energy, which have reduced competition, innovation and adoption of new technology. There’s the effect of high personal and business taxes, which has had incentive effects on investment, work effort and resource allocation.

Then during the post-2000 housing asset boom, the emphasis on residential investment rather than plant, machinery and equipment was augmented by the fact that the construction sector had some of the lowest labour productivity of all Canadian sectors. And of course, one can always blame reliance on our natural resource sector intensity, which when times are good dampens the incentive to innovate and when times are bad bemoans the lack of resources to innovate.

It’s not that Canada has stopped growing, it’s that Canada is growing at a much slower rate than its nearest and most important competitor (the U.S.). Canada seems to have settled into a comfortable low growth equilibrium despite all the supposed advantages being conferred over the last 50 years by increased access to and integration with the U.S. market and economy. Falling effective tariff rates in the wake of the Second World War and the General Agreement on Tariffs and Trade (GATT) and access to the large American market should have increased competitive pressures fostering both more innovation, investment and cost-reducing economies of scale. Indeed, one might have expected convergence of Canadian and American productivity levels. Yet paradoxically, Canada’s productivity slide relative to the U.S. coincides with the increasing integration of the two economies.

Figure 2 plots Canadian to U.S. real per capita GDP as a percent share from 1870 to 2025 and accompanies it with a weighted scatterplot smooth to illustrate longer term trend. It combines this with the effective Canadian tariff rate over the same time as well as denotes the three key events in the 20th century integration of the Canadian and U.S. economies: The Auto Pact (1965), the Free Trade Agreement (1988) and NAFTA (1994). Note that our effective tariff rate prior to World War II was seldom below ten percent but declined steadily afterwards.

Canada’s real per-person GDP relative to the U.S. rose for the first century after Confederation. Canada’s real GDP closed the gap more rapidly from 1890 to the First World War and again from post-Second World War until the mid 1970s. However, somewhere between the signing of the Auto Pact and the first free trade agreement, Canada’s real GDP began to consistently grow more slowly than the U.S. From a height of nearly 90 per cent of U.S. real per-person GDP, it has now fallen to below 70 per cent.

There’s a rather large economic literature as to why increased integration and trade with a larger economy might paradoxically lead to divergence of per-person income and growth rates rather than convergence. Alwyn Young argued that under a free trade agreement between a large developed country with a higher stock of knowledge and a smaller less developed country, the less developed country would receive conventional gains from trade but the long-term dynamic implications were that the less developed country could experience falling technological progress and GDP growth compared to autarky. Of course, one might argue that Canada by mid-20th century was a highly developed economy, but then one might not guess that from the state of its national highway system compared to the U.S.

Devereux and Lapham maintained that in a world with two economies, under trade liberalization, the country with the higher stock of knowledge could increase its share of human capital in research and development while the other will systematically reduce its share with the end result being concentration of research and development (R&D) in the country with the initial advantage. While Canada has been able to innovate and conduct R&D, it has always borrowed technology and innovation from the U.S. and elsewhere, and under trade liberalization this practice may have worsened.

Of course, there are always counterpoints and Trefler finds that in the wake of the first free trade agreement, the Canadian industries that saw the largest tariff decreases did see industry-level labour productivity rise at comparable levels to those American industries receiving the largest tariff reductions. This of course raises the question as to why if productivity in affected Canadian industries did go up, it did not ultimately translate into higher rates of real per-person GDP growth. Where did the productivity gains go if not ultimately to raise our living standards?

The point of all this is as follows. Whether we renew a trade agreement with the U.S. and Mexico or craft a new one with the EU or China or India or CANZUK or anyone else, Canada’s productivity performance must be addressed. If the last 50 years have taught us anything, it’s that a free trade agreement and continuing to simply export as we always have is not enough to ensure our future standard of living.

Without resolving our interprovincial trade barriers, boosting our research, development and innovation and translating it into outcomes, making our tax system more competitive and less stifling of work and investment effort, and addressing the cozy oligopolistic nature of our markets, all the market access and trade in the world will apparently not reverse our productivity decline. Neither will simply boosting our infrastructure investment to move more exports to the world market. By not addressing the fundamental structural and institutional problems facing Canada’s economy that hamper reaping the benefits of markets and trade, we will continue to be the economic frog in a slow boiling global pot of water.

Tuesday, 29 September 2026

Are We Over Reacting to July’s GDP Growth Rate?

Today’s release of July’s real GDP growth of close to zero by Statistics Canada has been interpreted as Canada’s economy stalling and a portent of ominous things to come as the trade dispute with the United States worsens. However, it is only one month’s result and needs to be put in some comparative perspective.

Figure 1 plots monthly real GDP growth since January of 2024 and compared to the previous three months July does look like a precipitous drop. However, if one goes back for several years, there have been other very low growth months (March 2024, August 2024, June 2025, March 2026) not to mention several months of outright decline (November 2024, February 2025, April 2025, May 2025, October 2025, January 2026). Indeed, over the entire 1997 to 2026 period, average monthly real GDP growth has only averaged 0.2 percent with the highest being June of 2020 at 5.8 percent and the lowest April 2020 at -10.4 percent – both during the initial phases of the pandemic.

Figure 2 provides another comparison. The real GDP growth rate for July of every year since 1997 is provided along with aggregate statistics for every July as well as for all the months the entire 1997 to 2026 period. At 0.02 percent, July 2026 is effectively zero but there was negative growth in the July of 1998 2001, 2007,2017 and 2023. Of these 30 Julys, July of 2026 is near the bottom, ranked at 24^th place. However, there have been six other July real GDP growth rates lower than July of 2026.

In other words, there is no point in overreacting to one month’s poor result after three months of consecutive growth. As Statistics Canada itself notes: “The goods-producing industries grouping was essentially unchanged in July as increases in construction and utilities were offset by declines in the other sectors comprising the aggregate. The services-producing industries aggregate was essentially flat, as increases across several sectors were offset by declines in retail trade and wholesale trade. Overall, 10 of 20 industrial sectors expanded in July.”

In general, summer in Canada is short and maybe more people than usual took time off and production slowed. Moreover, July of 2026 also saw wildfires peak in several parts of the country and this may also have been a factor especially when it comes to the service sector as more people remained indoors.

Wednesday, 23 September 2026

The Weakening of Canadian Per Capita GDP Growth

Lost in all the angst of our current trade dispute with the United States and the push to diversify Canada's export partners is the fact that despite what were very favourable market access terms via free trade arrangement with the United States and the subsequent growth in our exports, our real per capita GDP performance has been moribund. Our only saving grace has been that we entered the period of decline in per capita GDP growth rates marking the last fifty years from an exceedingly high base. Figure 1 plots IMF-WEO data on per capita GDP in constant prices ($2021) for Canada and a select number of important important countries and trade partners. As hard as it might be to believe, in 1980, once adjusted for purchasing power parity, real per capita GDP in Canada was higher than the United States and the E.U.

If one then moves forward, what is remarkable is our performance against these - albeit cherry picked - comparison countries. Most of them are either important trade partners for Canada or have the potential to become more important (especially in the case of the E.U. and the UK) in the wake of the current trade dispute with the United States. Our real per capita GDP is still high by world standards in that we are well above China, India, South Africa, Mexico and Brazil, not to mention New Zealand and Japan. However, the U.K. and the E.U. have nearly caught up with us. Australia and the United States surpassed us some time ago. Our real per capita GDP has grown but just about everyone else has grown faster.

Figure 2 presents the ranked implied annual growth rate of the real per capita GDP numbers in Figure 1 and also includes those for the World economy as a whole. China and South Korea are the prime examples of the Asian miracle with annual growth rates since 1980 at 7.6 and 4.8 percent respectively. This has allowed per capita income in China to double nearly every ten years which is an impressive performance even if they are still at an average per capita GDP that is half of Canada's. South Korea started from a higher base than China but also has had a stellar performance with its per capita GDP doubling every 15 years since 1980 and at 98 percent of Canadian per capita GDP has essentially reached parity with us.

The world has developed rapidly since 1980 with the world per capita GDP growth rate being a bit below South Korea's and that has been driven by two of its largest economies - China and India. The United States and Australia and the U.K. in the end have seen their real per capita GDP expand by just under 2 percent annually while the E.U. and Japan are closer to 1.5 percent. Canada clocks in at 1.1 percent in terms of its annual implied annual growth rate - below New Zealand at 1.3 percent but above Brazil, Mexico and South Africa.

For all the talk about the E.U, as a sclerotic trade partner for Canada given its productivity issues, it has grown faster than Canada and its per capita GDP is also for all intents and purposes on par with Canada. These types of growth numbers should be a wake up call for Canada. We have only done as well as we have because of inertia and that cannot last for ever.

NORTHERN ECONOMIST 2.0

Northern Economist 2.0

Friday, 30 October 2026

Ontario Fall 2026 Economic and Fiscal Statement: Is This as Good as it Gets?

Saturday, 10 October 2026

Mayors and City Performance: Thunder Bay, 2000 to 2025

Monday, 5 October 2026

Trade, Tariffs, Integration and Productivity

Tariffs, trade, integration and productivity—the Canadian conundrum

Tuesday, 29 September 2026

Are We Over Reacting to July’s GDP Growth Rate?

Wednesday, 23 September 2026

The Weakening of Canadian Per Capita GDP Growth

Northern Economist 2.0

Friday, 30 October 2026

Ontario Fall 2026 Economic and Fiscal Statement: Is This as Good as it Gets?

Saturday, 10 October 2026

Mayors and City Performance: Thunder Bay, 2000 to 2025

Monday, 5 October 2026

Trade, Tariffs, Integration and Productivity

Tariffs, trade, integration and productivity—the Canadian conundrum

Tuesday, 29 September 2026

Are We Over Reacting to July’s GDP Growth Rate?

Wednesday, 23 September 2026

The Weakening of Canadian Per Capita GDP Growth

northerneconomist.blogspot.com