The Bank of Canada’s growth projections are bad news for the Ontario Liberals

National Post editorial board:
On Wednesday, in its latest economic update, the Bank of Canada delivered bad news that ought to concern all Canadians. We hope the newly elected Liberal majority government in Ontario, led by Premier Kathleen Wynne, was paying particular attention.

The update was broadly similar to other recent reports: Canadian economic growth remains sluggish, even six years after the global economic crisis. Interest rates will be maintained at 1% in hopes of spurring growth. But Bank of Canada Governor Stephen Poloz, while speaking in the measured way of a banker, did not mince words when describing the situation.

“Our serial disappointment with global economic performance for the past several years means that we remain preoccupied with downside risks,” he said. “We do not have a sustainable growth picture in Canada.” The Bank significantly trimmed projections for economic growth both globally and in the United States, our largest trading partner. This led to modest trims to our own growth forecasts.

For many of our provincial governments — notably our largest, Ontario — this ought to be alarming. The Bank of Canada is sending a strong signal, as if any more were needed, that they cannot count on strong economic growth to balance their budgets for them. But that’s essentially the plan of the Ontario Liberals, who are running a $12.5-billion deficit this year and hope to balance the books by 2018. Canada’s largest provincial economy recently had its credit outlook lowered, and can expect punishing downgrades if it misses that 2018 goal.

The global economic recovery is, of course, beyond the control of Canadian premiers. But we are not immune to global problems. Any government whose long-term plan for balanced books relies on strong economic growth is not dealing with reality. As politically unpalatable as spending restraint and cuts are, especially to self-described activist premiers like Ms. Wynne, prudence demands that our leaders move resolutely to balance the books as soon as possible.

National Post