sector. The Big Three, General Motors, the Ford Motor
Co. and Chrysler have all announced production cuts for
this year. Also, consumer demand for cars has slowed
down in the United States. That is an area of weakness for
Ontario.
However, in Canada, we don’t think that the province
will slip into a recession. We see growth of 2 percent for
Ontario this year. Labor markets are tight in central
Canada as they are in the western provinces. We have
seen wage gains, which has been higher than the rate of
inflation. We have seen that in Ontario as well. And also
Ontario will benefit from the federal fiscal stimulus as well.
However, in Ontario, we might also see a slow down in
the residential sector of the economy. People will wait on
purchasing new homes. This is an area of weakness, as
well as the trade sector.
GCX: What does the federal stimulus entail?
Bernard: Fifteen billion dollars worth of new fiscal
stimulus for household spending and investment was
announced in October 2007 to take affect this year.
Specifically it is a personal income tax reduction, retroactive to the beginning of 2007, and which will be paid out
in 2008.
For example, for a tax filer earning up to $37,000, they
will get another $200 per year, so that amount will be
$400 in 2008 because it is retroactive. Also, the basic personal exemption was lifted.
Those are some of the measures, so for households that
represents those tax cuts and others that were announced
earlier, about $12 billion of new money for all Canadians.
And there are also some corporate tax cuts as well.
And in Ontario there is also a lot of momentum in the
construction industry. There are several office developments
at the moment that are ongoing in downtown Toronto.
Also, the province is spending a lot to revamp its
nuclear power capacity. And also wind capacity is being
developed as well. So the energy side will be a strong
point for the province this year.
GCX: What is happening with Québec’s economy?
Bernard: Similar conditions as in Ontario. The trade
sector in 2007 witnessed a decline in exports to the
United States. We will only see marginal growth this year
because for some sectors, market conditions are difficult.
If we look at forestry, which is an important sector in
Québec, until the U.S. housing situation is resolved, this
sector will suffer in the province. It will only see marginal
growth in exports. However, the domestic economy is
strong in the Québec, for the same reasons as in Ontario.
And also in Québec, there is a new provincial income
tax, close to $1 billion for this year that should continue
to support strong consumer demand this year. There is
also a lot of momentum on the construction side as well.
There are large energy projects in development. So overall
we see the economy advancing by 2. 4 percent this year.
GCX: What do businesses looking to locate to these
provinces need to understand about the region’s business
climate?
Bernard: Right now there will be a lot of uncertainty
due to the weakness and slow down in the U.S. economy.
However, it is a cyclical slowdown, so by the end of this
year and in the beginning of 2009, the U.S. housing market should get back on its feet. Right now it is weak. But
as the months and quarters go by the inventories of
homes on the market should return to a more normal
level. As the economy picks up steam it will benefit the
economies of Ontario and Québec. Another point to note
is sometimes we think tight labor markets are something
happening in British Columbia or Alberta, but they are
tight everywhere in Canada. ■
Interview by Rachel Duran.
Marie-Christine Bernard is the associate director, provincial
outlook, for The Conference Board of Canada. She can be
reached by e-mailing bernard@conferenceboard.ca. The
Conference Board aims to be recognized as Canada’s most
influential, independent source of insights for leaders. It builds
leadership capacity for a better Canada by creating and sharing insights on economic trends, public policy and organizational performance. Visit the organization at
www.conferenceboard.ca.
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