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Ontario Economy

Wynne’s losing performance: How Ontario’s growth-killing policies are sinking the economy – by Philip Cross (National Post – October 1, 2015)

The National Post is Canada’s second largest national paper.

Ontarians are clearly having buyer’s remorse after re-electing its Liberal government last year, with two-thirds now believing that Ontario is headed in the wrong direction. An exasperated Kathleen Wynne recently asked “What is it that especially disqualifies me for the job I’m doing?” as Premier of Ontario. Well, since she asked, let’s list the problems the Liberal government has created.

Start with persistent slow economic growth. Since 2002, real GDP growth in Ontario has been consistently below the national average, with a total shortfall of over 10 percentage points. Two-thirds of this gap occurred outside of recession years. Meanwhile, Ontario’s unemployment rate rose above the national average in 2007 for the first time on record and has stayed there.

Ontario has lost its traditional above-average income status in Canada. In the decades after World War II, real disposable income per capita in Ontario was 20 per cent above the national average; in the 1990s under the Harris government, it was still 10 per cent above average. In 2012 and 2013, incomes in Ontario fell below the national average for the first time ever.

Ontario now qualifies for equalization payments, confirming its shift from “have” to “have-not” status within Confederation.

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U.S. Steel Canada threatens to leave Canada if court rejects request – by Greg Keenan (Globe and Mail – September 18, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

U.S. Steel Canada Inc. is threatening to cease operating in Canada by the end of the year if an Ontario Superior Court judge rejects its request to stop paying municipal taxes, halt payments into pension funds, and cut off health care and other benefits to 20,000 retirees and their dependents.

A decision by the company’s parent, United States Steel Corp., to shift production of high-value-added steel to U.S. mills means the Canadian unit requires a “business preservation order” that will allow it to keep operating, U.S. Steel Canada said in a court filing.

Unless the court approves U.S. Steel Canada’s motion to conserve cash by slashing spending, “we don’t see any way to avoid ceasing operations at the end of 2015,” the company’s president, Mike McQuade, said in a separate memo to employees.

The prospect of a shutdown of operations in Hamilton and Nanticoke, Ont., comes as U.S. Steel and its Canadian unit prepare to enter mediation efforts after a year of protection from creditors under the Companies’ Creditors Arrangement Act.

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Southern Ontario ‘The New Rust Belt,’ The Economist Declares – by Daniel Tencer (Huffington Post – August 31, 2015)

http://www.huffingtonpost.ca/

The Economist magazine has published an article on the “puzzling weakness” of Canadian manufacturing, noting the sector’s years-long slide, which the magazine says has turned southern Ontario, Canada’s manufacturing heartland, into a “new rust belt.”

Observers had been expecting Canadian manufacturing to put in a strong performance this year, thanks to a steeply lower loonie that makes exports more competitive.

But so far, the rebound hasn’t happened. Output in Canadian manufacturing was 2.3 per cent lower this May than it was a year earlier, the latest month for which data is available, and job growth has been at half the pace of the broader economy, after years of declining job numbers.

The Economist article adds an interesting talking point to the debate: In 2000, manufacturing was 18 per cent of Canada’s economy, the same level as Germany. By 2013, it had fallen to 10 per cent, the same level as the U.S. and U.K. It attributes that to the long period during which the Canadian dollar was high thanks to high oil prices, harming the competitiveness of non-oil exporters.

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First Mining Finance sees more acquisition opportunities after three-way deal – by Peter Koven (National Post – September 3, 2015)

The National Post is Canada’s second largest national paper.

Canadian mining heavyweight Keith Neumeyer is taking advantage of awful market conditions to snap up promising assets left and right.

First Mining Finance Corp., Neumeyer’s “mineral bank,” unveiled a three-way deal this week in which it will buy Gold Canyon Resources Inc. and PC Gold Inc. for a total of about $66 million in stock. This comes less than two months after First Mining acquired Coastal Gold Corp., its first acquisition.

Vancouver-based First Mining only went public in April, but the company sees this as the ideal time to buy junior mining assets on the cheap. Juniors are suffering through their worst bear market since the Bre-X crisis because of sinking commodity prices and a near-total lack of financing options.

“We don’t want the market to turn around soon, because we really want to load up on assets,” Pat Donnelly, First Mining’s president, said in an interview. “And so the longer this bear market continues, the better for us.”

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OPG partners with First Nation for $300M project – by Alan S. Hale (Timmins Daily Press – August 28, 2015)

The Daily Press is the city of Timmins broadsheet newspaper.

SMOOTH ROCK FALLS – Nearly 30 years of work by the members of the Taykwa Tagamou First Nation culminated in a ceremony held along the bank on the New Post Creek north of Smooth Rock Falls on Thursday morning.

The location is the future site of the Peter Sutherland Sr. Generating Station, which is a joint project between Ontario Power Generation (OPG) and a band-owned company, Coral Rapids Power. Although construction began on the $300 million hydroelectric dam months ago, the official announcement of the project was an emotional one for the First Nation members; some of whom have worked for decades to make it a reality.

“It took a big team to put this together. We had to push hard for it, and sometimes it nearly went off the rails. But we had a dream, and it is now a reality,” said band councillor and former chief Peter Archibald, who has worked on the project since 1979. “When this started, I had long hair that was black. Look at me now — falling out and white!”

Once completed, the new dam will produce 28 megawatts of power; enough to power 1,000 to 2,000 homes. The construction of the dam is expected to create 220 construction jobs.

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Why Ontario should look west, not east, for hydro power – by Wil Tishinski (Globe and Mail – August 20, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Will Tishinski is former vice-president of power supply planning (retired) for Manitoba Hydro.

It was recently reported that Ontario is looking to buy power from Newfoundland and Labrador. This is the wrong direction. Ontario should be looking westward to Manitoba, which is more accessible.

Manitoba currently receives 75 per cent of its electricity requirements from the Nelson River, which has an ultimate capacity of 6,000 megawatts. Only half of that potential is developed today. To meet its own needs, Manitoba will build the generating sites incrementally, with the last plant being constructed perhaps 50 years down the road.

It makes more sense to develop the unharnessed 3,000 MW now and to share at least half that with Ontario. The entire block of power could be transmitted by direct-current transmission to a converter station near Dryden, Ont.

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Toronto-Waterloo corridor could be Canada’s own Silicon Valley – by Iain Klugman and Kevin Lynch (Globe and Mail – August 19, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

But it takes more than geography and statistics to build an innovation ecosystem
capable of driving national productivity and growth. It requires an incredibly
intensive interplay among world-class university research, targeted government
support for technology development, industry R&D, venture capital and astute
early adopters of the newly created technology. (Iain Klugman and Kevin Lynch)

Iain Klugman is CEO of Communitech. Kevin Lynch is vice-chair of Bank of Montreal.

Each September, thousands of new students stream into Ontario’s universities, carrying their clothes, books and increasingly global ambitions. The question for Ontario and Canada is: Where will those ambitions ultimately take them?

If they are technically brilliant, entrepreneurial and highly motivated, as many of our graduates are, Silicon Valley will beckon – and it has only a little to do with the California weather.

With a population of just more than three million, the single corridor between San Francisco and San Jose has the greatest concentration of high-tech jobs in the United States; is the headquarters for technology companies with billions in sales and trillions in market capitalization;

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Ontario’s Power Trip: How Hydro is walloping Ontario business – by Parker Gallant (National Post – August 19, 2015)

The National Post is Canada’s second largest national paper.

Over the past several months there has been a constant din of noise from all business segments in Ontario about the high price of electricity and its effects. Electricity prices have risen as they have absorbed the high costs of 20-year contracts for renewable energy in the form of wind and solar as additions to Ontario’s electricity grid. Ontario currently has a huge surplus which results in as much as 20 per cent of our generation exported at fire sale prices.

Couple that with a drop in demand, annual spending of $400 million on conservation messages, smart meters that allow time of use (TOU) pricing and the Hydro One, OPG and other Ministry of Energy employees enjoying wages and benefits that outstrip the private sector means electricity bills for all segments of businesses and households are now a drain on the economy versus an attraction for new business and the jobs they might create.

The foregoing recently manifested itself in a report from the Ontario Chamber of Commerce entitled: “Empowering Ontario: Constraining Costs and Staying Competitive in the Electricity Market.” The report stated soaring electricity prices would cause one (1) in 20 Ontario businesses to shut their doors within the next 5 years.

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Ontario’s 2,400-km power pipe dream – by Terence Corcoran (National Post – July 21, 2015)

The National Post is Canada’s second largest national paper.

In its 2013 long-term energy plan, the Ontario government said it would begin looking at importing electricity from other jurisdictions when such imports “are cost effective for Ontario ratepayers.” On Monday, Ontario Energy Minister Bob Chiarelli appears to have noticed that electricity rates in the province have already soared beyond the point of cost-effectiveness, thereby making it attractive to look at importing cheap power, as per plan, from other jurisdictions.

In comments surrounding the announcement of a joint “high-level working group” to study electricity trade between Ontario and Newfoundland & Labrador, Chiarelli said the objective is to “bring down rates” in Ontario. Well, that’s news.

Anyone who follows his public pronouncements knows that he has been blissfully unperturbed by Ontario’s soaring electricity prices. So his acknowledgment it might be necessary to bring rates down will be welcome by consumers and industries. In the past, the minister has mostly rejected the idea that electricity rates are all that high and need to be reduced.

Less encouraging, however, is the proposed source of the cheaper electricity, hydro power development in Newfoundland & Labrador, from where electricity would have to be wheeled about 2,400 kilometres to make it to Toronto.

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Is Brad Wall the only premier who cares about 2015, not just 2050? – by Rex Murphy (National Post – July 18, 2015)

The National Post is Canada’s second largest national paper.

The distant future is a politician’s most useful friend — it is where every good and noble thing they promise actually happens. It is where the clutter of present events and the roiling fortunes of this busy harsh and confounding world do not impinge on their their wildest wishes.

For example, under Ontario’s green ambitions, we are given to understand the goal is to reduce carbon dioxide emissions by a full 80 per cent by 2050. This is Premier Kathleen Wynn’s pledge, a commitment that will take merely 35 years to be tested — a generous breathing space by any standards for a political commitment, and which happily just might be the identical term it takes to learn all there is to know about the infamous billion-dollar cancellation of a couple of Ontario gas plants a couple of elections ago.

We have long since learned, and from a thousand examples, that the promises of most politicians barely survive the time it takes to make them. Antiques like me remember the bitter mocking Pierre Trudeau once gave Robert Stanfield on the latter’s promise to introduce wage and price controls — “Zap! You’re frozen!,” said the wily Trudeau — only to pirouette mere days after an election to introduce … wage and price controls.

Pledges three, four or 10 decades out are perfect vapourings. To call them useless is to elevate their dignity. To build present-day policy under the umbrella of such projections is to blend fantasy and irresponsibility.

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Going green: Does Ontario’s energy shift have the power to sustain itself? – by Richard Blackwell (Globe and Mail – July 11, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

TILLSONBURG, ONT – In a huge factory on the outskirts of Tillsonburg, the transformation of Ontario’s manufacturing economy is under way.

Here, in what was once a Magna International auto parts plant, German industrial conglomerate Siemens AG is building giant wind turbine blades, massive components formed from fibreglass, epoxy and balsa wood that are half the length of a football field. About 350 workers mould, bake and trim the huge blades, which are shipped to wind farms throughout Southern Ontario.

The plant’s car-parts past is both symbolic and significant. As the province’s traditional – largely automotive – manufacturing sector shrinks, the Liberal government has attempted to hasten a shift to green technology. The 2009 Green Energy Act (GEA), in particular, was designed to achieve this end – along with weaning the province off dirty, coal-fired electricity production.

By subsidizing wind, solar and other technologies, and forcing developers to buy components and services from local companies, a clean manufacturing sector would be kick-started. At least that was the theory. On the surface, the plan appears to have worked. The province is now sprinkled with green businesses that have – at least in part – replaced some of the collapsing manufacturing infrastructure.

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Ontario is no Greece, but its debt is more than a casual concern – by Konrad Yakabuski (Globe and Mail – July 10, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

This was the week the debt merry-go-round jerked and lurched and the whole world got nauseous.

Greece, which hit its debt wall years ago, once again took Europe to a precipice. Whatever the outcome of Sunday’s “final deadline” for a deal with its creditors, Greece is a goner, sadly. How much damage it does to the rest of the world remains to be seen.

Greece’s fate could also await Puerto Rico, whose governor suddenly declared that the $72-billion (U.S.) debt the U.S. territory in the Caribbean has racked up is “not payable.” That somehow came as a shocker to bondholders who had been breezily plugging coins into the island’s debt merry-go-round.

Then there’s China, whose debt-induced stock market bubble continued to deflate despite the Communist regime’s best efforts to defy the capitalist laws of gravity. It may take another Chinese miracle to contain the fallout caused by amateur investors who bought stocks on margin.

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Ontario’s job killer: Business sounds alarm over soaring electricity prices – by Ross McKitrick and Tom Adams (National Post – July 10, 2015)

The National Post is Canada’s second largest national paper.

The Ontario Chamber of Commerce this week released the findings of an unprecedented consultation with its members and the results are painfully clear: soaring electricity prices are killing business in Ontario. One in 20 Ontario businesses now expect to shut their doors in the next five years due to electricity costs, and nearly 40 per cent report that electricity costs have already forced them to delay or cancel investment decisions.

The Chamber acknowledges that the larger policy picture from Queen’s Park is grim, with plans for cap-and-trade, higher minimum wages, rising workplace safety premiums and a new government-run pension system. But their report, Empowering Ontario, focuses above all on soaring electricity costs, a problem unique to Ontario that is directly traceable to a decade of foolish policy decisions.

The Chamber is to be applauded for taking on this issue. Many Ontario businesses have tried to shield themselves by seeking beggar-thy-neighbour gimmicks that merely shift their costs onto others, resulting in a less efficient and transparent pricing system. For instance the Chamber slams the Class A/B rate split that benefits large consumers by redirecting some of their costs onto households and small businesses.

Perhaps Ontario business leaders are finally realizing that moving their deck chairs to the high side of a sinking ship is not a long-term solution.

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High hydro rates hurting business: OCC – by Carol Mulligan (Sudbury Star – July 9, 2015)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

The Greater Sudbury Chamber of Commerce is calling on the Ontario government to address the impact of rising electricity rates on businesses by increasing transparency and reducing the complexity of understanding hydro rates in the province.

The Sudbury chamber, which represents about 1,000 businesses, has added its voice to a report released Wednesday by the Ontario Chamber of Commerce, an umbrella organization representing 60,000 members in Ontario.

The report, Empowering Ontario: Constraining costs and staying competitive in the electricity market, makes five recommendations for government and energy agencies to curb rising hydro costs and help businesses survive.

If those measures aren’t taken, the report shows one in 20 businesses in Ontario, or 5%, could be out of business within five years.

Geoff Jeffery, a lawyer with Weaver Simmons LLP, is immediate past chair of the Greater Sudbury chamber.

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National Post View: Ontario has to get its house in order now, while it still can (National Post – July 8, 2015)

The National Post is Canada’s second largest national paper.

If Charles Sousa ever tires of being Ontario’s finance minister, he might find a second career as a corporate communications expert. Specialty: disaster management.

When Moody’s Investors Service reduced the province’s debt outlook from stable to negative a year ago, Sousa responded that it was no big deal. “The bankers aren’t freaking here.… What has happened is the degree of revenue has not met expectations,” Sousa said, as if a revenue shortfall in a chronically indebted economy wasn’t worth troubling himself with.

Similarly, when Standard & Poor’s downgraded Ontario’s long-term credit rating on Monday, Sousa managed once again to find the tiny ray of sunshine in the gathering gloom. “Part of the basis for S&P’s stable rating is that Ontario has a stable, majority government,” he beamed. “The report,” he added, “further notes that Ontario has ‘had some success in bending its cost curve over the past several years.”

The provincial debt is on track to reach $298 billion this year, almost half the size of the federal debt in an economy barely a third as large; servicing it costs $11 billion a year, the third-largest expense in the budget, even at today’s record-low interest rates; and the province’s productivity, according to a recent study by the Centre for the Study of Living Standards, is growing at the second-slowest rate in the country: just 0.5% a year between 2000 and 2012.

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