What if New Brunswick was Ontario? A thought experiment
It remains an enduring mystery to me how resigned New Brunswickers can be when it comes to the economy. There is a collective shrug among us when we see reams of bad economic data. That’s just New Brunswick. This resignation applies to our friends in Ottawa.
New Brunswick is in the throes of likely the worst period of economic stagnation since the Great Depression.
The thought experiment: What if Ontario and New Brunswick traded places? Remember, Ontario hasn’t exactly been the star of Canada’s economy recently. I could have compared us to SK or AB but let’s keep it simple.
The chart shows the average annual employment growth rate in New Brunswick (on a five year increment basis) going back to 1979. Between 1979-1983, Ontario’s employment grew by 60% faster than NB but overall fairly weak. Moving on you can see NB underperformed Ontario for the most part although in the Rae years, NB actually out-performed Ontario for employment growth. Fast forward to the most recent period. Ontario’s number is actually worse because included is 2009 and its two percent employment decline.
When Ontario slipped into employment decline during the recession, there was panic on the streets of Ottawa. The feds threw billions at the auto industry, manufactured a stimulus package around Ontario’s needs and even set up an ACOA in southern Ontario. New Brunswick does the same thing but only sustained over six years and, shrug, that’s just New Brunswick.
My column in the TJ yesterday talked about the problem of linearity. We just expect Ontario to do well – if it doesn’t it is a short term challenge that we have to work to overcome. We just expect New Brunswick to underperform and when it does well – we see this as an aberration.
We need to reverse the polarity on this – in New Brunswick – not Ontario. Remember we are wed to Ontario in a unique way. Why did NB get $140 million more in Equalization this year? Because Ontario is doing better and saw its share of equalization decline (to the chagrin of the Ontario Finance Minister). New Brunswick needs a strong Ontario economy.
The economy should be a bigger concern in New Brunswick. We pull out the growth of Moncton and dwell on that, as one example. Moncton is not Toronto – in its influence over the NB economy. It is clear that the Moncton CMA can do well while the overall NB economy remains weak.
The good news is there are some positive opportunities on the horizon that should see NB’s economy rebound somewhat in the coming years. My own view is that we need to get back up to 2.5%-3% growth per year in order to stabilize the public finances but that will require a substantial boost in private sector investment.