Op-ed: COVID-19 disrupted Doug Ford’s first mandate. The economy will shape his second.

Doug Ford could not have been clearer on election night: Ontario faces a difficult road ahead. There are big challenges and an uncertain economic climate on the horizon.

Just like COVID-19 disrupted his first mandate, the economy will shape Doug Ford’s second term at the helm of the province. After an election where pocketbook issues dominated, voters expect action from the government to tackle the soaring cost of living, housing affordability and labour shortages. Here are the big challenges facing Ontario and what the new government might do to manage them:

Cost of living

Ontarians are feeling the effects of record-high inflation driven by supply chain disruptions. For millennials and Gen Z, this is the first time they have encountered high inflation.

Consumer prices increased a stunning 6.8 per cent year over year in April 2022 across Canada, with Ontario above the national figure at 6.9 per cent. In the last 12 months, the price of gasoline has increased by almost 40 per cent and food by almost 10 per cent. Inflationary pressures are expected to continue hindering affordability for at least the rest of the year. The latest OECD Economic Outlook forecasts annual inflation will hit 6 per cent in Canada this year.

Inflation will put Doug Ford in a challenging situation as he begins his second mandate. While his government tried to reduce the cost of living at the margins for Ontarians by getting rid of license plate renewal fees and temporarily cutting the gas tax, the government needs to be careful to not add more fuel to the proverbial inflation fire when rolling out affordability measures.

Global factors disrupting supply chains and fueling inflation such as Russia’s invasion of Ukraine and the pandemic are outside Doug Ford’s control. While committing to strengthen supply chains like the 2022 Ontario budget did is the right approach for the future, the Premier’s options to combat inflation in the immediate term are almost inexistent.

While it was smart politics, Premier François Legault’s decision to send cheques to Quebecers to help with the skyrocketing cost of living earlier this year was a good example of what not to do to fight inflation. The cheques artificially increased individuals’ purchasing power without doing anything to help address the root causes of inflation.

Housing affordability

Long approached through a Toronto-centric lens, housing affordability is now an Ontario-wide economic challenge that requires a provincial approach.

House prices are up well beyond just the GTA and Ottawa. Sault Ste. Marie and Sudbury saw their respective MLS Home Price Indexes surge 88.3 per cent and 82.7 per cent between April 2019 and April 2022. This was higher than in the Greater Toronto Area (69.9 per cent).

The Bank of Canada delivering “jumbo interest rate hikes” adds a layer of complexity to the housing challenge. While interest rate hikes have slowed down sales activity and price increases, higher borrowing costs are further deteriorating affordability. The situation will only get worse as mortgage terms come up for renewal in the coming months.

Aggressively growing Ontario’s housing supply must be a top priority for the Ford government even if it means ruffling the feathers of some municipal politicians. The premier shied away from including in his housing bill and the 2022 Ontario budget the more controversial recommendations made by the Housing Affordability Task Force. Benefitting from a strong majority at Queen’s Park and with opposition parties in disarray, Doug Ford will be in a perfect position in the fall to roll out measures to prevent exclusionary zoning and enable greater density in single-family neighbourhoods.

Labour shortages

“Hiring” signs are everywhere right now. In March 2022, there were 370,220 job vacancies in Ontario for a total job vacancy rate of 5.6 per cent.

Difficulty finding workers is another obstacle for Ontario businesses already facing record-high inflation and supply chain challenges. This is hindering their ability to fully recover from COVID-19 and expand. For the tourism sector, labour shortages are a nightmare with summer around the corner.

While the cooling off of the economy resulting from higher interest rates might help alleviate job vacancy pressures, the policy tools available to the Ford government to address the issue in the short term are limited. Supporting workers was a key focus of the PC campaign, but it will take time for employment and training programs to bear fruits.

Doubling down on Ontario’s efforts to attract high-skilled immigrants and facilitating swift foreign credential recognition will also be important in the second mandate.

Beyond inflation, housing and labour shortages, Doug Ford will undoubtedly have to contend with economic black swans. The premier learned the hard way during his first mandate that extreme weather events, public health and geopolitics can create massive challenges for the province and the economic well-being of Ontarians. How he responds to the economic challenges facing Ontario will shape his second mandate.

Sebastien Labrecque is the deputy director and chief economist of StrategyCorp’s Institute of Public Policy and Economy. Sebastien has worked in the federal government at Canada Mortgage and Housing Corporation and Innovation, Science and Economic Development.

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