Unless the provincial government starts tackling its mountain of debt soon, today's younger generation will face big struggles to pay it down, warns a new report.
Ontario's financial accountability officer (FAO), who gives independent advice to the legislature about budget matters, says millennial taxpayers will have to shoulder debt the baby boomers ran up if governments ignore the need to reduce the debt.
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The projection comes in a long-term budget outlook released by the FAO on Thursday, looking at how coming demographic changes will affect provincial government finances.
The outlook says the debt will continue to rise unless governments boost revenue or cut spending
"If these difficult fiscal adjustments are postponed, the burden of stabilizing Ontario's public finances would be increasingly — and arguably unfairly — shifted from the baby boom generation to younger Ontarians," the FAO's chief economist, David West, told a news conference at Queen's Park.
"Boomers will begin passing away in the coming years, and by the 2030s and 2040s, when Ontario has a significant problem, it'll be young Ontarians today and future Ontarians that'll be left to shoulder the burden," said West.
The provincial debt currently sits at about $300 billion, but the debt figure that matters most to economists is its size relative to the overall economy: the debt-to-GDP ratio. Right now that's at 40 per cent, up significantly from the pre-recession level of 27 per cent.
The Wynne government has not started bringing the ratio back down even though the provincial economy is ticking along. And that's what has the financial accountability officer worried.
"Kind of like a mortgage on a house, if you don't make your principal payments and interest payments the mortgage just gets larger," West said at the news conference.
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To get the debt ratio back to its pre-recession level by 2030, when all the baby boom generation is past retirement age, the report says the government must immediately start running annual budget surpluses of $6.5 billion and using them to pay down the debt.
Even the neutral FAO acknowledges it is politically unlikely any party would campaign on increasing taxes or cutting spending that would be necessary to do that.
"Convincing Ontarians of the need for immediate fiscal restraint of this magnitude would be challenging for any Ontario government," says the report.