Better foundations: The returns on infrastructure investment in Ontario
Discussions regarding infrastructure investment as a driver of economic growth have returned to the forefront of policy debates. Both Ontario’s provincial government and the federal government have proposed record commitments to infrastructure in their latest budgets. However, not all infrastructure assets enhance productivity. Fostering productivity growth is the single greatest challenge for both public and private sectors in Ontario. Simply investing in infrastructure will not necessarily provide productivity boosts, unless investments are strategic.
In Better foundations: The returns on infrastructure investment in Ontario, the Institute identifies the types of infrastructure that can enhance the province’s labour productivity. Moreover, our research reviewed the current state of asset allocation in Ontario to provide a general guideline for future resource allocation, which can help build a better foundation for economic growth.
Our results show that Ontario has the lowest stock of infrastructure per worker among selected Canadian provinces. What is even more concerning is that Ontario’s composition of infrastructure assets is suboptimal. To reap the full benefits of the investments, each project needs to be thoroughly evaluated. The Institute believes that having the optimal apportionment in mind and identifying the areas with the highest return on investment can provide an important, initial step toward boosting productivity in Ontario.
The Institute recommends that the Ontario government:
- Prioritize infrastructure projects according to estimated productivity returns.
- Adopt a streamlined process to select projects.
- Implement well-designed user fees that reflect usage levels.
- Facilitate private investment into productivity-enhancing infrastructure.