There are really two sets of issues here. The first relates to the implications of the short-term cyclical downturn. The second relates to the longer-term structural challenges facing Ontario. Let me address these in turn. It is clear that the cyclical pullback in the U.S. housing and auto sectors is causing particular difficulties for Ontario.
The relative importance of these other factors will differ within and across jurisdictions.15 Nonetheless, there is no guarantee that relying on housing wealth will yield the expected payoff. The second channel through which slower growth and lower returns affect financial stability relates to risk taking.