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Ontario, once the industrial powerhouse of Canada, has become precariously reliant on its booming housing market to fuel economic growth, warns a new report.

To show how Ontario’s manufacturing sector has slipped, the Fraser Institute report compares Ontario to Quebec, whose economy was historically weaker. Quebec now has a lower unemployment rate than Ontario, higher growth in GDP per capita, and more resilience in such sectors as lumber, paper, primary metals smelting and even installation of data centres.

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Rather than encourage manufacturing, Ontario has relied on housing, which contributed 29 per cent to Ontario’s economic growth last year, says the report, Ontario’s One Cylinder Economy: Housing in Toronto and Weak Business Investment, released Wednesday.

The report’s author, Philip Cross, who worked 36 years at Statistics Canada, warned that, with the Bank of Canada now expected to increase interest rates, Toronto’s housing sector could collapse, leading to serious economic disruption that would ripple across Ontario.