For every shred of good news we scrounge up on the economy there is a new tsunami of bad. Finance Minister Joe Ceci’s announcement that the projected provincial deficit is set to climb to approximately $10.5 billion, the highest the province has ever seen, makes us wonder what will stem the tide.
The obvious answer is a rebound in oil prices, but there is no guarantee we will ever see oil again at the prices that have bolstered our economy for so long. An all but collapsed energy sector has resulted in not only a loss in resource revenue but also a loss in income tax revenue with tens of thousands of Albertans battling with unemployment and corporate profits depressed.
Diversification has been heralded as our saviour but it is not something that is going to be handed to us or forced by government, it is something we will need to work for.
While that might seem daunting to many, it might be just the challenge needed to spur Albertans into action.
Glen Hodgson, chief economist with the Conference Board of Canada, set out this week to dispel some of the myths of the so-called Alberta Advantage. In a recent column, Hodgson suggests that using resource royalty revenue to drive provincial budgets, fund services, pay salaries and keep corporate and personal taxes artificially low, is unsustainable.
Instead, he suggests the province must wean itself off resource dollars as a direct source of revenue, investing it and drawing income from its investment gains for budgetary application.
While some might see that formula, which would undoubtedly result in an increase in taxes, as a dismantling of the Alberta Advantage, Hodgson maintains that the true advantage is the people of Alberta. If we want to know how to diversify the economy and restart Alberta’s economic engine, we have to look at ourselves.
A recent Conference Board of Canada report gave Alberta an A-plus for entrepreneurial spirit and willingness to start their own business. Our province was also ranked first for entrepreneurial ambition among 26 jurisdictions, including 10 provinces and 16 advanced and developed countries.
St. Albert demonstrates why Alberta ranks so high in those categories. As the economy slumped, the number of people taking up a new business has spiked by 50 per cent. Nearly 400 businesses set up shop in St. Albert in the past year, which demonstrates that when things get tough, Albertans do not take it sitting down.
Oil might rebound in the years to come but projections are now looking at the end of the decade. Even then we cannot continue to rely so heavily on oil. The world will move on to renewables. Still, we can find some confidence in the fact Alberta is populated by innovative and determined people, which will help pull us out from under this dark economic cloud. But it is going to take some work.
