When it comes to the Alberta economy, the worst may be over, but it’s not going to feel that way if you’re still looking for work. And unless the provincial government can get its finances in order, serious trouble is lurking ahead.
The Alberta Government released its third-quarter fiscal update Thursday claiming there are plenty of positive signs for economic recovery. The economy is expected to grow by 2.4 per cent this year, according to NDP.
The government isn’t the only one predicting growth in Alberta. The Conference Board of Canada’s winter provincial outlook predicted the provincial economy to grow by 2.8 per cent this year and another 1.9 per cent in 2018.
Much of this growth will come from an expected rise in oil prices, sparked from OPEC’s agreement to cut world oil production. The work to rebuild Fort McMurray will also push growth, as will the return of oil production in the oilsands. This growth comes after a contraction last year, from the wildfire and low oil prices.
Despite this good news regarding growth, there are plenty of reasons for concern.
Even with a predicted increase in resource revenue, the deficit for the current fiscal year is expected to climb about $444 million from the original budget. When resource revenues go up, shouldn’t the deficit go down?
Unfortunately, the government instead took an opportunity to increase spending, passing the cost to future generations through debt. Taxpayers are also on the hook for a $1.1 billion “one-time” cost for the phasing out of coal-fired power. That is what taxpayers will be borrowing to pay power generators to shut their plants before they have a chance to recover the costs of building them. The Alberta NDP has learned from similar missteps by the Ontario Liberals and didn’t want a constant reminder of that payment showing up on our monthly utility bills. Better to hope that voters won’t notice the extra $1.1 billion hiding in a much bigger pile of debt.
“That budget is a mess,” said Barrhead-Morinville-Westlock MLA Glenn van Dijken. “This government needs to recognize the mess it’s in and indentify ways to start reducing spending. We can reduce spending in a very practical way but until the government gets its head out of its rear end and recognizes that they have a spending problem we are headed down a road to $56 billion dollars of debt in less than three years.”
The government’s inability to manage spending isn’t just a long-term issue. Total debt-servicing costs are topping the $1 billion per year mark. That’s a lot of Albertans’ money that could be better spent elsewhere and that number will only increase, as the NDP plan to rack up more deficits.
Thursday’s news conference saw Finance Minister Joe Ceci predict a return to balanced budgets in 2023-24, which is several years in the future from the original NDP commitment of returning to balance in 2018. At this point, it seems unlikely Albertans would ever see a balanced budget from the Notley government.
As noted in the update, the potential for lower oil prices is the main risk to economic recovery and that risk is real. The 2016-17 Third Quarter Fiscal and Update and Economic Statement notes: “Geopolitical uncertainties, including U.S. trade policy under the new administration and elections in Europe, could dampen global growth and oil demand.”
There are signs of life in Alberta’s economy, but that doesn’t mean the government should go ahead and spend more money. The economy is still down. Many Albertans are still out of work. There’s a lot of risk involved with basing budgets on oil price projections. We need the government to exercise fiscal prudence, with a commitment to not burden our future.
