SEIZING THE DAY TO SET THE PROVINCE ON A STRONGER LONG-TERM FOOTING
http://www.td.com/document/PDF/economics/special/AlbertaFiscalOutlook.pdf
http://www.td.com/document/PDF/economics/special/AlbertaFiscalOutlook.pdf
Alberta fiscal outlook
- Thread starter Locutus
- Start date
Wow!! An Alberta thread not started by the one and only MentalFloss. (SHOCK!!)
At least it's a positive one.
At least it's a positive one.
I have no problem with cheap oil. Lots of other jurisdictions are successful without oil revenue. Cheap fuel is good.
Yours isn't.
Medicine Hat's economy declined for five consecutive years between 2008 and 2012, and 14,000 jobs were lost over that period.*
Moose Jaw's economy grew by a modest 1.2 per cent per year during the 2005-2012 period.*
Prince Albert has enjoyed economic growth of more than four per cent on an average annual basis since 2007.*
Brandon's economy contracted by a total of 1.6 per cent between 2008 and 2012, but has enjoyed strong population growth in recent years, a positive indicator moving forward
Right now you would never know that oil has taken a nose dive around Calgary.
Out by Stony Trail there is so much development going on, it's mind boggling. Between 64th Ave and Airdrie, Alberta on Highway 2, New Hotels, Office Buildings, Raced Tracks.. it's crazy.
Still plenty of help wanted signs all over the place.
If I remember, I'll try to get some photos on my way to Edmonton today, I have a load of servers I have to bring up and connect.. which reminds me.. I should be going now.. the day is not getting any younger.
With the current price of gas and diesel one would never know oil prices are in the dumpster. It is not like the oil companies are going to bleed red ink anytime soon.
Lots of jobs to be had around here. Oil can stay at $20/barrel as far as I'm concerned.
The price of crude has never been the main problem. It is the amount of taxes various levels of government have placed on a liter of gas. Taxes that don't go down when the price of crude drops.
Alberta faces structural deficit even if oil rebounds
Alberta faces structural deficit even if oil rebounds
Province's fiscal forecast likely too optimistic on oil prices, report finds
11:32 AM ET
The government of Alberta could be facing a long-term deficit situation for reasons beyond the temporary plunge in oil prices, TD Bank said in a report Thursday.
Economists Jonathan Bendiner and Derek Burleton say the province's current estimate of a $7-billion budget shortfall might not be realistic and the government could be facing much more serious fiscal challenges — namely, a structural deficit.
By the numbers: Alberta's $6 billion budget shortfall
Ontario poised to grow as Alberta slows down, TD says
Unlike what's known as a cyclical deficit, which is when governments temporarily dip into the red because of a temporary slowdown in the business cycle, a structural deficit is a situation where a government spends more than it earns even after the real economy rebounds, because of the compounding impact of debt payments.
Alberta is set to unveil its latest provincial budget next Thursday. Policymakers have already signalled to expect spending cutbacks, but the bank's report says it doubts those alone will be enough to fix Alberta's long-term financial problems.
"While the government has discussed a number of policy tools to address its fiscal challenge, a slash and burn approach to achieving fiscal balance in quick time can be costly to the economy and does not address current inefficiencies in program spending and an over-reliance on non-renewable-resource revenues," the TD report says.
Oil forecast is too rosy
Alberta's government has budgeted a $7-billion gap in its finances this year, based on an assumption that the price of West Texas Intermediate — the benchmark type of North American oil — will "average less than $65 US per barrel" through 2015, Premier Jim Prentice said in a speech to the Rotary Club of Edmonton earlier this month.
Given that oil closed below $43 US a barrel yesterday and the year is now almost one-quarter finished, that projection may be a tad optimistic. TD Bank's forecast is much bleaker, expecting an average price of $52 per barrel of WTI this year, rising to $68 next year.
Alberta schadenfreude: Why does the rest of the country seem to have it?
If oil prices prove to be lower than the government is forecasting, that $7-billion deficit guess is likely to be on the low side, the bank says.
"The lower price forecast suggests that without any actions, the budget deficit could come in by as much as $1 billion higher than the government’s cited figure for fiscal 2015-16," TD notes.
Problems beyond oil
Even if oil rebounds, the province could still face a structural deficit in the range of $4 billion to $5 billion in a few years, potentially turning it into a have-not province. "Borrowing related to fund[ing] these shortfalls would transform Alberta’s current net asset position into a net debt position by the next fiscal year and rise to as high as seven to eight per cent of GDP by fiscal 2018-19," TD says.
Alberta's outlook is getting worse by the day, CIBC says
That's much better than the ratios for many other governments, but still reason for concern to Albertans, the bank says.
Alberta has already floated the idea of cutting five per cent of all spending from its budget, while dipping into its $6-billion contingency fund. That's a pretty deep cut to services, but TD notes that Alberta spends more per capita on services than any other province — by as much as $1,300 per person.
But taking a knife to every budget equally isn't the best plan, TD says. "Experience has shown, however, that merely starving departments of funding misses the opportunity of securing longer-term savings."
Don't starve local governments
Infrastructure spending, TD says, should remain a priority, as that's typically an area where government's see good bang for their buck. And the bank urges the province to resist the urge to simply pass the buck on to local governments, the way others have. "Spending cuts must balance short-term fiscal objectives with longer-term sustainability."
TD also says to be wary of asset sales, because too often that just results in a one-time windfall of a "future income stream that would have flowed into government coffers anyway."
On the subject of taxes, the bank notes that thanks to resource royalties, Alberta currently has the lowest tax burden in Canada, and among the lowest in North America. It also famously doesn't have a provincial sales tax, something the government has hinted it has no plans to change.
Bring in a sales tax?
But that's a mistake, TD says. "By closing the door on the introduction of a PST, the government is missing an opportunity, in our view.
"Budget 2015 will provide a major opportunity to set the province’s finances on a more sustainable path. We hope that the government seizes the moment."
Share this story
http://www.cbc.ca/m/news/business/a...eficit-even-if-oil-rebounds-td-says-1.3001177
Alberta faces structural deficit even if oil rebounds
Province's fiscal forecast likely too optimistic on oil prices, report finds
11:32 AM ET
The government of Alberta could be facing a long-term deficit situation for reasons beyond the temporary plunge in oil prices, TD Bank said in a report Thursday.
Economists Jonathan Bendiner and Derek Burleton say the province's current estimate of a $7-billion budget shortfall might not be realistic and the government could be facing much more serious fiscal challenges — namely, a structural deficit.
By the numbers: Alberta's $6 billion budget shortfall
Ontario poised to grow as Alberta slows down, TD says
Unlike what's known as a cyclical deficit, which is when governments temporarily dip into the red because of a temporary slowdown in the business cycle, a structural deficit is a situation where a government spends more than it earns even after the real economy rebounds, because of the compounding impact of debt payments.
Alberta is set to unveil its latest provincial budget next Thursday. Policymakers have already signalled to expect spending cutbacks, but the bank's report says it doubts those alone will be enough to fix Alberta's long-term financial problems.
"While the government has discussed a number of policy tools to address its fiscal challenge, a slash and burn approach to achieving fiscal balance in quick time can be costly to the economy and does not address current inefficiencies in program spending and an over-reliance on non-renewable-resource revenues," the TD report says.
Oil forecast is too rosy
Alberta's government has budgeted a $7-billion gap in its finances this year, based on an assumption that the price of West Texas Intermediate — the benchmark type of North American oil — will "average less than $65 US per barrel" through 2015, Premier Jim Prentice said in a speech to the Rotary Club of Edmonton earlier this month.
Given that oil closed below $43 US a barrel yesterday and the year is now almost one-quarter finished, that projection may be a tad optimistic. TD Bank's forecast is much bleaker, expecting an average price of $52 per barrel of WTI this year, rising to $68 next year.
Alberta schadenfreude: Why does the rest of the country seem to have it?
If oil prices prove to be lower than the government is forecasting, that $7-billion deficit guess is likely to be on the low side, the bank says.
"The lower price forecast suggests that without any actions, the budget deficit could come in by as much as $1 billion higher than the government’s cited figure for fiscal 2015-16," TD notes.
Problems beyond oil
Even if oil rebounds, the province could still face a structural deficit in the range of $4 billion to $5 billion in a few years, potentially turning it into a have-not province. "Borrowing related to fund[ing] these shortfalls would transform Alberta’s current net asset position into a net debt position by the next fiscal year and rise to as high as seven to eight per cent of GDP by fiscal 2018-19," TD says.
Alberta's outlook is getting worse by the day, CIBC says
That's much better than the ratios for many other governments, but still reason for concern to Albertans, the bank says.
Alberta has already floated the idea of cutting five per cent of all spending from its budget, while dipping into its $6-billion contingency fund. That's a pretty deep cut to services, but TD notes that Alberta spends more per capita on services than any other province — by as much as $1,300 per person.
But taking a knife to every budget equally isn't the best plan, TD says. "Experience has shown, however, that merely starving departments of funding misses the opportunity of securing longer-term savings."
Don't starve local governments
Infrastructure spending, TD says, should remain a priority, as that's typically an area where government's see good bang for their buck. And the bank urges the province to resist the urge to simply pass the buck on to local governments, the way others have. "Spending cuts must balance short-term fiscal objectives with longer-term sustainability."
TD also says to be wary of asset sales, because too often that just results in a one-time windfall of a "future income stream that would have flowed into government coffers anyway."
On the subject of taxes, the bank notes that thanks to resource royalties, Alberta currently has the lowest tax burden in Canada, and among the lowest in North America. It also famously doesn't have a provincial sales tax, something the government has hinted it has no plans to change.
Bring in a sales tax?
But that's a mistake, TD says. "By closing the door on the introduction of a PST, the government is missing an opportunity, in our view.
"Budget 2015 will provide a major opportunity to set the province’s finances on a more sustainable path. We hope that the government seizes the moment."
Share this story
http://www.cbc.ca/m/news/business/a...eficit-even-if-oil-rebounds-td-says-1.3001177
Re: Alberta faces structural deficit even if oil rebounds
Looks like the exact same report Locutus just posted.
Looks like the exact same report Locutus just posted.