A more expensive barrel of oil has given a bump to the provincial economy, reducing the projected deficit to $547 million from $682 million projected in April.
Finance Minister Tom Osborne gave an update on the province’s financial situation, updating the numbers from the 2018 budget.
While revenues are up, spending remains more or less the same. The province is still spending $8.35 billion in fiscal 2018-19.
Osborne says finding $6 million in savings on that amount of spending is “a huge accomplishment.”
“To hold expenses steady is a huge accomplishment when you factor in the consumer price index,” said Osborne.
The increased revenue means government is going to borrow less this year, as well. Instead of borrowing $1.45 billion, borrowing will be reduced by $200 million to $1.25 billion.
As a result, the total net debt for the province will also see a decrease: down to $15.37 billion from $15.53 billion – on a per capita basis, still leading the country.
Richard Alexander, executive director of the Newfoundland and Labrador Employers Council, doesn’t share Osborne’s optimism on that front.
“There hasn’t been any appreciable change in spending levels,” said Alexander.
“Government has done things on severance and wage freezes and things like that, but when you’re borrowing that much money, your debt serving costs are increasing so much that we have less money to put into health and education.”
The Employers Council also released a public opinion poll on Tuesday, showing just eight per cent of the province is confident government will be able to meet their 2022-23 target of returning to surplus.
The survey found that 64 per cent of residents are concerned about the fiscal state of the province, with 60 per cent saying government needs to find a way to curb spending.
The 2018 budget estimated a barrel of oil would cost $63 per barrel. The average price so far is $75.75. Every dollar increase in the price of oil means another $19.9 million for the provincial coffers.
Because of the increase, Osborne says government is increasing its oil price estimate by $11 – now up to $74 per barrel.
While the oil estimate creeps upward, Osborne says he’s still using an “abundantly prudent” estimate.
“We were advised to use a higher oil prediction in budget 2018. We refused to do that because that’s what the previous government did,” said Osborne.
“I still think that at $74, we are abundantly prudent.”
The previous Tory government was roundly criticized for overestimating the price of oil. Osborne says oil revenues represent 15 per cent of all provincial revenues, down from 30 per cent in 2011.
While that number is down, Alexander says the reduced percentage of oil revenue is really indicative of just how low oil prices have dropped since 2011.
“Back in 2011, oil was trading at around $111 per barrel. The price of oil drops, that means it’s less as a percentage of total revenue of the province,” said Alexander.
“What that’s been replaced with is a billion-dollar tax increase from the 2016 budget and being replaced with borrowing.”
The unemployment rate is more or less steady at 14.5 per cent.
Tory finance critic Keith Hutchings says government is relying on oil revenues, something they criticized the previous government for.
“Any improvement here is related to oil revenues,” said Hutchings.
“There’s nothing here that indicates that this policy, this framework, anything is going to be met.”
NDP Leader Gerry Rogers says just because people aren’t rioting in the streets like they were in the 1930’s over the fiscal state of the province doesn’t mean things are better.
“Go down to the Gathering Place and tell me that what people are experiencing with the cut of the adult dental program, the cut of services including bus passes … you tell me that doesn’t look like the 1930s, when people can’t afford teeth,” she said.
The gross domestic product (GDP) saw a big decline of 2.8 per cent, a larger decline than expected at the 2018 budget, which was 0.8 per cent.
The population decline continues. Government’s estimate of a 0.6 per cent decrease in population is still right on target.
One major difference in the budget estimate to Tuesday is housing starts. Government had predicted a 10.2 decrease in housing starts, but the updated data shows a flat market, with growth expected by 0.1 per cent.
The Employer’s council survey randomly sampled 401 adults 18+ across Newfoundland and Labrador. Overall results are accurate to within ±4.9 percentage points, 19 times out of 20.
Twitter: DavidMaherNL
•••
Earlier story
A more expensive barrel of oil has given a bump to the provincial economy, reducing the projected deficit to $547 million from $682 million projected in April.
Finance Minister Tom Osborne gave an update on the province’s financial situation, updating the numbers from the 2018 budget.
While revenues are up, spending remains more or less the same. The province is still spending $8.35 billion in fiscal 2018-19.
The 2018 budget estimated a barrel of oil would cost $63 per barrel. The average price so far is $75.75. Every dollar increase in the price of oil means another $19.9 million for the provincial coffers.
Because of the increase, Osborne says government is increasing its oil price estimate by $11 – now up to $74 per barrel.
The previous Tory government was roundly criticized for overestimating the price of oil. Osborne says Oil revenues represent 15 per cent of all provincial revenues.
The increased revenue means government is going to borrow less this year, as well. Instead of borrowing $1.45 billion, borrowing will be reduced by $200 million to $1.25 billion.
As a result, the total net debt for the province will also see a decrease: down to $15.37 billion from $15.53 billion – on a per captia basis, still leading the country.
The unemployment rate is more or less steady at 14.5 per cent
The gross domestic product (GDP) saw a big decline of 2.8 per cent, a larger decline than expected at the 2018 budget, which was 0.8 per cent.
