Just before he tabled the 2020 Alberta budget on Feb. 27, provincial finance minister Travis Toews said, in a classic example of understatement, “We are not projecting a boom time. The volatility is extreme.”
The government says the budget is “a plan for jobs and the economy.”
“Budget 2020 maintains budgets for health, education and core social services. We remain focused on creating jobs, growing our economy, and streamlining programs to ensure a sustainable future. Our plan to get spending under control is working — we’re on track to balance the budget by 2022-23 and we’re bringing down the deficit faster than expected.”
The province is banking that a combination of corporate tax breaks, continued government deficits and a renewed flow of energy royalties will lift Alberta out of its economic hole.
The budget item that is arguably of the most interest to the Alberta construction industry is the 2020 Capital Plan for public infrastructure.
The government says new projects worth an estimated $772.4 million over the next three years will “create opportunities for private sector participation and support more than 3,000 new jobs by 2022.”
Frederick Vine, chairman of the Alberta Construction Association (ACA), says the association welcomes the increased investment in infrastructure.
“The 2020 capital budget is $17.4 billion for the three years 2020-2023, compared to $15.9 billion in the 2018 capital budget and $16.2 billion in the 2019 capital budget,” said Vine.
Investment in infrastructure supports good jobs and provides the schools, health care facilities and other structures needed by Albertans, he says.
“ACA truly appreciates the government’s partnership with industry in reviewing legislation, policies and procedures to eliminate red tape and enhance value for taxpayers through infrastructure,” said Vine.
The budget is the government’s attempt to get its finances back on track and the deficit under control
— Jack Mintz
University of Calgary
What do the pundits have to say about the budget?
Alison McIntosh and Ian Hussey of the Parkland Institute at the University of Alberta say the budget’s fiscal projections depend on two optimistic assumptions.
First, that the one-third cut to the provincial corporate income tax rate will result in significant additional revenue for the provincial government from increased business investment in the economy and a related increase in private sector employment.
And, second, that three new pipelines (Line 3, Trans Mountain expansion, and Keystone XL) will be built and start operating in the next three years.
“The UCP (United Conservative Party) assumes (the pipelines) will all be built and that there will be no delays to current construction schedules,” they write in a post-budget analysis. “Based on these assumptions, the government projects significant growth in bitumen royalties … in 2021 and… in 2022. These assumptions by the UCP seem optimistic, given past pipeline delays and ongoing opposition to these projects.”
Hussey says the economic pain that Albertans are suffering is real.
“The energy economy is one-quarter of Alberta’s economy and one-third of Calgary’s,” he said. “Four office towers in downtown Calgary are sitting empty. And other sectors of the economy, such as agriculture and forestry, are doing poorly, too.”
Jack Mintz, President’s Fellow of the School of Public Policy at the University of Calgary has a generally favourable opinion of the budget and believes the Kenny government is right to focus on bringing its deficit down.
“The budget is the government’s attempt to get its finances back on track and the deficit under control,” he said. “That initiative will have the support of the many Albertans who want a tight hold on the province’s purse strings.”
Mintz says Alberta has a history of big-ticket spending, deficits and debts, followed by slashing cut-backs.
“Ralph Klein’s cutbacks in the 1990s followed the high spending of the Lougheed and Getty years,” he said. “And he managed to remain popular as he cut back spending, because he explained to the electorate why the reductions were necessary.”
Mintz says Premier Kenney’s cuts are not as aggressive as Klein’s, but he will bring the provincial debt down.
“Kenney wants to do operations and administration more efficiently and bring their cost down,” he said.
Mintz says Alberta can’t continue with its high-spending ways.
“After 2015, when commodity prices went down, it became clear that we weren’t going to return to high energy prices again, but government spending, especially education and health, remained high,” he said. “The government hired more people, especially in education and health, and paid them more, with the result that the deficit went up. Now it has to come down.”
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
