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B.C. forecasts surplus of $5.7 billion, but ‘shock rebound’ may not last: minister

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VICTORIA — British Columbia’s budget forecast shows a surplus of $5.7 billion, dwarfing the previous estimate and giving the government room to help people facing the ongoing cost-of-living crunch, says Finance Minister Selina Robinson.

The projected surplus is $5 billion higher than the $706 million forecast last September, Robinson said Friday.

The latest fiscal update, covering the government’s financial results from last April to September, puts the province in a “significant surplus position” to continue using its resources to deliver results on housing, public safety, health care and climate change, she said.

“Many British Columbians are feeling squeezed, feeling squeezed to put food on the table and cover costs,” she said at a news conference. “Our strong fiscal position means we can continue to put people first.”

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Much of the added surplus comes from higher personal and corporate income tax revenues, at $3.7 billion, while sales taxes and natural gas royalties were also higher, Robinson said.

But the minister cautioned that such hefty surplus forecasts are not guaranteed to continue.

Robinson said B.C. is showing strong growth despite the ongoing pandemic, but the current numbers could be attributed to a “rebound.”

“We also need to remember these numbers that we’re seeing here, this is a shock rebound number,” she said. “Whether they’re going to hold over the long term remains to be seen. We don’t know if these numbers are going to hold year over year.”

Robinson said $2 billion of the added revenue has already been earmarked for cost-of-living measures announced since the summer.

Those include $1 billion for the Climate Action Tax Credit and BC Affordability Credit increases, $395 million for car insurance rebates and $320 million for a one-time electricity bill credit.

Since being sworn in on Nov. 18, Premier David Eby has made several spending announcements, including pledging $230 million in police funding to hire hundreds more officers.

Eby has said the B.C. economy is doing well and the province’s budget can cover the cost of his latest plans.

“We will use these dollars we have to invest in things people need,” Robinson said. “We’re in a strong position to continue making thoughtful decisions.”

But opposition parties say the New Democrat government has been holding back money while people are struggling to make ends meet during times of rising inflation and interest rates.

BC Liberal finance critic Peter Milobar said it appears the government withheld some relief initiatives until Eby took over from former premier John Horgan.

“Everyday people are now paying the price for his delays, despite the province having the money to provide relief,” he said in a statement. “As these numbers make clear, the NDP have no excuse to avoid making much-needed investments in areas like health care, affordability, and mental health and addictions.”

Green Leader Sonia Furstenau said the fiscal update shows the government has been failing to meet the needs of the citizens of B.C.

“For those who are struggling to pay their bills, cover the cost of groceries, find affordable housing, and access reliable health care, this budget surplus is an indication that the B.C. NDP government could have been doing more,” she said in a statement.

Furstenau said the government had the money to raise social assistance and disability rates, build community health centres and invest in education, transit and housing, but didn’t.

The fiscal update says the most recent private sector economic growth forecast now projects the B.C. economy to grow 2.8 per cent this year and 0.5 per cent in 2023.

Robinson said she will meet with economic forecasters next month to discuss the province’s growth projections.

This report by The Canadian Press was first published Nov. 25, 2022.

 

Dirk Meissner, The Canadian Press

Economy

Russia is pushing its central bank to give 'upbeat' economic updates – Business Insider

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Russia is pushing its central bank to give ‘upbeat’ economic updates  Business Insider

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Biden highlights economy, spars with Republicans in State of the Union speech – Global News

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Biden highlights economy, spars with Republicans in State of the Union speech  Global News

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Given high inflation, slowdown in Canada’s economy is ‘a good thing,’ Tiff Macklem says

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Bank of Canada governor Tiff Macklem says that although a slowing economy may not seem like a good thing, it is when the economy is overheated.

Speaking in Quebec City on Tuesday, Macklem said that higher interest rates are working to cool the economy as elevated borrowing costs are constraining spending on big-ticket items such as vehicles, furniture and appliances.

As demand for goods and services falls, Macklem says the economy will continue to slow.

“That doesn’t sound like a good thing, but when the economy is overheated, it is,” he said.

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In addition to global events, the overheated domestic economy pushed up prices rapidly, he said.

To slow the economy domestically, the Bank of Canada has embarked on one of the fastest monetary policy tightening cycles in its history. It has hiked its key interest rate eight consecutive times since March, bringing it from near-zero to 4.5 per cent.

However, last month, the Bank of Canada said it will take a “conditional” pause to assess the effects of higher interest rates on the economy.

“Typically, we don’t see the full effects of changes in our overnight rate for 18 to 24 months,” Macklem said on Tuesday.

“In other words, we shouldn’t keep raising rates until inflation is back to two per cent.”

However, the governor said the Bank of Canada will be ready to raise rates further if inflation proves to be more stubborn than expected.

Bank of Canada hikes interest rates again to 4.5%

The Bank of Canada is raising interest rates again, bumping it to 4.5 per cent. This marks the eighth increase in less than a year, leaving some homeowners scrambling to keep their mortgages.

As gas prices have fallen and supply chains have improved, inflation in Canada has slowed since peaking at 8.1 per cent in the summer. Macklem called this a “welcome development,” but stressed inflation is still too high.

“If new data are broadly in line with our forecast and inflation comes down as predicted, then we won’t need to raise rates further,” Macklem said.

For inflation to get back to two per cent, Macklem said wage growth will have to slow, along with other prices.

Wage gains lagging inflation

Wages have been growing rapidly for months but continue to lag the rate of inflation. In December, wages were up 5.1 per cent.

Though annual inflation is still at decades-high levels, economists have been encouraged by a more noticeable slowdown in price growth over recent months.

The Bank of Canada forecasts the annual inflation rate will fall to three per cent by mid-year and to two per cent in 2024.

Royce Mendes, an economist with Desjardins, said that Macklem is crossing his fingers that the rate hikes he has implemented so far will be enough to get it done.

“The head of the Bank of Canada seems quite comfortable sitting on the sidelines even as his U.S. counterpart will be discussing the need for further monetary tightening south of the border,” Mendes said.

 

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