The Higgs government says the economy will rebound in the coming fiscal year as COVID-19 wanes, but it won’t be enough for the province to avoid a large deficit.
Finance Minister Ernie Steeves is projecting the provincial economy will grow by 2.9 per cent this year, after shrinking 3.5 per cent in 2020 because of pandemic restrictions.
But government spending will still outpace revenue, leading to a deficit projection of $244.8 million for 2021-22.
“It’s not the budget I want to deliver but it’s the budget New Brunswick needs,” Steeves told reporters.
“It’s a different world. The pandemic has changed things completely for everybody.”
Increasing vaccination rates and easing of public health and travel restrictions later this year should spur the economy but “there remains a high level of uncertainty in the forecast, and a return to pre-COVID levels of economic activity will take time,” Steeves said in his budget speech.
Increased spending
Overall, spending will be up 3.4 per cent in the coming year while revenue will grow only 1.2 per cent, an imbalance that runs contrary to the Progressive Conservative’s frugal instincts but that Steeves said is necessary after an extraordinary first year of the pandemic.
“This budget takes us further into debt,” Steeves said. “We don’t want debt, but you know what? Now is the time. We have to spend money this year.”
The large deficit projection is based in part on federal funding for a range of COVID-19 programs expiring at the end of the fiscal year on March 31.
Conditional grants from Ottawa jumped from $324 million to $599 million this year, with almost all of the extra money to support the province’s pandemic response. Those grants are budgeted to drop back to $357 million in the coming year.
Steeves said the provinces would push the federal government to continue the funding.
“You just can’t cut it off. It can’t be a hard stop.”
New Brunswick Finance Minister Ernie Steeves reveals details in his government’s 2021-2022 fiscal budget during a news conference on Tuesday, March 16. (Shane Magee/CBC)
Ottawa hasn’t yet said precisely how much it will fund in 2021-22, but if there’s a new influx of money after April 1 it could lower New Brunswick’s deficit figure. A massive influx of federal dollars this year brought a once-ballooning pandemic deficit down to $12.7 million.
Pandemic spending
The budget includes $64 million for specific pandemic spending, including $30 million for the vaccination program now underway.
“New Brunswickers will see a fiscal plan that demonstrates our commitment to providing the necessary supports to address the pressures that the pandemic will continue to place upon the province,” Steeves said.
There’s also significant increases in some non-COVID-19 areas.There’s an increase of about $7 million for mental health across several departments, including $3 million to deal with increased demand for addictions and mental health services.
There’s also $10.8 million in new spending on affordable housing.
The budget forecasts an even larger deficit of $296 million in 2022-23 before it will start to decline the following year to $220 million.
Carbon tax
The government will raise the provincial carbon tax that drivers pay at the pumps by about two cents to 4.21 cents per litre in the coming year. But that announcement was lacking some key information on how revenue will be spent.
Officially, the national climate plan requires a carbon tax rate on gasoline of 6.6 cents this year. The PCs went along with that a year ago but cut the gas excise tax by more than four cents to leave the consumer paying about two cents per litre at the pumps.
This year the national plan requires an 8.8-cent-per-litre tax, so the province would have to reduce the gas excise tax again to keep the net tax stable at the pumps.
But there’s been no decision yet to do that.
There will be about $28 million in leftover revenue if the province keeps the excise tax where it is.
It wasn’t clear Tuesday what other options the government is considering, but Steeves said four choices are on the table and all would see the money returned to New Brunswickers.
“I don’t know if I want to discuss all of them. I have my favourite,” he said. “In one form or another, it will get back to the people.”
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
