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Alberta’s outgoing finance minister has a number of phrases of sage recommendation for Alberta’s incoming finance minister.
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Preserve the books balanced and be ready to show down your colleagues if issues get powerful.
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“Don’t be afraid of creating a popularity as a minister that claims ‘No,’” outgoing finance minister Travis Toews, who will probably be handing off the portfolio Friday, mentioned in an interview.
“The finance minister can have a lonely position … You’re the one which’s finally tasked with making certain a robust stability sheet, making certain a wholesome monetary assertion and a balanced funds. Each different minister has a unique project — and each different ministry requires these sources.
“So my recommendation to the following finance minister? Don’t be afraid to say no and don’t be involved if you find yourself with a popularity as a minister who says no. Which means you’re doing all your job.”
On Friday, Premier Danielle Smith will unveil her new provincial cupboard and political watchers will probably be retaining an in depth eye on who takes over the chore of overseeing Alberta’s $71-billion spending plan.
The financial outlook in Alberta this 12 months is extra buoyant than in most different provinces, though a excessive stage of uncertainty nonetheless exists.
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Rates of interest proceed to climb with Wednesday’s stunning choice by the Financial institution of Canada to push the in a single day charge up by 25 foundation factors to 4.75 per cent. It got here after inflation rose by 4.4 per cent in April, together with a 4.3-per-cent hike in Alberta, in comparison with costs a 12 months earlier.
Three separate forecasts this week all present Alberta is anticipated to report among the many highest financial development charges within the nation in 2023 — at 2.4 per cent — however it’s considerably beneath final 12 months’s ranges.
On Thursday, ATB Monetary additionally projected the province’s financial system to develop by 2.2 per cent in 2024, with its forecast reflecting greater rates of interest, a dip in commodity costs and a weaker international financial system.
The financial affect tied to the Alberta wildfires prior to now month, which briefly knocked out manufacturing of an estimated 300,000 barrels of oil equal (boe) per day at one level final month, is one other challenge.
Nevertheless, the province’s inhabitants elevated in the course of the fourth quarter at its highest stage for the reason that Eighties, whereas rising capital spending within the power sector can also be offering a elevate.
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A report launched Thursday by RBC Economics says Alberta will lead the provinces, whereas the Canadian financial system grows by simply 1.3 per cent. (Each the financial institution and the Convention Board of Canada additionally challenge the province’s GDP will broaden by 2.4 per cent this 12 months.)
RBC anticipates benchmark West Texas Intermediate (WTI) crude costs will common US$78.40 a barrel this 12 months.
“Count on to buckle up slightly bit, however in comparison with the remainder of Canada, Alberta is in a a lot stronger place than most different provinces,” mentioned RBC economist Rachel Battaglia.
Nevertheless, there are nagging questions concerning the employment outlook as discuss continues of a doable recession in Canada. Suncor Vitality is anticipated to chop 1,500 positions by 12 months’s finish whereas pipeline big TC Vitality confirmed earlier this week that it’s eliminating an unspecified variety of jobs.
For Alberta’s subsequent finance minister, there are different challenges forward.
Costs for WTI crude traded round US$71 a barrel on Thursday, about $8 beneath what’s projected within the March funds. (Each $1-a-barrel drop in WTI costs over the funds 12 months will cut back provincial revenues by $630 million.)
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As nicely, the province might face higher-than-expected prices to battle wildfires and different emergencies, though the final funds put aside a $1.5 billion contingency fund for unanticipated spending.
The UCP authorities projected a $2.4-billion surplus this 12 months, and the social gathering made quite a lot of marketing campaign pledges final month, together with a $1-billion promise to create a decrease revenue tax bracket.
With new provincial laws that requires the federal government to stability its books — though it does permit for some exemptions — the strain will probably be on the Smith authorities to keep away from any pink ink.
“We are able to see these surpluses dwindling proper now, given the present costs of oil,” mentioned Jason Leslie, chief working officer of the Alberta Chambers of Commerce.
“We have now received to challenge prudently. We’re approach off beam.”
Whereas oil costs are down from the March funds, forex adjustments and a smaller-than-budgeted worth low cost for Western Canadian Choose heavy oil present a counterweight to weaker crude costs.
If WTI oil costs common within the mid-$70 a barrel with a slender oil-price low cost, “I believe our income line will probably be simply effective,” mentioned Toews, who completed second to Smith in final 12 months’s UCP management race and didn’t run in final month’s provincial election.
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But, the distinction between a funds surplus and deficit isn’t a large one.
“The road will not be extremely thick. We arrange a $1.5-billion contingency, partly to cope with unanticipated prices, but additionally to offer slightly little bit of buffer,” mentioned the one-term MLA for Grande Prairie-Wapiti.
“If WTI costs proceed to languish round $70 and even additional weak spot, if we proceed to must combat forest fires on the charge we’ve been preventing all of them summer season, and if now we have a higher-than-average crop insurance coverage … there’s little doubt this subsequent authorities could have some powerful choices to make so as to get the funds balanced.”
That’s why it’s necessary for the following finance minister to deal with issues inside their management, akin to value self-discipline and positioning the province to be aggressive for funding, mentioned Toews, who doesn’t anticipate an additional profession in politics.
And, he added, be ready to say no, even when circumstances enhance.
“It’s just one minister’s job to stability the funds and handle responsibly from a fiscal standpoint — that’s the finance minister’s.”
Chris Varcoe is a Calgary Herald columnist.
cvarcoe@postmedia.com
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