A stronger economic outlook for 2006 is bolstering British Columbia’s surplus, but emerging economic and natural resource risks pose challenges.
Sept. 15, 2006
VICTORIA – A stronger economic outlook for 2006 is bolstering British Columbia’s surplus, but emerging economic and natural resource risks pose challenges, Finance Minister Carole Taylor announced today with the release of the First Quarterly Report for 2006/07.
“Overall, B.C.’s economy is performing very well this year and that’s having a positive impact on the Province’s bottom line,” said Taylor. “But there are a few areas where a watchful eye is needed.”
“Natural gas prices are always volatile, and prices have been much lower than forecast for the February budget. Our natural gas revenues this year are down by three-quarters of a billion dollars. And a weakening U.S. housing market and the risk of slower growth in the U.S. economy pose risks to the economic outlook for both British Columbia and Canada as a whole.”
Solid employment gains, strength in housing market activity and stronger retail sales contributed to the improved economic outlook for 2006. B.C.’s economic growth is now forecast at 3.6 per cent compared to 3.3 per cent at budget. For 2007, economic growth remains unchanged from budget at 3.1 per cent, reflecting cautious assumptions for growth in the U.S.
The surplus for 2006/07 is forecast at $1.2 billion, up from the $600 million expected at budget. Improved surpluses are also forecast for 2007/08 and 2008/09.
Total revenue for 2006/07 is forecast to be just over $1 billion higher than budget, due to increased taxation revenue and higher BC Hydro net income. These improvements are partially offset by a $774 million drop in natural gas revenue.
Total government spending is forecast to be $722 million higher than budget for 2006/07, due to higher forest fire costs, Negotiating Framework incentive payments for agreements concluded in 2006/07, and additional spending by school districts, universities and colleges, and health authorities.
“With any fiscal plan, there are things you can influence and others you can’t,” said Taylor. “With some risks, like a slowing U.S. economy, the best you can do is anticipate the consequences – but you can’t control it. And then there are things that you can influence, like public sector compensation. That’s why we put so much effort into the Negotiating Framework.”
“Since the February budget, we ratified 138 negotiated agreements covering 98 per cent of British Columbia’s public sector. Having that certainty for the next four years is a real benefit to the fiscal plan.”
The taxpayer-supported debt-to-GDP ratio, a key measure of debt affordability, continues its downward trend. The ratio is forecast to decline to 15.7 per cent in 2006/07.
In addition to presenting the First Quarterly Report, the Finance Minister also released the 2007 Budget Consultation Paper, which is provided to the Select Standing Committee on Finance and Government Services to assist their consultations with British Columbians on choices and opportunities for Balanced Budget 2007.
