This time last year, Alberta was anticipating an $11b deficit for 2022/23. Now, the government expects a surplus of $511 million ($2.3b excluding contingency).
Massive turnaround. Here's a decomposition of the relevant changes. #ableg
There will be two competing stories out there. Both have elements of truth.
1) The government had little to do with the improvement. It's all oil prices.
2) The government's fiscal/economic policies made today's surplus possible.
High oil prices increase both resource revenues and increase corporate income taxes. That's basically the whole ballgame relative to where Budget 2021 was projecting for 2022/23.
Not due to government.
BUT the government did lower the spending trajectory in Alberta relative to the previous government. Aligning per capita spending to other provinces.
For perspective, had spending continued with 2018 Q3 plan (prev govt), then there'd be a deficit of nearly $4b in 2022/23 despite the higher prices.
But (and this is an important but), the budget energy price assumptions are *very* conservative. Very.
I mean, who knows where oil prices will be in the future, but the market expects much much higher than budgeted for.
At these higher prices, even the previous government expenditure plan would have been in surplus in 2022/23. At WTI comes in at 85 in 2022/23 and 86 in 2023/24 then here's the picture.
It's also worth noting that previous government would have had higher revenues because of modestly higher tax rates (CIT in particular, which would have earned a higher share of rising profits from high oil prices).
In any case, definitely an interesting debate.
A better discussion would be about how Alberta gets off the royalty rollercoaster. We remain exposed to significant fiscal risk.
We haven't entertained saving resource revenues since 2015. Perhaps it's time again?
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The GoA/LifeWorks thought the Act implied we reverse the clock and estimate what a hypothetical APP would have accumulated since 1966 had all other variables remained unchanged. That reached 53% of CPP assets, or ~$334 billion. This was highly touted by the APP engagement panel.
How do carbon taxes affect food prices? In our latest paper, @dr_jen_winter and I analyze both direct and indirect impacts across the entire food supply chain:
TL;DR: Carbon taxes in Canada, such as the federal $80/tonne emissions price, are often criticized for raising costs. But we find that emissions pricing increases domestic food costs modestly—about 0.8%—with imports shrinking the overall impact on food prices to about 0.5%.
The paper isn't yet accepted for publication, so comments are welcome! 😀 We've completed revisions for the Canadian Journal of Agricultural Economics and recently resubmitted. The link above is to the latest version.
Today's data: inflation rate falls to 2.7% in April. Would have fallen more, but gasoline pushed the rate up. Shelter remains largest contributor, but pace of increase is falling.
The key Bank of Canada core measures of inflation have also remained within the target range -- lower than 2% -- over the past 3 months. This is what the bank is looking forward before lowering rates.
Here are the contributors to the drop. Most items down, but energy prices offset some of that.
This accounts for *changes* in the CPI annual rate of increase. Alternatively, had energy prices remained flat yoy, then CPI growth would have been 2.4% in April.
Today's data: inflation! 🥳 Prices were 2.9%, on average, higher in January than a year earlier. Inflation down from 3.4% in Dec. Biggest contributors to the drop were energy, food, travel. Cell phones offsetting some.
Looking at the headline rate, shelter is larger contributor. Rent accounts for ~0.5 points of the 2.9, mortgage interest costs ~1.0 points.
Important: note the strong decline in the pace of grocery price growth. Now in line with historical norm.
The decline in inflation has also been fairly broad based, with now fewer than half of items seeing a pace of price growth above 3% -- although still a larger share than normal, which is ~0.3-0.4.
This is higher than last month, true, but it doesn't mean the inflation situation is worsening. I noted this yesterday, saying 3.4% was the number to watch.
This is a *very* important point to keep in mind for the next *several* months. Even if things are completely normal month-by-month, the headline rate won't fall much over the next quarter.
As expected, inflation fell in October. A lot. From 3.8% in September to 3.1% in October. And monthly, adjusted for seasonality, prices were lower in October than Sept.
A big part of the reason is from lower gasoline prices. That's anticipated because oil prices were down. There's a tight connection between energy's contribution to CPI and oil prices (obviously). This has been a consistent story over the past two years.
You can see the size of the contribution from energy to the change in inflation since September here 👇 . Basically everything else was a net wash.