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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Average consumer prices in January 2022 were 5.1% higher than a year earlier. Highest since 1991. Excluding energy, prices were 4% higher. www150.statcan.gc.ca/n1/daily-quoti…#cdnecon
What's behind the accelerating inflation rate? This visual might help. It decomposes the change in inflation due to several important components. Energy prices and household depreciation account for most of the change.
First, some context. In Budget 2018 the carbon tax (just the retail levy, since I presume the UCP was not referring to the large-emitter carbon tax, which they support) was projected to be $1.5 billion by 2020/21.
That's approximately 0.4 percent of GDP. In 2017/18, it was 0.3.
I initially thought the largest tax increase would have been found back in Budget 1936 when we brought in a sales tax! That was two percent. Today that would be about 0.6 percent of GDP, so ... larger than than the CTax.
Remarkable that following such a massive shock, federal debt services costs will average ~1.2 percent of GDP for 2021-2026. Budget 2019, prior to COVID, was projecting debt services costs of 1.2 percent from 2021 onwards.
Those claiming the fiscal sky will soon fall due to this federal borrowing are ... mistaken
Simple illustration: If beyond 2026 we have interest rates ~3 percent & NGDP growth ~4 & revenue/GDP is stable & real per capita spending is stable --> debt/GDP gets to pre-COVID levels by 2034. Far sooner than previous projections.
CPI up 4.1% in August compared to last year. Highest since 2003. Excluding food/energy (which are highly volatile), prices up 3%. #cdnecon
Important to remember, though, that much of the higher inflation we've seen in recent months is in part due to drops during COVID and prices returning to trend today means above-average inflation since last year's levels are lower.
Here's an illustration of that.
Also important to remember that the central bank looks to several measures to understand inflation pressures. Here are three of their main metrics. One exceeds the target range, the two others still don't.