Cold re­al­ity with­ers bud­get pro­jec­tions

The Prince George Citizen - - Opinion -

Ah, the rose. A beau­ti­ful pres­ence. A short-lived bloom. But once done, just the thorns to see. The mes­sage of our prov­ince’s fi­nance min­is­ter Tues­day as she de­liv­ered a quar­terly eco­nomic up­date was anal­o­gous to that pass­ing of the vi­tal­ity that comes when a fresh flower no longer holds true and firm.

A turn­ing point in her gov­ern­ment’s life has ar­rived.

The buoy­ant eco­nomic cli­mate in­her­ited by the NDP is now a much more som­bre heir­loom it must own and cul­ti­vate.

To stretch the metaphor, its ac­tions on hous­ing have dried the rev­enue stream so nec­es­sary to water the plant. The global down­turn in forestry is start­ing to hit the books. And the spec­tre of re­forms of the In­sur­ance Corp. of Bri­tish Columbia (ICBC) may lower the boom.

What were once salad days are now a grape­fruit diet.

A pro­jected sur­plus made con­fi­dently only in Fe­bru­ary of $274 mil­lion in the 2019-20 fis­cal year is now fore­cast to be $179 mil­lion, but only thanks to dip­ping into a con­tin­gency fund for $300 mil­lion to stay in the black.

A pro­jected GDP fore­cast of 2.4 per cent this year and 2.3 per cent in 2020 has been, in rose terms, se­verely pruned to 1.7 per cent this year and 1.9 per cent next year. All told, a few months have taken one full point off the plan.

Who can pre­dict what a few more months might in­cite?

The tough­est re­sults are yet to come from a forestry sec­tor whose suf­fer­ing has taken months to af­fect gov­ern­ment rev­enues, from a hous­ing sec­tor that is into the throes of so much new tax­a­tion that it not yield­ing the ven­er­a­ble prop­erty trans­fer tax rev­enue gov­ern­ments count upon, and from the very real pos­si­bil­ity that the prov­ince’s pro­claimed dump­ster fire at ICBC is not im­mi­nently ex­tin­guish­able.

There are, too, other matters well be­yond Ca­role James’ con­trol as min­is­ter. The Don­ald, Boris and Xi spring im­me­di­ately to mind.

But there is one mat­ter she can con­trol: her­self. In com­ment­ing on the hous­ing mar­ket slump, James has been un­apolo­getic for her gov­ern­ment’s role. It is a con­ceit to be­lieve that the tax­a­tion of hous­ing will make it af­ford­able for who her gov­ern­ment is speak­ing to – the younger, low­er­mid­dle-in­come co­hort that wants into the mar­ket – un­less there are much more dra­matic mea­sures in the wings. Cer­tainly the sup­ply of new hous­ing, if that is any solution, will not ma­te­ri­al­ize in this en­vi­ron­ment. But then again, much of what the gov­ern­ment is do­ing to the real es­tate sec­tor is more of a po­lit­i­cal voucher than an eco­nomic remedy.

It is in­creas­ingly hard to see how the rev­enue and ex­pense trend lines trans­late into any­thing other than a deficit in the near term, be­cause the gov­ern­ment’s com­mit­ments to an ex­pan­sion of its role in the econ­omy has locked it­self into spend­ing it can­not fore­stall.

We might be ab­sorbed by the fed­eral elec­tion cam­paign, but it’s not as if the next provin­cial vote is eons away. If the econ­omy in­deed goes side­ways glob­ally, Bri­tish Columbia would find it­self in a high-tax fi­nan­cial box with­out great ma­neu­ver­abil­ity to adapt. The very real pos­si­bil­ity is that the NDP faces the elec­torate in the fall of 2021 in a fi­nan­cial strait, in part due to its am­bi­tious so­cial agenda and in part due to a mis­cal­cu­la­tion of when to in­vest in an eco­nomic cy­cle. Not that it had a choice: its sup­port­ers were ex­pect­ing spoils and it had lit­tle choice but to do so upon as­sum­ing power if it did not wish to dis­ap­point­ment them.

But the coun­try’s best-per­form­ing econ­omy is not the re­silient flower we might wish. It de­pends on re­sources in the main and real es­tate has be­come a 21st cen­tury com­mod­ity in that fold. The tax-and-spend chap­ter is clos­ing and the real busi­ness of be­ing a fi­nance min­is­ter has hit James’ desk.

That next quar­terly re­port should be quite the pre­sen­ta­tion.


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