For the first time in a decade, Newfoundland and Labrador is reporting a surplus instead of a deficit and the Newfoundland and Labrador Employers’ Council is hoping to see government take further action to continue that trend in the months and years ahead.
Executive Director Jaclyn Sullivan says while it is positive to see a surplus, she cautions that it has been caused by unexpected revenues and thus is not something that can be counted on for future budgets.
That’s why she wants to see government take action to address their spending first, and she hopes the fiscal update will be the impetus for them to start that process.
Meanwhile, the province’s opposition parties share similar views that while the fiscal update is positive news, it is not necessarily because of government’s own doing.
NDP leader Jim Din states that government “caught a break” with high oil revenues, and PC Leader Barry Petten feels the same noting that’s pure luck that government finds itself in this situation.
Petten says there are still 125,000 people without a family doctor, people are sleeping on the streets, and there are sugar taxes and carbon taxes. So, while the update is good, he says getting to this point has not been the result of good fiscal management. Dinn says depending on oil revenue is extremely volatile, and wonders where the plan is for the future.
A local investment advisor is applauding news that the province is in a surplus, but warns of the long-term impacts on the Future Fund if the economy goes into recession.
Oil prices are much higher than originally forecast, resulting in an unexpected extra $1.3 billion for the province.
As a result, $157 million is being put into the newly-created Future Fund, which government plans to use to pay down expensive debt and lower the cost of borrowing.
Larry Short, Senior Investment Advisor with Short Financial, a branch of IA Private Wealth in St. John’s, says the trouble with that is the reliance on long-term investments at a time when the economy is slowing.
“We have to be very careful that we’re not back on the roller coaster of increased resource revenue, followed by a recession,” says Short. “That could result in lower oil prices, meaning we could be facing an increased deficit next year.”