Big federal deficit not alarming to Business Council of B.C.’s Finlayson

Economic growth should keep debt-to-GDP ratio steady, rebound in dollar, oil may improve confidence

Jock Finlayson is executive vice-president of the Business Council of British Columbia.

Jock Finlayson is executive vice-president of the Business Council of British Columbia.

Critics are worrying too much about the federal government’s large projected budget deficit of nearly $30 billion this year, according to a spokesman for the Business Council of British Columbia.

Executive vice-president Jock Finlayson said aggressive stimulus spending is justified given the “feeble” national economy, particularly in oil- and commodity-producing areas, even if that seems out of step with what’s needed in B.C.

“I don’t find the fact that they’re going to be running a sizable deficit for the next year or two particularly alarming on its own,” he said.

Finlayson noted $30 billion is equivalent to only 1.5 per cent of Canada’s overall economy, measured by its GDP (gross domestic product).

“As long as economic growth is 1.5 or two per cent we’ll actually see the debt-to-GDP ratio remain stable (at around 31 per cent) or even inch down a bit,” he said.

The U.S. and U.K. are running much larger budget deficits as a share of their economies, he added.

Finlayson is less enamoured of the federal projections for continued big deficits stretching out five years, adding he’d like to see Ottawa wrestle them down towards a balanced budget sooner.

Otherwise, he said, the federal Liberals could be surprised by other economic trouble, such as a recession in the U.S. or a faster-than-expected climb in interest rates.

“If those kinds of scenarios unfolded then we could end up stuck with chronic deficits at the federal level rather than shrinking deficits.”

The federal strategy is geared to address the sharp downturn that accompanied the collapse of oil and other commodity markets in other provinces.

That’s translated into not just greatly reduced spending by oil and gas companies, but also pipeline, engineering and environmental services companies that do associated work, along with waves of layoffs and rising unemployment.

“This epic downturn in commodity markets is reverberating through a lot of different industries that are part of the resource supply chain.”

Loonie’s swoon reverses with oil rebound

There has been some recovery since oil prices bottomed in January – it’s now $40 a barrel instead of $26.

The loonie has also rebounded from its low, climbing from under US 69 cents in mid-January to above 77 cents on March 18. It closed Wednesday at 75.7 cents.

Finlayson previously forecast the Canadian dollar would languish between 67 and 75 cents for the rest of the decade.

He now thinks the mid-70s are more likely for the rest of this year if oil holds around $35 to $40, or possibly the lower 70s if oil prices weaken.

The loonie has lifted over the past two months as a result of the rise in oil prices as well as the weakening of the U.S. dollar, in part because markets now expect interest rates there to rise at a slower pace than previously anticipated.

The Canadian dollar is still much lower than it had been in recent years, and Finlayson said that’s good for many exporters.

“If you’re a widget manufacturer, or a farmer or a tourism operator here in B.C., a 75-cent dollar is very manageable from a competitive perspective.”

The fact the loonie has rebounded and stabilized after falling so steeply may also help shore up consumer and business confidence that had been rattled by the dollar’s dive, he said.

An improving economy could help Finance Minister Bill Morneau beat his targets. The budget projections assumed oil would average $25 through 2016, a number that looks pessimistic at the moment.

There’s also a $6 billion contingency built into the federal deficit.

Finlayson said all that suggests 2016’s actual deficit could come in lower, perhaps $20 billion.

Just Posted

Kindergarten kids from Evans elementary school in Chilliwack painted rocks with orange hearts and delivered them to Sto:lo Elders Lodge recently after learning about residential schools. (Laura Bridge photo)
Kindergarten class paints rocks with orange hearts in Chilliwack for local elders

‘Compassion and empathy’ being shown by kids learning about residential schools

Chilliwack potter Cathy Terepocki (left) and Indigenous enhancement teachers Val Tosoff (striped top) and Christine Seymour (fuchsia coat), along with students at Vedder middle school, look at some of the 500-plus pinch pots on Thursday, June 10 made by the kids to honour the 215 children found at Kamloops Indian Residential School. (Jenna Hauck/ Chilliwack Progress)
Chilliwack students make hundreds of tiny clay pots in honour of 215 Indigenous children

‘I think the healing process has begun,’ says teacher about Vedder middle school project

Dennis Saulnier rescued his daughters, two-year-old Brinley (left) and four-year-old Keegan, after their truck was driven off the road and into Cultus Lake on May 16, 2020. Reporter Jenna Hauck has been recognized by the B.C. and Yukon Community Newspapers Association for her story on the rescue. (Jenna Hauck/ The Progress)
Chilliwack Progress, Hope Standard staff take home 7 Ma Murray awards

Jenna Hauck, Eric Welsh, Jessica Peters, Emelie Peacock all earn journalism industry recognition

(Unsplash.com)
Protecting our elders: It’s up to all of us to look out for them

World Elder Abuse Awareness Day (WEAAD) is June 15

Image by Free-Photos from Pixabay
Webinar looks at sexual abuse prevention among adolescents

Vancouver/Fraser Valley CoSA hosts free online session on June 15

At an outdoor drive-in convocation ceremony, Mount Royal University bestows an honorary Doctor of Laws on Blackfoot Elder and residential school survivor Clarence Wolfleg in Calgary on Tuesday, June 8, 2021. THE CANADIAN PRESS/Jeff McIntosh
‘You didn’t get the best of me’: Residential school survivor gets honorary doctorate

Clarence Wolfleg receives honorary doctorate from Mount Royal University, the highest honour the school gives out

A million-dollar ticket was sold to an individual in Vernon from the Lotto Max draw Friday, June 11, 2021. (Photo courtesy of BCLC)
Lottery ticket worth $1 million sold in Vernon

One lucky individual holds one of 20 tickets worth $1 million from Friday’s Lotto Max draw

“65 years, I’ve carried the stories in my mind and live it every day,” says Jack Kruger. (Athena Bonneau)
‘Maybe this time they will listen’: Survivor shares stories from B.C. residential school

Jack Kruger, living in Syilx territory, wasn’t surprised by news of 215 children’s remains found on the grounds of the former Kamloops Indian Residential School

A logging truck carries its load down the Elaho Valley near in Squamish, B.C. in this file photo. THE CANADIAN PRESS/Chuck Stoody
Squamish Nation calls for old-growth logging moratorium in its territory

The nation says 44% of old-growth forests in its 6,900-square kilometre territory are protected while the rest remain at risk

Flowers and cards are left at a makeshift memorial at a monument outside the former Kamloops Indian Residential School to honour the 215 children whose remains are believed to have been discovered buried near the city in Kamloops, B.C., on Monday, May 31, 2021. THE CANADIAN PRESS/Darryl Dyck
‘Pick a Sunday:’ Indigenous leaders ask Catholics to stay home, push for apology

Indigenous leaders are calling on Catholics to stand in solidarity with residential school survivors by not attending church services

“They will never be forgotten, every child matters,” says Sioux Valley Chief Jennifer Bone in a video statement June 1. (Screen grab)
104 ‘potential graves’ detected at site of former residential school in Manitoba

Sioux Valley Dakota Nation working to identify, repatriate students buried near former Brandon residential school

The Queen Victoria statue at the B.C. legislature was splattered with what looks like red paint on Friday. (Nicole Crescenzi/News Staff)
Queen Victoria statue at B.C. legislature vandalized Friday

Statue splattered with red paint by old growth forest proponents

Police cars are seen parked outside Vancouver Police Department headquarters on Saturday, January 9, 2021. THE CANADIAN PRESS/Darryl Dyck
Vancouver police officer charged with assault during an arrest in 2019

The service has released no other details about the allegations

Most Read