Unfortunately, even though that’s what he’s saying, almost everything Oliver is doing suggests panic has already taken root in Ottawa.
On Thursday, Oliver surprised the country by announcing the federal budget would be pushed back sometime into April because of "market instability." In particular, rapidly falling oil prices that threaten federal and provincial government revenues.
"We need all the information we can obtain before finalizing our decisions," Oliver said in a speech Thursday to the Calgary Chamber of Commerce.
It wasn’t readily apparent what Oliver hoped to accomplish or what additional information he could collect by delaying. It would allow Ottawa a couple of additional months to allow oil prices to recover, even a bit, which would boost the federal treasury in the 2015-2016 fiscal year. That is important because Prime Minister Stephen Harper has promised to balance the federal budget come hell, high water or ridiculously low crude prices.
Even last month, with oil dropping quicker than the mercury in a December thermometer, Harper was resolute. "Even with dramatically lower oil prices, we will balance the budget," Harper was widely quoted as saying.
Oliver repeated this message in the new year, promising that, notwithstanding the downward pressure that lower oil prices is putting on government revenues, he would eventually deliver a balanced budget.
Harper and Oliver appear to be basing this on the belief, not completely unfounded, that in commodities, what goes down must ultimately come back up. Unfortunately, it’s unlikely oil will come up that much by April.
A very loud, very large chorus of voices from the economic community is now predicting prolonged low oil prices. The battle of wills between oil-producing nations which is at the heart of the global glut of oil that has driven down prices is quite likely to graduate into a war of attrition. Many analysts, including the Bank of Canada, do not see any immediate recovery for crude oil.
What then could Oliver be waiting for? Nobody really knows. And that sends a bad signal out to a country worried about Ottawa’s ability to navigate the economic storm that appears to be headed our way.
Much as in the fall of 2008, when the Conservative government talked boldly about tax cuts and balanced budgets even while the world was plunged into a deep recession, this government appears to be among the last to realize that its fiscal plans are going to come undone by forces clearly beyond their control.
No one blamed the federal government for the recession, but many expressed concern about the sluggish way Ottawa responded to the slowdown.
This time around, the federal government delivered an economic statement in the fall that promised billions of dollars in new tax cuts and credits, along with billions more in new spending. All made possible, we were told, because the federal budget would be balanced in the next fiscal year, and beyond.
Low oil prices have scuttled those plans. TD Bank Economics reported this week Ottawa will likely not balance its books in its next budget due to lost revenues from tax cuts and the drop in oil prices. Soon, the Parliamentary Budget Office is expected to weigh in, and it’s widely expected to cast more doubt on plans to balance the budget.
Oliver is right when he describes current market conditions as unstable. However, Oliver should be focused on saying and doing things that will help stabilize the markets while encouraging employers, investors, venture capitalists, financial institutions and the citizenry not to panic.
Unfortunately, a statement like "delay the budget" easily translates into "time to panic."
Oliver’s decision to wait will also cause more than a little grief at the provincial level. The provinces generally require a fair bit of information from Ottawa’s budget to set their own spending plans for the upcoming fiscal year. This includes the timing and rules around infrastructure programs, transfer payments and the level funding for cost-shared programs.
Attempting to budget without that information will set the stage for a year of shock waves, as provinces scramble to adjust their plans after Oliver finally delivers a budget.
Oliver may have been looking for a respite from the normal pre-budget tension by delaying the tabling of the federal budget, hoping for a couple of additional months for oil prices to stabilize, if not rise, along with predictability on fiscal matters going forward.
What he may find is that the one thing he fears most now — instability — is the only thing he will find in greater quantity come April.
Original Article
Source: winnipegfreepress.com/
Author: Dan Lett
No comments:
Post a Comment