December 10, 2007
Releases Fall Update:
The Honourable Tom Marshall, Minister of Finance and President of Treasury Board, today released the province’s fall financial update which forecasts an $881.8 million surplus for 2007-08, compared to a surplus of $261.2 million that was forecast when Budget 2007 was released in April.
Budget 2007 had forecast total revenues of $5,632 million, compared to the current forecast of $6,148 million, an improvement of $516 million.
Minister Marshall said the change is due to much higher oil prices, increased production from the offshore projects, higher royalties for the White Rose project and higher than expected mineral prices. The province's improved financial position over the past couple of years is also largely a result of the re-negotiated Atlantic Accord which finally allowed the province to benefit from oil revenues in a meaningful way. The additional monies allowed the province to address significant liability issues and, in turn, freed up money and improved interest rates.
On the expense side, the minister reported that program expenses are not expected to exceed $4,727.3 million at March 31, 2008, a reduction from the $4,839.4 million forecasted at Budget. Debt servicing expenses are also expected to be $5.8 million higher than originally forecast.
"The treasury of the province has been the beneficiary of unprecedented growth in world prices for commodities, especially crude oil. This temporary windfall from our non-renewable natural resources presents our province with a unique financial opportunity. Since 1949, it is only in the past several years our province has reported surpluses and none as large as this year’s," said Minister Marshall. "It is also important to acknowledge the Atlantic Accord 2005, which was successfully negotiated by Premier Williams, and its remarkable contribution to the overall improvement to the province’s fiscal position. Undoubtedly, long- term future prosperity for the province truly hinges on how effectively we capitalize on this opportunity today."
"We are indeed at a crossroads in our history; there are a lot of competing needs; however, we must not lose sight of the fact that our government, and indeed the people of the province, bear an enormous debt load of nearly $22,000 for every man, woman and child living in our province today. That is more than double the national average of $10,000 with the next highest province at $13,000," said Minister Marshall. "Our interest costs this year alone are approximately three quarters of a billion dollars and that is money that is not being spent on hospitals, nursing homes, schools, roads, affordable housing and policing, among other things."
"It is important to remember that the legislature provides authority to spend public money and government cannot spend beyond the authority provided by the House of Assembly. Approximately $345 million will be used to finance our infrastructure spending for the year, eliminating the need to borrow for that purpose," said Minister Marshall. "In addition to funding capital expenditures, any residual cash balance will be available to fund the province’s expected financial requirements related to the White Rose and Hebron projects. Once we account for the change in capital assets, the balance will reduce the province’s net debt."
Minister Marshall said at no point in its history has the province been in a better position to address massive debt and debt servicing costs. "We must balance long overdue debt reduction with sustainable program spending, continue to replace aging infrastructure, invest in our Energy Plan and strengthen rural regions," said Minister Marshall. "Every investment must reflect long-term sustainability and serve to strengthen and diversify our economy as we prepare for the day when oil and gas revenues are gone."
Minister Marshall said the overall economic outlook has improved since Budget time and reflects a bright future for the province. The GDP forecast for this year has been revised upward to 8.9 per cent from 8.5 per cent because of stronger domestic demand, as evidenced by solid gains in retail sales and housing starts. The province’s labour market continues to perform well with employment growth of 0.7per cent expected for the year. This results in the lowest unemployment rate since 1981. Personal income and disposable income are expected to post gains and housing starts which were expected to decline at Budget time are now expected to increase by 9.0 per cent for the year. Retail sales for 2007 are also are expected to increase significantly to 8.9 per cent, up from the Budget forecast of 2.5 per cent.
"It would be irresponsible of us to spend our way back into the untenable fiscal position we inherited four years ago," said Minister Marshall. "Even though the current financial position is strong, the demands on the treasury far exceed what can be immediately delivered.We must remain vigilant in our fiscal deliberations and use every means to ensure the long-term best interest of the province is protected and a solid foundation is laid for our children and grandchildren." The 2007-08 Fall Financial Update is available online for viewing at http://www.gov.nl.ca/fin/2007-08update.htm
2007 12 10 11:50 a.m.
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