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Premier Beaton Tulk
Speaking Notes

St. John�s Board of Trade � Outlook 2001

Wednesday, January 17, 2001
Newfoundland Hotel, St. John's


INTRODUCTION

  • Good morning. It is a pleasure to participate in the Board of Trade�s annual Outlook conference. Let me say that the outlook for Newfoundland and Labrador in 2001 is very good indeed.

  • I�d like to begin this morning by placing my remarks in some context. I don�t think anyone here today would disagree that this province has come a long way since the devastation of the northern cod moratorium in 1992.

  • In the years since, we have seen a rebounding in our economy. Our Gross Domestic Product numbers are evidence of that. Real GDP growth of 4.7 per cent is projected in 2000. This will be the third straight year of strong growth, following 6 per cent in 1998 and 1999.

  • Employment performance last year was not as encouraging as GDP. Employment fell slightly in 2000, dropping by 0.1 per cent.

  • This decline, however, comes on the heels of very strong employment growth in 1999. In fact, employment advanced by close to 10 per cent in the previous three years.

  • Furthermore, growth in employment since 1997 has been on par with the national average.

  •  The value of exports is estimated to have grown to a record $8.2 billion in 2000, accounting for the bulk of overall economic growth for the year. The value of manufacturing shipments will exceed $2 billion for the first time ever, and capital investment will exceed $3 billion for the second straight year.

GLOBAL AND NATIONAL ECONOMIES

  • Of course, our economy is affected by global and national economic performance. This is particularly true for our export-oriented industries.

2000

  • The International Monetary Fund is projecting global real economic growth of 4.7 per cent in 2000. Similarly, growth in both the United States and Canada is projected to be strong, with growth of 5.2 and 4.7 per cent respectively.

  • Buoyant economic conditions in major markets like the United States benefit export-oriented industries locally. For example, year-to-date provincial newsprint shipments in 2000 are up by 13.5 per cent and iron ore production is up by 27.5 per cent.

  • Provincial exports, in general, are expected to grow by about 33 per cent to $8.2 billion in 2000. Oil production accounts for about one-quarter of total value.

2001

  • In 2001, economic growth is expected to slow. In October 2000, the IMF was projecting global economic growth of 4.2 per cent next year, 3.2 per cent for the U.S. and 2.8 per cent for Canada.

  • Although 2001 is lower than 2000, in an historical context it is still expected to be a very strong year.

  • While growth is continuing, recent weaknesses in the U.S. auto manufacturing, home construction and newsprint industries may affect demand for local mineral, lumber and newsprint inputs.

 

PROVINCIAL ECONOMY

  • Provincially, economic projections are favourable. On average, private sector forecasters are projecting real economic growth of 4.4 per cent in 2001.

     

  • This rate, if realized, will place Newfoundland and Labrador among the lders in the country for the fourth straight year.

  • Job growth is expected to resume in 2001. Employment growth, based on private sector and provincial forecasts, is expected to result in a record high of over 207,400 person years.

  • Export growth will be strong, driven mainly by increased crude oil production. Exports in other resource industries are expected to remain on par with 2000.
  • Offshore oil production should grow substantially with Terra Nova scheduled to come on stream in the second quarter of 2001.

  • Subject to approval of the development plan application, production could begin at Port au Port.
  • And on Monday, White Rose partners Husky Oil and Petro Canada filed a development plan with the Canada-Newfoundland Offshore Petroleum Board. If all goes well with that process, First Oil could occur by 2004. This is good news for the province as it will add 75,000 to 100,000 barrels of oil per day to our offshore production.

  • In addition, the recent awarding of the front-end engineering design contract for White Rose to Maersk/Seabase of St. John�s is a prime example of the heightened participation of local business in the offshore oil industry.

  • Fisheries landings are expected to remain on par with 2000. While crab and cod quotas could continue to decline below 2000 levels, these declines should be offset by increased turbot and flounder landings.

  • Non-resident tourism is expected to continue to remain strong, driven by the Marconi Centennial celebrations and increased cruise ship visits.

  • The province will use the Marconi celebrations as an opportunity to promote Newfoundland and Labrador�s developments and capabilities in the information technology sector. The keynote event will be an industry-based international IT communications conference, tentatively scheduled for September.

  • Industry surveys show that IT employment continues to grow by 25 per cent annually. Employment in call centres, in particular, could grow by approximately 65 per cent in 2001 as Convergys continues its hiring and centres open in Gander and Corner Brook, operated by the Hospitality Concepts Inc. and the ICT Group respectively.

  • The Civic Centre will be completed by the spring of 2001, and the St. John�s Airport expansion and Trans-Labrador Highway projects will near completion next year. Construction of The Rooms will be in high gear at that time as well.

  • The mining industry could show further diversification. A second gold mine � Hammerdown � is expected to open near Springdale, and development of the Duck Pond copper and zinc deposit near Buchans is expected to begin.

  • The province will begin to actively promote the establishment of a silicon smelter in Labrador in 2001. Labrador West has a rich silicon resource base, inexpensive power, the necessary industrial infrastructure, a favourable business climate and a family-oriented lifestyle.

  • Should these efforts pay off, a silicon smelter could create up to 130 jobs and could serve to encourage further investment in this mineral rich area of Labrador.

 

TAX POLICY

  • As you can see, Newfoundland and Labrador�s economy is on the right track. Government�s challenge is to maximize the benefits of our growing economy so that all regions and all residents share in the opportunities this growth presents.

  • One of the ways Government is meeting this objective is through income tax reductions.

  • A three-year personal income tax reduction program resulted in savings of $42 million for taxpayers in 2000 and will save taxpayers $60 million in 2001. Combined with tax reductions announced by the federal government, over the three-year period $400 million will be put back in the hands of Newfoundlanders and Labradorians and into the economy of the province.

  • These tax reductions are broadly based, but are good news particularly for middle-income earners who contribute substantially to tax revenues. For example, a single taxpayer earning $30,000 a year will save $440 in combined federal and provincial personal income taxes in 2001, while a family of four with one earner making $30,000 will see combined total savings of $730 in 2001.

  • Cumulative tax cuts in 2000 and 2001 will add up to $799 for a single taxpayer earning $30,000 a year and $1,523 for a family of four with one earner making $30,000.

  • This will have a direct impact on the economic growth of the province. One indicator of this impact is retail sales. During the first nine months of 2000 sales reached $3.3 billion, up 7.4 per cent over the same period in 1999.

  • Government has moved on other tax initiatives favourable to business. Our corporate income tax regime is among the most competitive in the country.

  • In the fall session of the House we followed through on our commitment in the 2000 Budget to further reduce the payroll tax. An amendment to the Health and Post-Secondary Education Act increased the payroll exemption threshold for employers in this province from $150,000 to $400,000 in 2001.

  • This is the third year in a row that Government has increased the threshold exemption, dropping more than 1,800 businesses from the tax roll. Approximately 94 per cent of all businesses in this province do not pay the tax.

  • Government will continue with its commitment to eliminate the payroll tax over time.

  • Another recent measure Government has adopted in support of small business is our venture capital tax credit program. The Direct Equity Tax Credit and the Labour-Sponsored Venture Capital Tax Credit are designed to stimulate the growth of small business and new jobs in expanding areas of the economy, with a particular focus on the needs of rural Newfoundland and Labrador.

  • These programs are complementary and respond to the demand of capital requirements for businesses at various stages in their development. And, they do so by using the tax systems of both the federal and provincial governments.

  • These programs are a direct result of Government�s Jobs and Growth consultation in the fall of 1999 and address the challenge small businesses face in raising investment capital, particularly in rural Newfoundland and Labrador.

FISCAL OVERVIEW

  • As Finance Minister Lloyd Matthews reported to the House of Assembly in December, the province�s financial performance for the 2000-01 fiscal year remains on target with our budgeted deficit of $34.7 million, which included a contingency reserve of $30 million.

  • Individually, some revenues, such as royalties from the offshore, are expected to increase from our budget forecast, while others, such as gasoline tax, may decrease. Increased royalties reflect a higher than anticipated world oil price, while decreased gas tax results from the same reason, higher prices result in lower consumption. Other revenues remain stable and are expected to be on target with our budget projections. The final revenue picture will not be known until we get closer to our fiscal year end.

  • The details of our projections for the fiscal year 2001-2002 will have to wait for the Budget in the spring, but I can say that Government is committed to a program of prudent and responsible fiscal management which will allow us to reinvest in public services like health care, education and social services. The Budget process is ongoing and we are continuing to evaluate our spending priorities.

CONCLUSION

  • While it would not be appropriate for me to anticipate the results of the budgetary process, I can share with you our overarching objectives.

  • We intend to maintain a disciplined program of responsible fiscal management and prudent spending.

  • We are committed to further tax relief, as it is fiscally responsible to do so.

  • We must strike the right balance between investing in key areas of our economy and social programs, and maintaining a sound financial position.

  • We have taken significant steps forward in recent years and we must be careful to make choices and take actions that will maintain our momentum.

  • Thank you and God Bless.

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