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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