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.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

(Black Press file photo).
Multiple stabbings at Comox bush party

Three youths hospitalized after an assault near Highland Secondary

Cumberland is surrounded by trees — and logging. Its council is supporting a call to stop old-growth logging in vulnerable areas of the province such as Fairy Creek. Photo by Mike Chouinard
Cumberland backs request to save B.C.’s old-growth forests

The Comox Youth Climate Council is asking local governments to take stand

Danita Bilozaze and her daughter Dani in Comox. Photo by Karen McKinnon
Valley woman makes historic name change for truth and reconciliation

First in Canada to be issued new passport under the TRC Calls to Action

For Leela Harrop, the recent death of her brother Raju Tiwari pushed her to sign up for the vaccine. Photo supplied
Comox woman on fence books vaccine due to brother’s death

Leela Harrop says she did have issues with signing up online this past week

Most categories of crime held steady from year to year in Cumberland. File photo
Cumberland crime numbers hold steady year to year

A few categories had notable changes but many were similar to 2019

Vancouver resident Beryl Pye was witness to a “concerning,” spontaneous dance party that spread throughout social groups at Kitsilano Beach on April 16. (Screen grab/Beryl Pye)
VIDEO: Dance party erupts at Vancouver’s Kitsilano Beach to the dismay of onlookers

‘It was a complete disregard for current COVID-19 public health orders,’ says Vancouver resident Beryl Pye

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

The following is a list of restaurants offering take-out and patio dining. ADOBE STOCK IMAGE
List of Comox Valley restaurants offering take-out, patio dining options

Restaurants in the Comox Valley continue to adapt to government-imposed restrictions in… Continue reading

Selina Robinson is shown in Coquitlam, B.C., on Friday November 17, 2017. British Columbia’s finance minister says her professional training as a family therapist helped her develop the New Democrat government’s first budget during the COVID-19 pandemic, which she will table Tuesday. THE CANADIAN PRESS/Darryl Dyck
B.C. finance minister to table historic pandemic-challenged deficit budget

Budget aims to take care of people during pandemic while preparing for post-COVID-19 recovery, Robinson said

Each spring, the Okanagan Fest-of-Ale is held in Penticton. This year, as a result of the COVID-19 pandemic, the festival will not be held. However, beer is still available. How much do you know about this beverage? (pxfuel.com)
QUIZ: How much do you really know about beer?

Put your knowledge to the test with this short quiz

Lord Tweedsmuir’s Tremmel States-Jones jumps a player and the goal line to score a touchdown against the Kelowna Owls in 2019. The face of high school football, along with a majority of other high school sports, could significantly change if a new governance proposal is passed at the B.C. School Sports AGM May 1. (Malin Jordan)
Power struggle: New governance model proposed for B.C. high school sports

Most commissions are against the new model, but B.C. School Sports (BCSS) and its board is in favour

Pall Bearers carrying the coffin of the Duke of Edinburgh, followed by the Prince of Wales, left and Princess Anne, right, into St George’s Chapel for his funeral, at Windsor Castle, in Windsor, England, Saturday April 17, 2021. (Danny Lawson/Pool via AP)
Trudeau announces $200K donation to Duke of Edinburgh award as Prince Philip laid to rest

A tribute to the late prince’s ‘remarkable life and his selfless service,’ the Prime Minister said Saturday

B.C. homeowners are being urged to take steps to prepare for the possibility of a flood by moving equipment and other assets to higher ground. (J.R. Rardon)
‘Entire province faces risk’: B.C. citizens urged to prepare for above-average spring flooding

Larger-than-normal melting snowpack poses a threat to the province as warmer weather touches down

Vancouver-based Doubleview Gold Corp. is developing claims in an area north of Telegraph Creek that occupies an important place in Tahltan oral histories, said Chad Norman Day, president of the Tahltan Central Government. (THE CANADIAN PRESS/HO)
B.C. Indigenous nation opposes mineral exploration in culturally sensitive area

There’s “no way” the Tahltan would ever support a mine there, says Chad Norman Day, president of its central government

Most Read