Move over, Alberta – British Columbia is the economic powerhouse of the country now.
On Tuesday, B.C.'s NDP government introduced its second full-fledged budget since taking power in 2017, and it includes lots of money to spread around while remaining balanced. In fact, barring some economic catastrophe, it will be the province’s seventh straight budget to post a surplus.
B.C.'s partners in Confederation can only look on in envy.
The province is forecast to lead the country in economic growth in 2019 and 2020, at 2.4 per cent and 2.7 per cent, respectively. (It has led or been near the top of this category over the past several years.) It had the country’s lowest unemployment rate at 4.7 per cent in 2018, and is forecast to be tops in that category again this year. Average wages increased 4.1 per cent last year, and it’s anticipated B.C. will again emerge the winner in that division in 2019.
Oh, and the province is on the cusp of seeing a $40-billion liquefied natural gas project get developed – with more than half of that amount staying in B.C. in the form of jobs and other ancillary benefits. And that doesn’t include more than $23-billion in taxes, royalties and other revenue that will flow into government coffers after production begins.
That strong economic health allowed an NDP government to spend generously in all its favourite areas in this budget: a $1-billion increase for health care; a child-benefit program that will be worth $28,000 to a family with one child until the age of 18 ($46,800 to a family with two children, and $61,200 to one with three); the elimination of interest on student loans. Over all, there is a $2.5-billion increase in spending over last year.
That’s a lot of cash. And perhaps lots of votes, too.
And the NDP has done it while maintaining a AAA credit rating and keeping the province’s debt-to-GDP ratio the second lowest in the country.
It doesn’t get much better. B.C. is now becoming comfortable at the top of the economic heap in this country, a spot that once seemed perennially reserved for its neighbour. Not any more. And without a new pipeline, it could be some time before Alberta is there again.
Of course, this doesn’t mean things couldn’t unravel on the West Coast, where for many young people the dream of owning a home like their parents did died a long time ago.
A suite of measures brought in by the NDP to cool the market have had an effect, although it’s difficult to say how responsible it is for the drop in sales and prices Metro Vancouver has witnessed over the past 18 months. The other development that has been a factor is the new mortgage stress test rules that were brought in by the federal government just more than a year ago.
In Greater Vancouver, the benchmark price for single-family homes has fallen, on average, more than 7 per cent in the past six months. Although there have been plenty of home sales that represent drops of 20 per cent or more in value over 2017.
You would think an NDP government that got elected, in part, on its commitment to restore sanity to the housing market would be thrilled with the turn of events. Except this government, as with the previous, Liberal administration, has come to rely on revenue from that same housing sector. The last thing the government wants is anything that resembles a sharp downturn, which would severely damage the broader economy as well.
It would seem the NDP is not anticipating that. In fact, all its revenue projections from its various housing-related taxes suggest it expects the housing market to make a comeback.
“I don’t believe we’re going to see a crash,” B.C. Finance Minister Carole James told me on Tuesday.
No one is predicting that. However, other things keep Ms. James awake at night, elements over which she has little control. A slowing Chinese economy. The latest challenges emanating from a White House that has become as unpredictable as any in recent history. The effects of Brexit on the European Union.
“It’s the outside global factors that I worry about,” Ms. James said. “We’re a small, open economy that can be impacted by global events that we have no control over.”
Finance ministers generally never stop worrying. Still, there isn’t one in Canada who wouldn’t change places with Ms. James right now. B.C. is booming and could be for the foreseeable future.