Throughout the economic crisis that Alberta is experiencing, Premier Rachel Notley has tried valiantly to reassure a worried public all will be okay. That a downturn in the oil industry is something the province has been through before and survived – and will again.
But the budget Ms. Notley's NDP government tabled this week should elicit sighs of concern from that same public. For if the numbers and graphs found in its pages suggest one thing, it is that this is not like other economic emergencies the province has faced.
Alberta may never again be the supercharged turbo that has powered our national economy for more than a decade. In fact, this budget may be historic in the sense that it will forever provide a signpost of when fiscal realities in the province were fundamentally altered; when the high standard of living that Albertans have enjoyed the past few decades began to, if not decline, stagnate.
Finance Minister Joe Ceci constantly refers to the generational nature of this recession. But unlike other budgets tabled during an extraordinary plunge in oil prices, ones that balanced the gloom with forecasts that pointed to hope and happiness on the near-term horizon, this one could not. It did not even try. Instead, it acknowledged reality: The recovery will be longer than previous ones. And what things will look like at the other end, no one quite knows.
It is a truth recognized by Peter Tertzakian, an energy economist with ARC Financial and one of the most trusted and respected voices on energy matters in the province. In a recent blog post, he acknowledged the alarming insecurity that surrounds Alberta's energy future.
He posited that meaningful cash will not start trickling back into the oil and gas industry until crude goes beyond $50 a barrel. However, the first major infusion of dollars will go to banks owed money and not into development. But even then, Mr. Tertzakian admits there is much uncertainty about how much business will actually be generated given that the energy industry faces a future in which people's consumption patterns are undergoing a major transformation. The massive influx of electric cars expected to hit the market over the next 10 to 15 years alone will significantly affect fuel demand.
When this recent oil recession hit, 17 major projects in the oil sands region were cancelled. Mr. Tertzakian says not a single one is likely to be revived even if oil rebounds.
By 2019, the provincial debt will be close to $60-billion, or higher. The government has admitted it will not attempt to put a legislative cap on the total amount of the liabilities that can be amassed. It would be pointless. The future is just too cloudy. Mr. Ceci talks about returning to balance in 2024. But that is eight years away. Who knows what the economic picture may look like by then? He might as well have said 2030.
Given the dimension of this decline, how could any government that is borrowing to pay operating expenses, that is tabling budgets that are in the red year after year, give raises to government workers? Alberta public sector employees have enjoyed an incredible run atop the salary heap in this country. It is now about to end in spectacular fashion. Who knows when nurses and teachers and a host of other government employees will see wage increases again.
Ms. Notley has talked about the need to change the boom-and-bust dynamics inherent in the province's commodity-based economy, and yet the budget contained precious little that suggests legitimate plans are under way to diversify. In fact, if anything was apparent, it was that the strategy to revive the economy depends on one thing: a recovery in oil prices. It is Plan A, Plan B and Plan C.
Not that anyone else could have tabled a document significantly better or smarter, or that offered a grander, more permanent solution to all that ails this province. In the circumstances, Ms. Notley and her government did about all they could. Slashing the public sector would have been a disaster, an unnecessary bloodbath that would have done relatively little to alter the reality of things.
Alberta is fortunate it has relatively little debt and so could absorb some of the punishment this recession is delivering by borrowing money. It is not an option it will continue to have. Looking ahead, the choices for the province only get more difficult.