If it’s a trial balloon, it’s one worth paying attention to. Tuesday, Finance Minister Tom Marshall told The Telegram’s James McLeod that next year’s budget is likely to mark a return to the province having to borrow money to cover its day-to-day expenses.
“We haven’t done that for quite some time. We’ve been very, very lucky. Very fortunate,” Marshall said.
If we’re going out to borrow, though, that fortune seems to be suffering from a hiccup.
As a province, we are hugely dependent on the oil industry. In some years, oil revenues have made up as much as one out of every three dollars that comes in to the provincial treasury.
It makes us susceptible to dips in oil prices and changes in currency and rates of exchange, and it has meant that we rarely see budget predictions that wind up aligning with the financial facts. Sometimes the province grossly underestimates revenues, and occasionally, they’ve come up short.
Pin-the-tail-on-the-oil-price is a game many people have played and lost.
Marshall, meanwhile, was keen not to harm consumer confidence, saying that despite the return to debt financing, the province’s consumers still have far more in common with Aesop’s grasshoppers than they do with the ants.
“Because they have this income and because for four years in a row we lowered income taxes, people have got high disposable income, and they’re spending. So all our numbers are great,” he said. “I’m generally pleased with the state of the economy, especially given the fragility of what’s going on out there in the world economy.”
The interview showed something else: a window on how the provincial government looks at its structural dependence on offshore oil revenues.
Marshall said current problems on the Hibernia production platform have that facility dropping its production from 145,000 barrels a day to 45,000 barrels a day.
“That’s going to have a big impact on our numbers this year,” he said. “If the oil is in the ground, it’ll come out next year. It just won’t come out this year. It’ll just help next year and hurt this year.”
Missing in that short, sharp analysis?
The fact that oil is a non-renewable resource, and this province’s producing fields are generally in decline. There could easily be a time when the oil isn’t in the ground to come out of the ground this year or next.
And, unlike countries that have stockpiled non-renewable wealth in savings funds for the future of their citizens — last month, the funds Norway saved from oil production reached the point that every Norwegian is essentially a millionaire — our wealth has dwindled to the point that, while we’re still getting oil revenues, we’re going to go to the markets and borrow.
Not that long ago, Marshall made the pronouncement in the House of Assembly that people in this province are living in a golden age.
Looks like the golden age might come with some fancy lead shoes.