This is bad news for the government.
Only earlier this month, Finance Minister Cathy Bennett spoke at a St. John’s Board of Trade luncheon, and implored the St. John’s business community to keep investing in their companies and keep the economy moving.
But in the midst of an economic downturn and dire fiscal messages coming out of the government, business owners may need more than words.
“That’s like saying to consumers, OK consumers, you need to spend more money so we can grow the economy now,” said Richard Alexander, executive director of the N.L. Employers’ Council. “They’re not going to do it unless they see opportunity. That’s how things work.”
Representatives for the business community say everybody is waiting for the signals in this spring’s budget, which will be a defining moment for the nascent Liberal government.
The government is currently running a $2-billion deficit this year, and has a $2.4-billion deficit forecast for next year.
Premier Dwight Ball has said the government cannot secure the kind of long-term borrowing it needs, and as a result the province has racked up $2.7 billion in short-term treasury bill debt.
Moreover, while Ball and Bennett say layoffs and tax hikes are possible, it was only a few months ago during the election campaign that the Liberals were fretting about the damage increased taxes would do to the economy.
Those fears are real, Alexander said.
“I’ve had conversations now within the business community that have said they're considering — on a personal level — just selling their home if they could sell it, and just moving away,” he said.
According to the CFIB Business Barometer, entrepreneurs’ hiring intentions are “very weak” — only seven per cent of respondents plan to add full-time staff soon, whereas 20 per cent are expecting to cut workers.
Fifty-six per cent of CFIB members said tax and regulatory costs are their biggest cost constraint.
St. John’s Board of Trade chairman Des Whelen struck the most optimistic tone, saying many entrepreneurs are too focused on their own work to obsess over the government’s financial situation.
All the same, he said the theme of the Board of Trade work with members is about teaching them how to “bulletproof” their business.
Whelen said what the government does is somewhat removed from business, but if taxes start going up and services are cut, that has an impact.
“The St. John’s Board of Trade has, for a number of years, been talking about government spending, and how government needs to spend within its means,” he said. “Now more than ever, this is critically important.
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