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Government Evaluating How Oil Price Drop Will Impact Budget

The following text was excerpted from the media outlet cited on March 10, 2020 and is provided to Noia members for information purposes only. Any opinion expressed therein is neither attributable to nor endorsed by Noia.

From VOCM News 

The Finance Minister says government is refocusing on what impact the major drop in oil prices will have on the upcoming budget, prior to releasing it.

Tom Osborne says at this stage, officials are well underway in budget preparation. In any budget decision, Osborne says it’s complex and they have to re-run the numbers and how it will impact things like job growth or employment numbers, spending, retail sales tax collection and more.

He says with the tumbling in oil prices since late last week, they need to re-evaluate where they are with that process, and if they can anticipate any longevity to the issue.

Osborne says that information will come from the eleven outside agencies they use.

He claims that as a government they’ve been good with oil price projections, however the coronavirus and OPEC flooding the market with oil was something no one could predict, as up until three weeks ago, they were above their mid-year projections.

Osborne says they budgeted $65 per barrel in the 2019 budget, and revised it to $63 per barrel in the Fall Fiscal Update, while the price was above $64 three weeks ago.

He says they were accurate in their projections, however these incidents obviously changed things, and it is concerning.

Meanwhile, with the price of oil plummeting, the need for diversifying the economy comes to light.

Osborne says they have been working at diversifying the economy, and it’s something that should’ve been done during the boom when the province was collection $24-billion in oil royalties.

He says unfortunately it wasn’t.

Osborne says they’ve worked hard at diversifying the economy in the tech, agriculture and aquaculture sectors and other areas. He compares it to planting trees, and says it can’t happen overnight.

He claims they’re already seeing signs of the impact with an increased population and number of jobs.

Opposition Parties Call for Osborne to Open Up About Province’s Fiscal Forecast

Meanwhile, the Opposition want the Finance Minister to open the books and show them what is in the fiscal forecast for the province.

Finance Critic, Tony Wakeham wants to know exactly what Osborne has done when talking to lending agencies and others about the heavy dip in oil prices.

Wakeham and PC leader Ches Crosbie have no intention of taking Osborne’s offer to reduce the interim supply bill to three-months if they will promise to not vote down the budget.

Crosbie says the budget is a confidence vote because of its importance, and they can’t give up their responsibility as the Official Opposition.

Wakeham adds that government needs to show the people of the province what the fiscal forecast looks like. He says they will share whatever information they get from Osborne as they aren’t interested in hiding anything from anybody.

He says its time for the people of the province to understand exactly where the province is, and what decisions need to be made.

NDP Leader Alison Coffin shared a similar sentiment.

She wants an overview on price predictions and how government has planned around the budget. Coffin adds that she is curious as to how Osborne has surveyed the situation, and how long it will last.

Coffin believes it would make sense for government to cut the interim supply bill back to three-months. However, Osborne is asking them to support a budget they know nothing about, making it hard for them to do their jobs as legislators representing the needs of the people.

However, she says she will not see the people of Newfoundland and Labrador go without pay because the Liberals are holding the Legislature hostage.

Oil Price Drop Not All Bad News, says Canadian Federation of Business.

The sudden and steep drop in the price of oil is not good news for the province, but it’s great news for consumers.

The Canadian Federation of Business’ Director of Provincial Affairs Vaughan Hammond says it’s not all bad news, but it is troubling for a provincial government already struggling with a huge deficit.

He says government now has to come up with a way to fill that gap.

Minister Osborne is already on record indicating the province will have to increase borrowing.

The problem, says Hammond, is that talk of reducing government spending usually has a dampening effect on consumer confidence.

He says government spends a lot of money on things that are not core services. He uses government’s investment in oil projects as an example. He questions whether we need to rely on oil equity and rely on oil royalties instead.