Mixed reaction to Paul Davis's generations fund announcement
Newfoundland and Labrador Premier Paul Davis' recent announcement of a legacy fund has garnered criticism from a local economist and praise from the St. John's Board of Trade.
Davis announced a new generations fund Wednesday meant to offset the ups and downs of the price of oil and the effect that has on public funds.
The St. John's Board of Trade is throwing its support behind the premier's plan.
In an interview with Here & Now's Jonathan Crowe, president Kim Keating said the fund is something the group has been promoting for a while.
"We're actually pleased to hear about this," she said.
"If you believe that the best years are ahead of us in terms of oil and gas production, then we think it's time to start talking about such a fund."
Key strategy for diversification
Keating said the province needs to start positioning itself for growth opportunities down the road, and the generations fund is a good place to start.
"If this is done properly, this could be a key strategy for diversification for this province," she said.
"Just like Norway did many years back — they were able to take oil and gas revenues, invest it in non-oil and gas sectors outside of their country, which will actually help us weather the ups and downs of the cyclical nature of an oil and gas economy."
Keating said it is possible to start a legacy fund and pay down the province's deficit at the same time.
"It's not just about paying down the debt, and it's not just about this fund — it's both," she said.
"We do need to pay down the debt, but we also need to think about longer term investment opportunities."
Pay off debt, Locke says
Wade Locke, an economist at Memorial University of Newfoundland, said there are other options for governments who want to invest in the future, like paying down debt or investing in infrastructure.
"We have debt, if we put it into here, we can't pay off the net debt," he said.
"There's not unlimited amounts of funds. If you put it into one fund then there won't be enough for other things."
Locke said there are situations where a legacy fund may make sense, such as in Alberta or Norway. However, he thinks right now in Newfoundland and Labrador such a fund is not the right course of action.
"At that point in time they should have a close look at whether it makes sense in that particular context. Right now it does not make sense," he said.
"We're not prepared here in Newfoundland and Labrador to pay the same amount of taxes they pay in Norway."
Locke stands by the notion that the government would be better off focusing on paying off the deficit rather than putting money away in the generations fund.
"It's not a black and white solution, it's a matter of weighing out the options," he said.
"Leaving less debt for your children and grandchildren is as much of a legacy as leaving a heritage fund with an outstanding debt that's bigger."