Income and employment growth strong in budget update, but housing starts have cratered

Newfoundland and Labrador's fall fiscal update shows income and spending are up, oil production is down — and housing starts have plummeted.

The numbers in the provincial government's update — a check-in at the middle of the fiscal year on how budgetary projections measure up to reality — are largely positive, including a slight improvement in the deficit. 

Finance Minister Siobhan Coady touted declining inflation — at 3.5 per cent, tied for second-lowest in Canada — and increasing household spending — up 4.4 per cent, outpacing inflation — as positives, but acknowledged residents are still struggling with high housing and food costs.

"It's difficult for a lot of people, and I'm not underestimating how challenging it is," she said. "That's why we've put $140 million in this year's budget toward supporting social housing, and you've seen some, you know, fairly significant investments."

With a fiscal update delivered on Halloween, Coady didn't have any treats to hand out as happened last year, with the announcement of one-time cost-of-living relief cheques of up to $500. Last year's update featured an unexpected surplus on the back of higher oil revenues, said Coady.

"Last year we had extra money from the oil and gas industry. This year we're not seeing that, therefore we are not able to provide the same cheque that we did last year," she said.

WATCH | Here's why you won't get any cost-of-living cheques this year from the N.L. government: 

No $500 cost-of-living cheques this year. Here’s why

1 year ago

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Last year, most taxpayers in Newfoundland and Labrador received $500 cost-of-living payments from the provincial government. Finance Minister Siobhan Coady, in a fiscal update on Tuesday, said the province is showing good signs — low unemployment rates, positive consumer spending — and help has already been provided.

The projected budget shortfall is now $154 million instead of the $160 million forecast in the spring, thanks to a $204-million increase in revenue largely in forfeitures from oil companies abandoning offshore oil prospects.

Government expenses are also up, to the tune of $198 million, mostly due to higher wages following new collective bargaining agreements and the effect of higher interest rates on debt servicing.

And the province's borrowing requirement is also up, by $700 million, and net debt is up nearly a billion dollars, from $16.2 billion in the budget to a forecast $17.1 billion.

WATCH | The difference between debt and deficit:

Debt and deficit explained in one minute

4 years ago

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Let's talk about the d-words: debt and deficit. They are two words we hear a lot in Newfoundland and Labrador. But do you know the difference? For a one-minute refresher, watch this animated explainer video.

Progressive Conservative Leader Tony Wakeham criticized the increased borrowing, especially because it's being done, in part to add $130 million to the province's "Future Fund" — sort of a provincial rainy-day fund established by the government last year.

"To me, it's like taking an advance on your credit card so that you can open up a savings account. I'm not sure that that's great fiscal policy," he said.

Coady said oil production has been less than expected — about $88.8 million less in revenue than forecast — because of the Terra Nova's delayed return to production as well as lower production in other offshore fields.

Housing starts down

While many economic markers in the update have shown improvement over 2022 — including retail sales, capital investment and employment — one glaring exception is housing starts. The forecast of 899 starts in 2023 represents a 34.8 per cent drop from last year's 1,379.

Coady blamed high interest rates and the effects of inflation on the cost of supplies and labour. Wakeham blamed the provincial government itself and said the effects have been seen in the tent protest outside Confederation Building.

"We've seen in the last two weeks the government has no strategy for housing and housing starts," he said.

NDP Leader Jim Dinn said the fiscal update was heavy on financial measurements of the economy — less so on the human costs.

"All I'm hearing about in the House is 'let's look at the budget document, Budget 2023,'" he said.

"Let's look at the human document, the people who are still without supports, the middle-class families who are struggling, who are probably just one paycheque away from being homeless. Let's talk about the people who are still stuck in shelters which are no longer emergency shelters but have become long-term care facilities.… Those are the things that are important to me."

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