BUDGET PLAN

Budget 2000

BUDGET PLAN

1999 Economic Review

Mr. Speaker, in 1999 Newfoundland and Labrador had the fastest growing economy of any province for the second consecutive year, with real GDP rising about 5.3%. Together with 1998, this is the best consecutive two years of economic growth we have recorded since 1973-74.

Total exports, led by the oil and fishing industries, reached $5.7 billion, representing a gain of 13.1%.

Hibernia produced over 36 million barrels of oil with an estimated production value in excess of $1 billion. Oil and gas exploration increased from $67 million in 1998 to $250 million in 1999.

The value of fish landings rose 36% as a result of higher catches of crab, shrimp and groundfish. There was a 27% increase in newsprint shipments reflecting recovery from the previous year. The value of manufacturing shipments grew 13.1%.

Tourism, anchored by Soiree �99, continued to perform well, bringing non-resident visits to their highest level ever.

We had our third consecutive year of strong retail sales, with retail trade expanding 6.9%. Investment reached a record level of $3.4 billion, an increase of 21%.

Our growing economy led to strong employment growth of 5.5% and brought employment to its highest level since 1990. This rate is double the national pace and the strongest growth of any province.

2000 Economic Outlook

Mr. Speaker, real GDP is forecast to again show significant growth in 2000, increasing by 4.7%. We should lead all provinces in economic growth for the third consecutive year. Increased exports and tourism, as well as personal income tax cuts and public sector spending, will be catalysts for growth.

Oil production should increase to reach its estimated annual peak production of 50 million barrels. Development of the Terra Nova oilfield this year, as well as delineation drilling at other offshore fields will contribute to growth.

Fish landings should be on par with 1999, with markets expected to remain strong for most species. Iron ore prices are expected to rise, and both the value and volume of mineral shipments will recover. The volume of newsprint shipments should rise to near record levels, with prices strong internationally.

Tourism should experience its best year ever with the Vikings! 1000 Years celebration.

Retail sales are expected to be up a further 5.1%, brought on by employment and wage gains, as well as $60 million in personal income tax cuts; an $18 million federal cut and a $42 million provincial cut.

Employment should grow 2.8%, with the unemployment rate falling another full percentage point, for a cumulative decline since 1996 of almost 3.5 points.

1999-2000 Fiscal Performance

Mr. Speaker, in the early years of this administration our economy struggled to adjust to the impact of the groundfish closure. Despite this setback, over our first three budgets we recorded the best fiscal performance for any three year period of any government since Confederation. Each year we met and bettered our deficit targets.

I am pleased to report that we will again meet our fiscal target by recording a modest deficit of $32.8 million for 1999-2000. Prior to this government taking office, the Province had not recorded a deficit this low since 1965-66. Large annual deficits were the norm in the intervening period, with deficits in excess of $100 million in 22 of those 30 years.

Since taking office, we have recorded the best fiscal performance for any consecutive four year period since the early 1960s. Our sound performance has not gone unnoticed. In 1998 and again in 1999 the Province received upgrades to our credit rating from two agencies. These upgrades are an expression of confidence in the fiscal and economic outlook for this Province.

The modest deficit, however, does not tell the whole story. We could have recorded a significant surplus of $166.2 million. This was due mainly to higher than expected current account revenues of $173.3 million. While recording a large surplus may have been a notable event in the short term, we are managing the finances of this Province for the long term and for the future sustainability of our social programs and our economy.

We will use our fiscal flexibility to defer certain revenues to 2000-01 to assist in achieving a satisfactory financial position and to make a number of strategic investments before year end.

Strategic Year End Investments

Of the $70.4 million allocated to strategic year end investments, $48.3 million, or over two thirds, is dedicated to health care, our number one priority. To assist municipalities, an additional $5 million will be put into the debt relief program. Another $11.2 million will go to enhancing education, $1 million to library books, $500,000 of a $1 million commitment to the School Children's Food Foundation, $400,000 to heritage conservation and $4 million to other initiatives.

2000-01 Fiscal Outlook

Mr. Speaker, for 2000-01 our priorities are the priorities of the people of this Province who spoke during the consultations on the Province's tax system held by the Premier's Advisory Council on the Economy and Technology, the Jobs and Growth consultations chaired by my colleague the Minister of Development and Rural Renewal and the recent pre-budget consultations. We received sound advice. Mr. Speaker, the priorities of the people are clear.

We were asked to control the deficit so social programs and public services can be sustained. We have delivered this kind of sound and prudent fiscal management every year and this year will be no exception. The deficit target for 2000-01 has been set at $34.7 million, which includes the $30 million contingency reserve we have maintained each year against unforeseen events.

People have told us that the average family cannot afford to pay higher taxes. This administration brought taxes down for the first time since Confederation with the $105 million HST cut in 1997. Taxes were cut again with the announcement last November that Provincial personal income tax would be cut by $175 million over three years, commencing on January 1, 2000.

People have told us that their priorities for any extra fiscal flexibility are straightforward. They want government to invest in health care, followed by education and helping those in need. Mr. Speaker, this is exactly what this budget does.

This budget also has another focus. We have listened carefully to the consultations held around the Province to renew our Strategy for Jobs and Growth. In this budget, we will be taking steps to respond to some of the things we heard.

A healthy fiscal position, combined with competitive taxes and a growing economy, is the only sure way to have adequate and sustainable social programs and public services. This first budget of the new century sets the course to achieving this goal.

Provincial Pension Plans

Since 1998 we have been contributing special payments to public sector pension plans, which by the end of 2000-01 will amount to $548 million. Further payments are required before government will have fulfilled its current obligations. The unfunded liability in all our public sector pension plans stands at $3 billion. We have committed to make additional payments of $116 million a year to reduce this obligation. These payments are necessary to ensure the pension benefits our employees have paid for are protected.

With the actions we are taking, pensioners can be confident they will continue to receive 100% of the benefits they paid for. Any increase in pension payments or indexing of the plans would require more payments by government and plan members. The present pension plans simply cannot afford any additional obligations for higher payouts at this time. We are open to discuss shared solutions with stakeholders.

for the health of our people, for the health of our economy

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