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Review of 2005-06

Mr. Speaker, before considering our detailed fiscal plans and expectations for 2006-07 and beyond, let us reflect on the year we are about to conclude.

A year ago, in Budget 2005, I laid before this House a plan which forecast a deficit of $492.5 million. Mr. Speaker, I am pleased to report today that I now expect the province will report a surplus of $76.5 million for the year 2005-06. This represents an improvement of $569.0 million. This surplus reflects a benefit from the Atlantic Accord 2005 of $322.3 million. Without the successful conclusion of negotiations by the Premier, the province would be facing a deficit of almost $250 million.

This surplus is fully consolidated and, as such, includes the projections of each and every organization included in the government�s reporting entity. During the 2005-06 fiscal year, our government made a decision to include the operations of Memorial University as part of the consolidated group, the last organization needed to complete the full consolidation process. These revised projections now fully report on the government�s stewardship of taxpayers� money.

The improvement in financial position from budget is predominately the result of increased revenues. The increase results from rising oil prices and the reclassification of 2004-05 Atlantic Accord revenues to 2005-06. Of the $545.6 million increase in revenues, $367.2 million is directly attributable to oil revenues and $133.6 million is due to the accounting reclassification. Because of responsible fiscal management, expenditures generally remained on track with the budget.

Forecast for 2006-07 and Beyond

Mr. Speaker, I am pleased to report that for the first time in our history the province is budgeting a surplus on a fully consolidated basis. The expected surplus of $6.2 million reflects revenues from our strengthened economy, including a growing resource sector, the benefits of the Atlantic Accord, reduced expenses related to debt servicing and the impact of the recent health accords and equalization arrangements, and includes substantial investments in the social and economic fabric of the province.

Beyond 2006-07, the benefits of a strong economy, the Atlantic Accord and strategic investments indicate surpluses in the foreseeable future.

We are particularly pleased that, as a result of responsible budgetary decision making, we will this year be allocating a significantly smaller percentage of our resources to service our debt, and our debt burden as a percentage of the province�s economic activity is significantly reduced. The province�s debt servicing expense as a percent of total revenues is now 13.7 per cent, a reduction from 23.3 per cent in 2003-04. Our debt-to-GDP ratio is expected to be 47.9 per cent, a reduction from 63.4 per cent in just three years. This is marvelous news and a testament to the effectiveness of multi-year fiscal planning. These positive indicators clearly demonstrate that, by continuing to walk a responsible fiscal path, we are leading Newfoundland and Labrador steadily upward from the quagmire of debt that has been holding us back for so long from economic sustainability and self-reliance. We are on the right track, we are making tremendous progress, and we are prepared to stay the course.

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