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Economic Uncertainty Ahead for Manitoba

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by Graham Lane

Published by the Winnipeg Sun, November 17, 2017

The Conference Board’s recent update provides a rather dismal outlook for Manitoba’s economy. The corporate think tank and economic soothsayer expects Manitoba’s economic growth to be only 1.3% in 2018 -with that meager gain mainly due to Hydro’s continued debt-funded money-losing expansion. Credit rating agencies have downgraded the Province’s credit worthiness while downside risks loom as consumers lose confidence and household savings rates fall.

Manitoba’s households and businesses have entered into a period of economic uncertainty. The elements of uncertainty include troubled NAFTA negotiations involving Canada, Mexico and a Trump-led United States. If an American tax reform proposal slashing taxes is passed, we will have an even stronger economic competitor down south. Beyond these challenges lies the Pallister Carbon Tax (front loaded to be 250% higher than Trudeau demands for 2018), Pallister’s refusal to help Hydro’s ratepayers, and his approaching 2018-19 provincial budget.

The worst outcome for Manitoba would have Trump taking the USA out of NAFTA – threatening Manitoba’s American exports. Pallister will likely fail to cut taxes in his upcoming budget, instead expect new havoc with his carbon tax and massive electricity rate hikes. The general economic picture suggests both higher interest rates and inflation, coupled with the risk of a lower loonie pushing import costs up. This just as America lowers their corporate taxes towards bringing more work back to the States. (Let us hope that the overdue drought doesn’t show up, damaging Hydro’s results and pushing future electricity rates even higher than already contemplated.)

A combination of negative events would further reduce disposable income for households while worsening the competitive situation of our industries and businesses. Manitoba’s employment base, now heavily skewed to an old-style, bureaucratic public sector, will shrink slowly, painfully and randomly given Pallister’s brutally ineffective small town management style. The lack of a transformative, performance focused model will eventually push deficits further up. Meanwhile, don’t count on marijuana to save the economy!

Recently, the consumer intervener to the Public Utilities Board’s (PUB) hearing of Manitoba Hydro’s massive rate increase application – the Consumers Coalition – tabled a submission from two of the Coalition’s experts. Drs. Wayne Simpson and Janice Compton’s thorough submission reviews Hydro’s rate application, concluding that if PUB grants what Hydro seeks the Province can expect materially lower disposable incomes for ratepayer households.

With economic pain likely ahead, Brian Pallister should realize that combining his new carbon tax with significant electricity rate hikes while interest rates rise will deliver serious challenges to an already vulnerable provincial economy further eroding private sector confidence. The pain will hit lower-income households and those heating electrically more than others. As to industry, firms relying on electricity as a production input will face further cost-push problems while retail and restaurant-hospitality firms will not gain from their customers’ lower disposable incomes..

Brian Pallister is no visionary or transformative leader. Expect his one-man show approach to bring more taxes along with random and superficial snips to spending here and there.

That said, what he needs to do in these uncertain times is to throw his carbon tax out the window and demonstrate leadership on the electricity rate hike file (a looming disaster for ratepayers largely brought on by the actions and inactions of government).

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