The 2019 budget season is almost done with only Ontario and Newfoundland and Labrador left to table their budget on April 11 and April 16, respectively. Then, all eyes will turn toward the three spring elections in Alberta, Prince Edward Island, and Newfoundland and Labrador. In this report, we briefly cover the main implications of these events for investors.
The Alberta Election (April 16th): The probable return to power of a conservative party
In 2017, Jason Kenney, a former federal cabinet minister in the Harper government, managed to unite Alberta’s Wildrose party and the Progressive-Conservative party into a single entity, the United Conservative Party (UCP). He was subsequently elected as its leader. Since the merger, the UCP has been leading polls by a wide margin over the NDP incumbent. While there has been some volatility in recent polls, the CBC poll tracker, a weighted average of all available polls, is forecasting the UCP’s probability of winning the most seats at 99%, with the party winning 49% of the votes versus 38% for the NDP. In other words, the UPC is on track to form a majority government.
Investors should take note of the following elements in the UCP platform:
- Balancing the budget in FY 2022-23, one year prior to the current government’s objective. The UCP intends to freeze operating expenditures at $49 billion to eliminate the deficit pegged at $6.9 billion (2.0% of GDP) in the third quarter fiscal update.
- Holding a referendum on Oct. 18, 2021, to remove equalization payments from the Constitution Act of Canada if the construction of a coastal pipeline is blocked and if Bill C-69, tied to the Environmental Impact Assessment Agency, is not repealed. From what we understand, the referendum would give the Alberta government the mandate to seek removal of non-renewable resources revenues from the equalization formula.
- Cancelling the $3.7-billion three-year contract to lease rail cars recently signed by the NDP government and bringing instead Alberta’s crude oil to global markets by increasingly relying on the private sector.
- Reducing the general business income tax rate from 12% to 8% over four years.
- Maintaining the existing $26.7-billion capital plan from FY 2019-20 to FY 2022-23.
The Prince Edward Island Election (April 23rd): the first ever Green government in Canada?
The Liberal party has been governing the Island since 2007. Since January, the Green party headed by Peter Bevan-Baker is leading Liberal Premier Wade MacLauchlan in the polls. A recent Mainstream research poll shows the following results: 36% for the Greens versus 32% for the Liberals. The Green party’s electoral platform includes an array of new spending measures (more funding for affordable housing ($5.5M), an increase in early childhood educators’ wages ($3.5M), an expansion of low-interest loans for fishers ($2.5M) and an expended dental coverage ($2.5M)). Total net new spending in the platform is estimated at $30 million. While this is higher than the $14 million (0.2% of GDP) surplus for FY 2018-19 estimated in the third quarter fiscal update, the Green party vows to present a balanced budget for FY 2019-20 and beyond.
The Newfoundland and Labrador Election (Before June 27)
Liberal Premier Dwight Ball has narrowed the election date to “before the children finished the school year,” which implies that the elections will be held before June 27. Also, Finance Minister Tom Osborne revealed last week that the budget will be unveiled on April 16. However, it is unclear if the budget will be approved by NL’s House of Assembly before elections are officially announced.