Feb 22, 2009

Not the usual sceptics


Scepticism about the provincial budget last week is extending beyond the usual sceptics.

BC’s Credit Union Central has published its take titled “The Bandage Budget” (read here) and it is raising some questions about assumptions being presented.

On the size of the possible deficit:

  • The projected deficit in 2009/10 is small in absolute ($495 million) and relative (0.25% of GDP) terms, however, there is a higher than usual risk associated with revenue projections during a recession.
  • Based on our own economic forecasts, a deficit of $1 to $1.5 billion or 0.6% of GDP in 2009/10 is the more likely outcome due to revenue shortfalls.

On employment and housing projections:

  • January 2009 employment is estimated at 2,267.6 thousand persons…compared to 2009 annual average of 2,303 forecast in the budget. The latest housing starts are equally well below the budget forecast.

On financial contingencies in the budget:

  • The buffer in Budget 2009 is among the smallest in recent years and is especially small when situated in the weakest economy in many years.

On future revenues:

  • Revenues in 2009/10 is not likely to be realized, particularly in the personal income, social services and property transfer taxes.

If the Credit Union economists are right in their forecasts, can we expect to see a second, more realistic budget within a few months of the May election? And should we start looking for words to rhyme with budget?