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Alberta 2003 Budget Making Alberta Even Better

Alberta 2003 Budget Making Alberta Even Better. Presentation to ESNA April 11, 2003. World Economy On The Rebound. Energy Prices Strong. WTI, US$/bbl. CDN $/mcf. Oil Gas 2003 $26.0 $4.68 2004 $22.0 $3.39 2005 $22.0 $3.46 2006 $22.0 $3.45. Oil Price (left scale).

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Alberta 2003 Budget Making Alberta Even Better

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  1. Alberta 2003 BudgetMaking Alberta Even Better Presentation to ESNA April 11, 2003

  2. World Economy On The Rebound

  3. Energy Prices Strong WTI, US$/bbl CDN $/mcf Oil Gas 2003 $26.0 $4.68 2004 $22.0 $3.39 2005 $22.0 $3.46 2006 $22.0 $3.45 Oil Price (left scale) Natural Gas Price (right scale)

  4. Inflation Volatile (% change) Alberta Canada

  5. Canadian Interest Rates Rising % U.S. Discount Rate Bank of Canada Overnight Target 3m T bill 10yr bond 2003 3.6% 5.6% 2004 4.4% 6.0% 2005 4.5% 6.0% 2006 4.5% 6.0%

  6. Alberta’s Economy • In 2003, economic growth is expected to be 3.6% - 3rd highest in the country after Newfoundland (4.7%) and New Brunswick (3.8%). • Alberta employment was up 2.6% last year, compared to 2.2% in Canada. • In first two months of 2003, Alberta’s employment increased 2.9%, compared to 3.3% in Canada. • Alberta’s unemployment rate was 5.3% last year, second-lowest in Canada, after Manitoba (5.2%). • Over the next three years, growth to average 3.3% per year, led by exports and investment.

  7. 2002: An Unusual Year For Alberta Medium Term Outlook: Alberta: 3.3% Canada: 3.0%

  8. Investment Strong Source: Statistics Canada and Alberta Finance

  9. Alberta Crude Oil Production Non-Conventional Conventional Source: EUB–ST-17, ST-3 and ST-39 Reports. December 2002 Conventional data is estimated

  10. Solid Employment Growth Forecast Employed, 000s

  11. Declining Unemployment Rate Forecast Source: Statistics Canada and Alberta Finance

  12. Alberta The Place To Be Alberta’s Medium Term Outlook: 19,500/yr Source: Statistics Canada

  13. Risks • Uncertainties related to the U.S. Iraq conflict are the most significant risks to the economic outlook. • A prolonged conflict or destabilization in the Middle East could weaken world economic growth and energy prices. • An early resolution to the conflict could produce a major reversion in energy prices. • The U.S. economic outlook is uncertain. A double-dip recession cannot be discounted. • A deterioration in the U.S. economy could put further upward pressure on the Canadian dollar. On the other hand, a major international crisis could strengthen the U.S. dollar as it tends to be a safe haven currency. • How the federal government intends to implement the Kyoto agreement is still uncertain. Alberta’s oil sands production and investment are particularly at risk.

  14. Fiscal Summary 2001-02 2002-03 2003-04 2004-05 2005-06 (millions of dollars) Actual* Forecast* Estimate Target Target Revenue 21,926 22,575 21,928 21,476 21,945 Expense Program 20,071 20,206 20,335 20,865 21,364 Debt Servicing 774 550 465 438 463 Total Expense 20,845 20,756 20,800 21,303 21,827 Net Revenue 1,081 1,819 1,128 173 118 Transfer from (to) Sustainability Fund - - (1,276) (209) 112 Capital Account - - 416 287 - Economic Cushion 1,081 1,819 268 251 230 Of which: Contingency Allowance 210 219 222 Other Requirements 58 32 8

  15. Sustainability Fund – How it Works Interest Earned on Sustainability Fund Available Surplus At The End Of Fiscal Year Resource Revenue Resource Revenue Over $3.5 Billion Sustainability Fund $3.5 billion to General Revenue Fund

  16. Sustainability Fund – How it Works General Revenue Fund Resource Revenue Drops Below $3.5 Billion Emergencies (i.e. flood, fires, droughts) Sustainability Fund Potential Natural Gas Rebates Resource Revenue Is High But Other Revenue Is Low

  17. Budget 2003 Priorities • Health and Wellness spending will increase by 7.2% in 2003-04, and then by 4.3% in 2004-05, and 5.8% in 2005-06. • Learning base program spending will increase by 4.7% in 2003-04, followed by 3.3% and 3.2% increases in 2004-05 and 2005-06 respectively. • Agriculture base spending will increase by $262 million to $808 million in 2003-04, and will average about $860 million per year for the next two years. • Additional funding will be provided for Supports for Independence benefit increases, children’s services, adults with disabilities, affordable housing, and protection and enhancement of Alberta’s environment.

  18. Capital Plan • The Capital Plan commits over $5.5 billion for capital spending over the next three years. Capital spending will double to an average of $1.85 billion a year • The Capital Plan includes $1.4 billion of alternative financing, which is assumed to start in 2004-05. Part of Capital Plan is pre-funded from the $910 million Capital Account established from the 2002-03 surplus. • Capital support to school boards, post-secondary institutions, health authorities, municipal governments, and other local authorities and organizations will total $3.2 billion. Spending on government-owned capital assets, including highways, will total $2.3 billion.

  19. Expenses 2003-04: $20,800 million

  20. Tax Advantage • Indexation of the personal income tax system to Alberta inflation will continue. Albertans have saved $130 million from indexing over the last two years, on top of the $1.5 billion in cuts in 1999 to 2001. • On April 1, the general corporate income tax rate was cut to 12.5%, the small business rate was cut to 4%, and income eligible for the small business rate was increased to $400,000. Alberta business will save $94 million this year, bringing the total savings since cuts began in 2001 to $435 million.

  21. Revenue 2003-04: $21,928 million

  22. Government Surpluses (Deficits) Source: Alberta Finance estimates as of March 19, 2003

  23. Budget Performance Index Source: Fraser Institute

  24. Aaa Aaa Aa1 Aa1 Aa2 Aa2 Aa3 Aa3 A1 A1 A2 A2 A3 A3 Baa1 Baa1 Baa2 Baa2 Baa3 Baa3 Government Credit Rating As of March 19, 2003 Source: Moody’s Investors Services

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