N.L. deficit lower than expected by $231M but it's not because of oil prices

Newfoundland and Labrador's deficit is down but, unexpectedly, that's not because of oil prices.

The latest numbersprovided by the provinceshow the deficit is now projected to be about $595 million $231 million lower than forecast inthe 2021 budget.

Revenue has increased by $186 million, mostlyfrom higher-than-expected corporate income tax revenue, moremining and mineral tax revenue, and more sales tax revenue.

Though oil prices are higher than expected up from $64 USper barrel to $74 USper barrel production is down, and the net impact to oil revenue is just $23 million higher than expected.

Debt and deficit explained in one minute

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Let's talk about the d-words: debt and deficit. They are two words we hear a lot in Newfoundland and Labrador. But do you know the difference? For a one-minute refresher, watch this animated explainer video.

Expenses have also dropped by $45 million, mainly due to delayed municipal projects and vacancies in core government departments.

The province's borrowing requirement is $1.5 billion and net debt is $16.7 billion, both lower than expected due to the decreased deficit.

Finance Minister Siobhan Coady, delivering the province's fall fiscal update Wednesday, said it shows that the province is moving in the right direction.

"We have to continue to hold the line on expenses, invest wisely and purposely to achieve a stronger, more sustainable Newfoundland and Labrador," Coady said.

Coady said the province may consider doing pre-borrowing for next year to avoid increasedinterest costs for next year.

Real gross domestic product is forecastto grow by 5.8 per cent, slightly higherthan expected in this year's budget, due to increases in consumer spending, capital investments and mineral production.

Retail sales, housing starts,home sale units, capital investments andemployment are also all higher than expected.

Province still facing significant debt

But Coadyalso emphasized the magnitude of the provincial debt, noting the entire population is responsible for it.

"A child born in this province today owes debt for its birthright."

She said the government is reducing expenses by eliminating duplication of roles within government departments, bringing institutions like the province's 911 centre into core government and potentially selling off assets like Marble Mountain, among other things.

Watch the full fall fiscal update below:

Coady said the provincial governmentis bringing in an outside expert to look at the benefits and downsides of potentially selling off the Newfoundland Liquor Corporation, which recently announced record profits, and is also looking at streamlining some governmentservices by moving them online.

Shesaid the province has taken a hard line on expenditures, and pointed to balanced budget legislation she has introduced in the legislature as part of the strategy for eliminating the provincial deficit.

Still reliant on oil

The finance minister also reiteratedthe province's plan to continue building the oil and gas sector,though she shied away from the government's previous commitment to double oil production by 2030.

She pointed out that Newfoundland and Labrador is still heavily reliant on the oil and gas sector;the province relies on about $1 billion in oil royalties. She repeated government commitments to continue oil and gas production and market the province's oil globally, saying the industry will continue to provide opportunities for years to come.

A report released in September said 60 per cent of the world'soil and gas reserves needto to be left untouchedto meet climate goals set out in 2015.

A Fossil Fuel Non-Proliferation Treaty endorsed by climate scientists around the world including in Newfoundland and Labrador has called for an end to fossil fuel exploration and a transition to a green economy, based on the recommendations released last summer by the Intergovernmental Panel on Climate Change.

Coady said the province is "very well positioned" to diversify its economy through industries like the technology sector, but also said the province is trying to make its oil industry greener bydecreasingthe carbon content oftheoil it produces.

She also doubled down on comments made by Premier Andrew Furey after attending COP26,saying the oilproduced by the province has low carbon content compared withoil from other parts of the globe.

"We are very environmentally responsible in our oil and gas industry," Coady said.

Opposition says deficit lower than expected due to luck

PC opposition finance citric Tony Wakehamsaid the reduced deficit is good news, but said it's due to good fortune and outside factors like mineral prices, not the actions of the provincial government.

Wakehamsaid the lower expenditures are partially due to vacant positions within government, whichshould be filled as soon as possibleor eliminatedif they are not needed.

He also called on the government for more diversification of the economy to reduce dependence on oil and gas, but said the industry is still needed to generate revenue for the province and help pay down the provincial debt.

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