Alberta an ‘island of optimism’ amid global uncertainty
Struggling global economy balanced by emerging market growth, ATB economist says
Some good news, for a change:
As global market volatility rises and investors become increasingly wary around the world, Alberta is shaping up to be an unexpectedly stable source of revenue, according to Todd Hirsch, senior economist at ATB Financial. ”Despite global uncertainty and the potential for a European default, Alberta remains an island of optimism,” Hirsch said Thursday, addressing a breakfast crowd in Edmonton.
“Chinese and Indian economies are still powering ahead. That will support these [current] oil prices.”
Hirsch was speaking at the Sutton Place Hotel in Edmonton about Alberta’s short-term business projections in light of a recent wage-increase survey released by the Hay Group, a national consulting firm. Oil and gas, along with the mining industry, are proving to be the most robust sectors, with wages in each expected to rise next year by 3.7 and 3.8 percent, respectively.
Hirsch is optimistic businesses can depend on a stable flow of natural resource revenue and afford to pay their workers more – provided there isn’t a sudden financial fallout. ”That’s always the dangerous part, that if everything does fall apart, like we saw in 2008 – if we see that precipitous drop in the price of oil – this province can’t sustain those kinds of wage increases.”
But he doesn’t see that happening any time soon, as a stagnant American economy will be balanced by growth in Asian markets. ”I predict it won’t be before June of next year that we’ll see interest rates go up,” he said. ”Since July and August [oil prices] kind of hovered in that $80, $90 mark, and at that range those prices are certainly good enough to support what’s going on here in Alberta.”
Arguably a bigger issue for the province is government spending, as the economist recently wrote in the Globe and Mail. In remarks following the morning address, he said Alberta is still hovering in a sort of “fool’s paradise,” where government is depending on skyrocketing land sales – in the liquids-rich Duvernay fairway, in particular – to paper-over its unsustainable spending habits.
“We’re going to have to make some tough decisions,” he explained, speculating that spending increases year-over-year may require the province to implement a sales tax. ”There’s a little bit of a false security, because we have nice public spending but very, very low taxes,” he said.