JOHN’S, N.L.—It’s enough to make one of Canada’s most successful folk musicians sing the blues.
Bob Hallett, founding member of Great Big Sea, is now a businessman who invested big-time in a St. John’s restaurant and bar three years ago when Newfoundland and Labrador was leading national economic growth.
Today, it’s among other resource-reliant provinces such as Alberta and Saskatchewan that have borne the fiscal brunt since oil prices tanked.
“Business is probably off across the board between 25 and 40 per cent,” Hallett said of downtown St. John’s. “Watching oil sink below $30 a barrel is certainly making it harder to be optimistic.”
Newfoundland and Labrador depends on offshore oil earnings for about one-third of government revenues. Provincial finances have been kneecapped in the 18 months since the price of Brent crude fell from US$115 a barrel. It was trading Thursday at just under US$31.
Premier Dwight Ball, whose Liberals took majority power last fall after 12 years of Progressive Conservative rule, warned this week his province is facing a credit downgrade. He announced pre-budget consultations to discuss options but offered no concrete plans as the projected deficit for 2015-16 is expected to hit $1.96 billion—79 per cent higher than originally forecast.
Oil royalties that were predicted to reach $1.2 billion have been revised to less than half that due to lower production and the price collapse.
Hallett is among increasingly vocal critics who blame rampant spending and a lack of rainy day planning over the last decade. Ball, while in opposition, called it a reckless squandering of historic wealth.
“The city (of St. John’s) and the province expanded their budgets to a degree which was always questionable and now seems downright insane,” Hallett said in an interview.
“And now we’re embarking on a consultation process when everybody in Newfoundland could tell them in five seconds what the problem is: We’ve spent way beyond our means and we have no means of paying for this so we have to find ways to cut back.”
Pedro Antunes, deputy chief economist at the Conference Board of Canada, said he sees the same lack of foresight across the country.
“Provinces in general—and it’s not just Newfoundland and Labrador but across the board—have been very weak at managing their fiscal situation.
“When times are good we should be putting some of that stuff away. When times are bad, we should be having some ability to kind of help stimulate the economy.”
Former premier Paul Davis, now leader of the Opposition, said every cent of successive surplus budgets over the last decade was needed to upgrade hospitals and schools, pave crumbling highways, repair faulty bridges and the list went on.
“We had to get the province fixed before we started a savings account,” he said in an interview. “Any time you’re in government, even in good times, you’re facing a difficult challenge because if you’ve got $100 to spend, there’s people looking for $1,000 worth of programs or services.”
Realtor Glenn Larkin of Royal LePage Professionals 2000 said St. John’s is already in “slight decline” and could see its housing market fall five per cent or more if oil prices don’t recover in coming months.
It has been a dizzying reversal of fortune.
“We had the perfect storm a couple of years ago when we had all of these new projects starting up. Now we’ve got the perfect storm going the other way,” Larkin said of oil woes, low iron ore prices and the wind-up of major construction contracts.
Hallett said he’ll ride it out.
“You don’t get into the restaurant business unless you have a firm set. The reality is, it’s always a dodgy proposition but you’re in it for the long haul.”