There are times when you wonder why anyone pays attention to a crowd like the Atlantic Province Economic Council.
They showed up in St. John’s on Monday to tell us that the major major projects that have been driving the economy are winding down.
And they charged $230 to anyone who wanted to show up for that insight or for the other one quoted in the CBC online story: the “party had to end.”
Penetrating Insight into the F**king Obvious.
Meanwhile, Goldman Sachs is warning that western economies are in for a rough time as public debt grows at the same time that population is aging rapidly. That is absolutely true.
In Newfoundland and Labrador, we are in for a local version of that Goldman Sachs thing. Our public sector debt is already running at 300% of our non-oil government income. That’s before the provincial government plans to add another $5.0 billion, at least., to the tally.
Now that’s not like Japan. Gross government debt there is running at twice the gross domestic product.
But for Newfoundland and Labrador, we have to be sensitive to the ability of the provincial government to handle its public debt. We’ve also got to be sensitive to the extent to which fluctuating oil prices can give a misleading sense of how much debt the government can comfortably handle.
That’s why around these parts your humble e-scribbler tends to look at the non-oil revenue as a good indicator of what the government would have to rely on if oil prices collapsed or even just fell dramatically.
Like say what they just did.
Well, part of what we have to figure is how much of the population will be over age 65. They are likely to be on fixed incomes at that point. That means lots of things, not the least of which is that they have a relatively limited ability to handle hefty tax increases.
Like the one coming in 2017 from Muskrat Falls.
Thankfully, the provincial government employs some truly fine people in its economic forecasting and statistics office. The politicians may completely ignore them but that doesn’t mean the folks aren’t important. They are. And we should be paying attention to them.
Take a look at their forecasts.
To go with the government deficit tables from Monday, here are some observations on demographics using the Medium scenario. Here are the key assumptions for this scenario.
Fertility - The total fertility rate increases from 1.41 in 2013 to 1.45 by 2017 and remains stable near this level over the remainder of the projection period.
Mortality - Life expectancies continue to increase in line with recent trends in age-specific mortality rates. Male life expectancy increases by 3.7 years between 2013 and 2035. Female life expectancy increases by 2.1 years over the same period.
Migration - Modest net in-migration is assumed for the next two years, but then net out-migration occurs from 2016 to 2018 as several major projects, including the Hydromet facility in Long Harbour, Hebron, Kami, and the Lower Churchill are completed. Strong net in-migration is assumed to resume temporarily from 2020 to 2022 as construction of the Bay du Nord oil project occurs, but slows in 2023 and 2024 as construction is completed.
Net in-migration resumes in 2025 and gradually increases thereafter to fill new jobs that are expected to be created as well as to replace baby boomers as they retire. Net in-migration averages roughly 1,800 per year over the entire projection period from 2014 to 2035.
This is actually a fairly optimistic estimate. It includes the projection that Statoil and Husky will bring Bay du Nord into production early in the 2020s, despite the recent drop in oil prices..
But anyway, just look at the forecasts. In 2018 – the start of our period – 21% of the population will be over age 65. By 2023, one in four people will be over age 65.
By 2035, 30% of the population will be over the age of 65 years.
Keep those numbers in mind over the next few months.