00:01:16.300Does this sound like a doom and gloom budget?
00:01:19.180Well, that was my question for you, because any time there's a deficit, I, you know, perhaps I'm just projecting from my own finances onto the province,
00:01:27.960but it always feels terrible when the outgoings exceed the incomings.
00:01:31.940But government financing is a different kind of thing.
00:01:35.200So, does this really change anything about the fundamental strengths or weaknesses of the Alberta economy?
00:01:43.340You're advising people on where to invest their money.
00:02:12.380And, you know, I moved to Alberta for many of the same reasons that many others moved to Alberta.
00:02:19.760That it's one of the best, if not the best place in the country, really, if you're seeking, what would you call it, economic prosperity or opportunities.
00:02:37.600First of all, deregulation, both in United States and Canada, even federally, and in Alberta as well, we're going through a deregulation cycle or where, where regulations are being looked at.
00:02:49.620And it's being addressed as to how efficient or inefficient those regulations are, and are they helping or hurting the economy?
00:02:56.480And certainly the push right now is to make things better and run smoother.
00:03:01.520And it's quite well known that many projects have not gotten off the ground, both in Alberta and many other parts of Canada, due to basically an overly heavy regulatory environment.
00:03:12.660And I think there's a consciousness right now that that needs to change.
00:03:17.340And Alberta is probably at the spearhead of that.
00:03:28.940So, you can make the case that some of these things, like containing methane leaks, are just a good thing to do anyway.
00:03:35.980But when it becomes such a burden to the industry that is starting to affect production and people's willingness to invest, what have you seen in deregulation that gives you hope?
00:03:46.940Well, first of all, there's a bit of order.
00:03:49.940If you look at the MOU that was recently signed, there's a lot more clarity in terms of the direction that they're going with respect to, say, carbon capture and also industrial carbon taxes.
00:04:02.580So, while we may not all like what we heard there, at least we have some certainty and some clarity in terms of the direction that they're going, for starters.
00:04:11.600And, and there's been, like I said before, multiple examples of projects, just simply not getting off the ground due to excessive regulation or approvals that just took, you know, essentially way too long, you know, for them to come to fruition.
00:04:26.180And some of those projects ended up going to the US.
00:04:29.340So, at least we have an awareness of that right now.
00:04:31.400And I do believe change is coming, but it's not really just, you know, regulations that there's opportunities here, you know, for the federal government with respect to tariff negotiations.
00:04:41.180And negotiating a new trade deal in the US that if done correctly, you know, could, could end up helping things in the next year to two years, um, with respect to Alberta, um, we're in the middle of, uh, bringing up discussions on say equalization payments, for example, and federal transfer payments, which again, no guarantees, but there's an opportunity there for, uh, possibly Alberta to negotiate a more favorable, uh, deal.
00:05:09.960So, um, put another way, you know, we, uh, we saw that $9 billion plus deficit right now, but what would the deficit be if we weren't paying, uh, so much, uh, in equalization payments, um, as a collective society, not, not the government, of course, the government doesn't pay directly to the federal government for transfers.
00:05:32.460Uh, but the people of Alberta and the business of Alberta do.
00:05:36.480So, uh, I would hazard a guess that it may not be a 9 billion, uh, plus it'd be something less than that, if not even zero.
00:05:56.320So if it depends, if you're looking at just equalization or total, let's call it transfers or transfers of wealth outside of Alberta.
00:06:04.140And, uh, of course, these are, these estimates can vary year by year, they're not the same every year and they're always a moving target.
00:06:10.460But if you look at say total transfers or total wealth net, uh, that are leaving Alberta per year, probably in the neighborhood of 12, 13, $14 billion a year.
00:06:20.880And again, that comes from people and Alberta businesses.
00:06:24.680Um, if you look at specifics to how much of that goes to equalization of which the majority of that would go to Quebec, but not just Quebec, you know, other Eastern provinces and so forth.
00:06:35.420Um, it's probably in that four to $5 billion range.
00:07:16.020There's shale gas opportunities there and many other provinces, but maybe the incentive is not quite there if they're receiving Alberta equalization.
00:07:23.880So these are things that are hopeful and we're not baked in there, but they are opportunities.
00:07:35.160Um, the fundamentals of Alberta, like where we make our money, the size of the skills of our workforce, uh, they haven't changed, but they're not, but there's not enough.
00:07:48.960So if we're, what are the opportunities on the cost cutting side, when you have massive increases in immigration into the province?
00:08:01.280So the cost cutting would be, uh, let's call it a controversial topic, you know, because, um, there's a percentage of government spending that's actually attributed to GDP.
00:08:13.520And this is actually a good news story for Alberta.
00:08:15.660Um, you can measure province by province, you know, across the country and basically ask the question and it's like, okay, you know, that province has, you know, X amount of GDP.
00:08:24.480How much of that GDP is directly attributed to government spending?
00:08:29.900And in the case of Alberta, it's the lowest in the country by far.
00:08:36.200You know, it's still, there, there are some provinces where that number, uh, could be 30%, 40%, or even more than 40%.
00:08:45.660You know, without naming the provinces, of course, um, and, you know, in, in, in Alberta, um, I think, I think I had the number here somewhere, but I believe it's in that, uh, 20 percentile range.
00:08:57.720Um, you know, it's low, it's substantially lower than other provinces.
00:09:02.280So, so, so, you know, so we're already pretty lean with respect to that as a percentage of GDP.
00:09:09.280Um, and then like, but keep in mind when you cost cut, you know, there is also a hit to GDP, uh, in the case of Alberta, that hit is lower because it has a lower, uh, attribution, uh, of government spending to GDP.
00:09:24.180I think a province such as Alberta would be more attractive to investors if they have a low government, uh, investment in the economy.
00:09:45.840Uh, so, okay, I, I am, uh, prepared to accept at base value the finance minister's line that the difficulties they face this year are a consequence of low oil prices and, uh, of, uh, very high levels of in-migration.
00:10:05.520I'm saying in-migration rather than on-immigration because, you know, it can be people like you who are moving in, uh, and you bring all your children with you and how we need a new school in Northwest Calvary.
00:10:18.240Um, so now seriously, Peter, um, if that's, uh, if we have a growing economy, why do we not have, uh, a growing tax base?
00:10:30.720How much of this is really immigration?
00:10:34.860Yeah, I would say the majority is, I mean, without looking at the details of the numbers, uh, you and I both just, you know, they were close to a pretty short look at the budget.
00:10:44.580Um, I, I'd say mostly it's oil prices.
00:11:06.240So it really comes down to the proportion of, uh, the immigration that's coming in.
00:11:10.220Um, are they economic migrants or the other types of migrants?
00:11:14.580Um, so, uh, so it might come down to, you call it a quality over quantity argument.
00:11:20.200Um, so I guess what people want to know, what I want to know is how big a problem is this?
00:11:26.180I mean, we have got inflation locked into the economy.
00:11:29.380So if we say we've got a, a $9 billion deficit today, that's probably like a, a $6 billion deficit
00:11:38.380said 10 years ago, well, not to be quoted, but, uh, these things do matter and $60 oil today, what, uh, what would that have been 10 years ago in terms of real purchasing power?
00:11:54.520So if you, you know, when I look at my bank account, I see what you're saying, investments are, are, are higher numbers, but they don't buy what they, what they, uh, bought 10 years ago.
00:12:04.180So are we in as, is this as bad as it looks?
00:12:08.860Um, so again, uh, so what you're referring to is, is specifically monetary inflation, as opposed to, uh, necessarily just looking at CPI.
00:12:16.600CPI is part of it, but, but it's definitely more of a monetary inflation argument.
00:12:20.020So, so to your, to your point, uh, $9 billion today, if you look at it 10 years ago, it's not 9 billion, it's something less than that.
00:12:27.940You know, we have to do the math in terms of what the exact numbers are, but you're probably not far off, you know, in, in your, in your estimates.
00:12:34.340So, so, you know, but that also is attributable to, um, uh, to GDP as well.
00:12:40.880So GDP over time, part of that increase in GDP is actually also attributed to, uh, to monetary inflation.
00:12:49.520That's why it's really important to look at, um, GDP ratios, whether it's net to GDP ratios or, um, or, or, uh, net GDP ratios or gross GDP ratios.
00:12:59.540And in either case, actually, Alberta, you know, by far has the lowest, um, uh, debt to GDP ratios in Canada.
00:13:09.260So despite the budget that we just seen, uh, we are still far ahead of any other province in the country, um, in terms of either, uh, uh, net debt to GDP ratio, or even gross debt to GDP ratio.
00:13:22.700So what roughly would be our gross debt to GDP ratio?
00:13:27.320Uh, it's, it's in the budget documents.
00:13:30.020It's in that eight percentile, sorry, not the gross, they quote the net and they quote the net in the budget.
00:13:35.340It's in that, uh, let's call it eight and a half, 8.7 range.
00:13:39.600Uh, the one thing I did see briefly in the budget document that just got released a short time ago, uh, is they are projecting, uh, that net debt to GDP ratio to rise, uh, over the next three years from in that eight percentile range up to 10, 11 and 12.
00:13:56.340So what would be the, uh, GDP, uh, to deficit ratio for the federal government?
00:15:29.880We are nowhere near the debt to GDP ratios, whether it's net or gross, um, to, to the point where there's any discussion whatsoever about going broke.
00:15:41.560Uh, and, um, while, uh, nobody, including myself likes the fact that let's just say we might be going in the wrong direction somewhat, um, in, in terms of, uh, uh, both the net debt to GDP ratio and also net debt and, um, and the deficit.
00:15:58.440You know, arising that nobody really wants to see that, um, necessarily, but we're still financially in a better position relatively than other Canadian provinces.
00:16:07.580And on, on top of that as well, like just looking into the future, um, if you think it through, you know, we're going through, uh, there's different names from some people might call it a fourth turning or some people might want to call it.
00:16:19.160Um, let's just say a lot of change that's happening in the economy, uh, whether it's, uh, due to artificial intelligence, uh, that's coming to the forefront or whether it's, oh, um, de-globalization, let's just say, and reshoring and manufacturing to North America.
00:16:41.380Um, a focus on manufacturing is happening, but with that, you know, that manufacturing needs energy.
00:16:47.380Lots and lots and lots of energy and look where we live, we have lots and lots of energy, you know, natural gas and oil and, and, uh, and in the budget as well, there were provisions for the development of a nuclear as well on top of that.
00:17:03.760And so we could play a pivotal role, um, in this, uh, shift towards, um, having, let's just say more industrial capacity and manufacturing within North America.
00:17:15.400We can play a pivotal role, uh, for that transition, call it de-globalization, um, you know, given the amount of energy and natural resources that we have to the point that could, uh, you know, really make this a wonderful place to live for decades to come.
00:17:29.940A strange thing, you know, for decades, we've been talking about globalization as a good thing.
00:17:34.680And now you can casually drop into a sentence, the word de-globalization with confident expectation that everybody's, you know, great, good idea.
00:17:46.720Well, it's complicated, but it's, things are changing it.
00:17:49.540You know, when, you know, what can change that is a few wars.
00:17:51.940Uh, so if you have a few wars where all of a sudden, let's just say that, uh, we're running out of, uh, ammunition in those wars, uh, to the point.
00:18:01.600And the reason we're running out is because we can't produce enough on our own without asking others, you know, for that production who may not want to give it to us.