Thank you. Mr. Speaker, it would be nice to be able to announce that we are starting the 17th Legislative Assembly with a booming economy and enough fiscal resources to make all the strategic investments we need to further strengthen the economy.
Such is not the case. We have recently weathered one recessionary storm and another one is looming. While our economy is showing some signs of recovery, stimulus spending has left us with limited funds for new programs and services. As we approach the federally imposed borrowing limit, we have little room left to adjust for revenue or expenditure shocks.
As we move into 2012, there are signs that some parts of the NWT economy are beginning a modest recovery from the financial and economic crisis that struck four years ago. Our economy has stabilized one-fifth below its pre-crisis peak. Some sectors have done better than others. Our wholesalers have recovered half of their losses and our retailers have recovered one-third of their lost sales. On a more positive note, the number of people employed has almost fully recovered.
Over the course of 2011, forecasters have revised their economic outlooks downward for many countries, including Canada. Economic uncertainty is a global reality at the moment with the debt crises in Europe and the ongoing fiscal and economic challenges in the United States.
Exports of non-renewable resources make up almost half of our economy, which means that international economic events have a major impact on the NWT. Right now we are experiencing economic uncertainty because of the fragility of the international financial system, the high value of the Canadian dollar and limited access to international markets. These factors all have negative implications for our exporting industries and, therefore, for NWT businesses and employment.
The GNWT entered the global economic slowdown in 2008 in a stable fiscal situation and through strict control of expenditures was able to maintain our fiscal position while making significant infrastructure investments. These investments helped to partially offset the slowdown in the private sector activity and at a lower cost than would have been possible in a booming economy.
This does not mean that we can relax. Careful control of our expenditures is necessary to ensure that our operations remain sustainable, especially given the uncertainty with respect to our revenues and our closeness to the federally imposed borrowing limit.
Major pressures like the completion of the Deh Cho Bridge, cost pressures faced by NTPC, the potential impact of federal Justice crime legislation and the negotiation of four collective bargaining agreements add significantly to this challenge.
While our revenue forecasts to 2015-16 have not changed materially since the 2011-12 budget, we are forecasting that the growth in revenues will be less than we were forecasting last February. The slowdown in our economy could slow population growth and, therefore, has an impact on Territorial Formula Financing and tax revenues.
Our current budget planning horizon was developed using three assumptions:
Expenditure growth will be tightly managed this year. This means that only $32 million a year is available to address increased program costs and demands and any new spending.
Planning for capital investment in core GNWT, community and housing infrastructure will be reduced but stabilized at approximately $137.5 million per year, starting in 2012-13.
Short-term debt will need to be used until the government starts recovering its cash resources in the next few years.
Our fiscal situation is tight and we are keenly aware of the risks to our forecast and economic uncertainty in the world at large. We are currently managing within our fiscal resources but we need to remain committed to this principle in order to continue to prudently manage our budget, should, as some suggest, our economy recover slower than anticipated.
The 17th Legislative Assembly has a fiscal strategy that will gradually add more space between our ability to borrow and the borrowing limit. We are building fiscal room so that we can start to address the inadequacy of our capital budget without compromising our existing programs and services or revenue increases.
Minister Flaherty has proposed a new definition for the territorial borrowing limits to be described in federal regulations, which provides more clarity to what is considered borrowing for the purposes of the limit. The current limit will be adjusted to recognize the new borrowing instruments identified by these regulations.
The proposed new limit does not address the adequacy of the current borrowing limit. We have long argued that the borrowing limit should be based on the principle of affordability as we have conservatively defined it in our Fiscal Responsibility Policy. We are working with the federal government in a reassessment of the current limit and expect resolution by the end of this fiscal year.
If we achieve a satisfactory increase in the borrowing limit, we will be able to make some additional, but targeted, strategic infrastructure investments to build a strong and sustainable economic future for the territory. To be clear, we must still manage our expenditures on programs and services within our existing resources. We do not intend to borrow from the future to pay for the services that we use today. An increased limit, however, will allow us to make the strategic infrastructure investments that will help achieve success in the specific priorities that this Assembly has developed.
The success of this Assembly to realize our vision will require that we find the means to make investments in key priority areas such as transportation, health and social services, alternative energy and housing. The proposed fibre optic cable from Fort Simpson to Inuvik is another exciting opportunity that will allow us to diversify into new knowledge-based industries at the same time we improve community connectivity along the Mackenzie Valley.
Our fiscal challenges are not unique and we are not shrinking from them. We have built a sustainable operation and are aware of our fiscal risks. We are managing those risks and are prepared as can be, given the fragile state of the global economy and the many things we do not control.
This government and the Legislative Assembly are dedicated to a vision of strong individuals, and families and communities sharing the benefits and responsibilities of a unified, environmentally sustainable and prosperous Northwest Territories. We will maintain a stable fiscal environment that will allow us to make the necessary decisions to turn this vision into a reality. Thank you, Mr. Speaker.
Thank you, Mr. Miltenberger. The Minister of Industry, Tourism and Investment, Mr. Ramsay.
