March 5, 2010

Budget 2010

Western Canada critical of Eastern focus in budget

Government should do more to cushion B.C., Alberta industry, contractor association V-P says

RICHARD GILBERT

staff writer

The 2010 federal budget focuses on stimulus spending in eastern Canada, which doesn’t sit well with some in Western Canada’s construction industry. “From a Western Canadian perspective, it seems the budget is heavily concentrated in central and eastern Canada,” said Bill Stewart, vice president of the Merit Contractor Association in Alberta.

“Our recovery in B.C. and Alberta is very fragile, so the federal government could do more to cushion the industry. The west needs infrastructure spending as well, and it doesn’t seem like there is much evidence of this in the budget.”

The budget follows through on the second year of a two-year economic action plan. It aims to rebuild Canada’s aging infrastructure by making investments in the transportation sector.

However, there is only one Western Canadian project mentioned in a section of the budget designed to modernize Canada’s infrastructure.

The Coast Guard’s Sea Island base near Vancouver will receive $27.3 million over five years to replace a hovercraft.

Stewart said he believes this is a major omission in the budget, because the construction industry in B.C. and Alberta led the whole country through the last boom bust cycle.

Others in the industry believe the government was already headed in the right direction with its action plan.

“What we like about the budget is that we continue to see the $7 billion in infrastructure spending that is being moved forward to create jobs,” said Building Trades Alberta executive director Ron Harry.

“This money will put people to work building bridges and other infrastructure across the country.”

Stimulus measures for 2010–11 include $7.7 billion in infrastructure stimulus to create jobs.

“From a construction perspective, the budget will stimulate the economy in a different way from region to region,” said Harry. “In Alberta, the stimulus funds will help us do infrastructure construction, between the economic correction and the time the oilsands and upgrader projects come back online.”

Fraser Institute senior economist Niels Veldhuis agreed that a core function of government is to facilitate the construction of infrastructure and economic growth. However, he argued that there are problems with accelerated infrastructure spending.

“With accelerated stimulus spending, the goal is to push money out the door as fast as possible,” he said. “But, the most important projects are not prioritized.”

According to Veldhuis, accelerated stimulus spending can become a constraint on a recovery led by the private sector.

“As the government gets the stimulus money out the door and the economy picks up, the government will be competing with the private sector for resources and labour,” he said. “This could crowd out the private sector recovery.”

For this reason, the timing of stimulus spending is critical. The $19 billion in stimulus spending, which began with the 2009 Budget, is due to come to an end in March 2011.

“The end of the accelerated stimulus spending is going to be a concern for the construction industry because the end of this spending will decrease infrastructure investment dramatically,” he said.

Given these problems with accelerated spending, Veldhuis would like to see a more thought out or a long-term plan that aims to improve the country’s infrastructure.

Whenever the economy recovers, the main issue will be reducing the deficit and balancing the budget.

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