(Bloomberg) -- British Columbia’s new government expects a narrower surplus than the one estimated by its Liberal Party predecessors as spending soars to battle raging wildfires in one of Canada’s fastest-growing provinces.
That’s due in part to the spiraling costs of battling the worst wildfires in the province’s history this summer. Budget documents show fire management costs may surpass C$500 million this fiscal year, eight times more than in the previous one.
The surplus is expected to decline further to C$228 million in 2018-2019 before expanding the following year to C$257 million, according to the update. The government also expects the economy to expand faster than previously estimated, revising the growth forecast to 2.9 percent this year, up from 2.1 percent in February.
Premier John Horgan took power in July after striking a deal with the Green Party to create the first minority government in more than six decades in the western province. His administration is set to boost spending after campaigning to make life more affordable for the average British Columbian -- pledges that helped end the 16-year rule of the Liberal Party whose tenure coincided with surging property prices and stagnant incomes.
‘Struggling to Get By’
"Too many people are struggling to get by," James said today, as she announced measures to halve healthcare premiums and boost funding for schools. She also indicated that more targeted measures lay ahead for Canada’s priciest property market. "We’re working on a comprehensive strategy to improve housing affordability, close speculation loopholes, and reduce tax fraud and money laundering in B.C. real estate."
James announced tax hikes to fund increased spending commitments. The general corporate income tax rate will rise by 1 percent to 12 percent, bringing B.C. in line with Alberta, Manitoba and Saskatchewan. The carbon tax will also go up by C$5 a metric ton starting April, while personal income above C$150,000 will be taxed at 16.8 percent, up from 14.7 percent, according to the budget update.
The Pacific Coast province has benefited from a robust economy, driven particularly by a booming housing market, and ended the last fiscal year with a C$2.8 billion surplus. It also boasts the second-lowest provincial unemployment rate in Canada at 5.1 percent, according to Statistics Canada.
"The economy is firing on nearly all cylinders," Bryan Yu, the Vancouver-based deputy chief economist of Central 1 Credit Union, said in a report last week. He cited rising exports, surging employment, a booming population and a stronger-than-expected housing market bouncing back from a series of measures to cool it. "Growth will rotate away from last year’s housing juggernaut as consumer demand picks up due to job growth."
B.C.’s economy is expected to expand 2.1 percent in 2018 and 2 percent in 2019, in line with previous forecasts, according to the budget update.