JABUGO, Spain (Reuters) – In Spain’s cured ham capital, the small southern village of Jabugo, uncertainty over who will govern next in Madrid is a remote concern for investors keen to produce more of the Andalusian delicacy.

Drawn by the export potential for premium ham, family-owned meat producer ElPozo is pouring 70 million euros ($78.38 million) into building a new processing plant in the area even as Spain enters its sixth month without a new government and gears up for a repeat election on June 26.

It is far from alone.

In part thanks to Spain taking Germany-inspired austerity medicine and dealing with its banking crisis earlier than many European peers, company investments have chugged along since an inconclusive December ballot.

Even now, with opinion polls projecting a similarly fragmented result and raising fears of a paralysis that could jeopardise Spain’s recovery from a painful double-dip recession, local and foreign firms are finding reasons to expand, from the country’s relatively low wages to recovering household spending.

French carmakers Renault and Peugeot separately confirmed in May they would be ploughing a combined 1.3 billion euros ($1.4 billion) into their Spanish plants over the next four years and the two will produce new models there.

The economy grew 0.8 percent between January and March for the third straight quarter, one of the fastest rates in the euro zone, as both consumers and businesses shrugged off politicians’ failure to strike a coalition deal.

In ElPozo’s case, surging Chinese demand for Spanish pork and high-quality cured ham is an opportunity it is loathe to pass on. Spain’s meat exports are thriving, having jumped 16 percent last year to nearly 2 million tonnes.

“We want to inundate the world with Iberian ham,” said Rafael Fuertes, one of the senior managers at ElPozo.

The firm already derives about 15 percent of its revenue from exports and is seeking to make a push in Latin America as well as Asia.

Its plant in Jabugo, first mooted in 2011, aims to produce  2.5 million sausages, hams and other types of cold cuts a year, after the firm more than trebled its early production targets and increased by 50 percent its investment budget last year.

Premium products will include cured legs of Iberico ham, produced from pigs fed on acorns from oak trees and hung out to dry in traditional ventilated cellars for months.

LOCAL SAFETY NET

For ElPozo and many other firms, support from local authorities has provided an extra safety net as parties on the left and right jostle for power in Madrid.

Spain’s 17 highly-devolved regions, whose stretched finances drew international concern at the height of the euro zone debt crisis in 2012, argue they are now a source of institutional stability.

They boast of their own parliaments, budgets and local subsidy schemes, while even small municipalities can help get projects moving.

ElPozo’s plant in Jabugo is due to start taking shape later this year and should create about 70 permanent jobs in this village of some 2,400 people.

“Here nobody is worried about whether there is a national government or not,” said Jabugo Mayor Jose Luis Ramos of the Socialist party, who has been in the job for the past 15 years.

DEALBREAKERS?

The economy has plenty of momentum, with companies going through with investment plans hatched before the last election, but it cannot continue on auto-pilot indefinitely and there are already signs that the momentum has begun to slow.

If the next election fails to quickly break the political impasse, and ushers in another round of inconclusive negotiations, the uncertainty could yet have a more marked impact on companies’ ambitions.

Spain’s trade tailwinds could also fade.

“Higher oil prices could now start working in the other direction,” said Gizem Kara, senior euro zone economist at BNP Paribas. “Exports are also not doing so well, due to a slowdown in emerging markets, compounded by the impact of the stronger euro. This is likely to weigh on investment growth.”

Industrial spending on equipment and machinery slowed slightly in the first three months of the year, growing 1.3 percent on a quarterly basis compared to 1.9 percent previously, while the construction sector registered a contraction as a result of infrastructure tenders drying up.

Already in May, surveys pointed to waning growth in Spanish factory orders, while the latest consumer and business sentiment indicators are mixed, at a time when uncertainty over the direction of policies still lingers.

Parties such as the left-wing Socialists or anti-austerity Podemos (“We can”) – which placed second and third in the December vote, behind the centre-right People’s Party (PP) –  have for instance called for a rollback of labour laws introduced in 2012 which lessened firms’ firing costs and made it easier for them to lower salaries.

Yet even changes such as these may not be dealbreakers as long as domestic demand holds up or firms succeed in finding new export avenues.

For ElPozo, Jabugo also had its own peculiar allure, even if it will be joining more than 20 other producers there.

Nestled in the hills of the Huelva province, where extensive oak woods provide an ideal feeding ground for pigs, the village is famed for a micro-climate that creates the optimal conditions for curing meat.

“We have a long term vision, we’re not risk capital investors,” ElPozo’s Fuertes said.

 (Additional reporting and writing by Sarah White; Editing by Julien Toyer)

The post Spain’s auto-pilot economy flies high above political turmoil appeared first on Ubiq TV | English News Channel.

RAYONG, Thailand (Reuters) – Everywhere you look on Thailand’s Amata industrial estate in Rayong you see signs in Chinese. It’s a similar story just along the coast in the tourist resort of Pattaya, where Mandarin is increasingly visible alongside English and Russian.

As China’s economy slows, its investors are looking abroad for growth and Thailand, home to one of the world’s largest ethnic Chinese minorities and a gateway to Southeast Asia’s 600 million consumers, is a hot investment destination in everything from industry to condominiums.

“Thailand is usually the first stop for Chinese tourists and investors,” said Xu Gen Luo, who runs the Thai-Chinese Rayong Industrial Zone, about 200 km (120 miles) south east of Bangkok. Dozens of new Chinese-owned solar, rubber and industrial manufacturing plants have opened in the zone since 2012.

“Thailand’s investment environment, especially its investment promotion policies, are among the best worldwide,” he said, adding that labour costs were higher in China.

Since a May 2014 coup, Thailand and China have drawn closer diplomatically and militarily as the ruling generals seek to counterbalance the country’s cooling ties with Washington.

Chinese investors have found a warm welcome in an economy that has seen investment crimped by a decade of political turmoil, and where the junta has struggled to revive exports and domestic demand in the two years since seizing power.

Investment pledges from China jumped fivefold in the first quarter from a year earlier to 5.7 billion baht ($163 million), from just 1.1 billion baht, giving China the third largest investment slate during the period as Chinese firms raced to meet a tax break deadline and U.S. investors held back.

That was still some way behind Japan, which pledged 15.6 billion baht. Japan and China jostle for influence in Southeast Asia and Tokyo has long been Thailand’s largest investor, with several large car plants accounting for much of the investment.

“LOST IN THAILAND”

But Chinese investment is growing strongly, in part due to Beijing’s policy of encouraging manufacturers to shift production abroad to deal with industrial overcapacity at home.

“What we’ve seen so far in Chinese investment into Thailand is small compared to what’s coming,” said Joe Horn-Phathanothai, chief executive of Strategy613, a strategic advisor focussed on Chinese and Thai corporate investments.

“Hand-in-hand with the slowdown in China we’ll see an increase in the number of deals the Chinese do abroad.”

Last year China was the fourth biggest foreign investor in Thailand, behind Japan, the United States and Singapore.

Tourist numbers have also jumped, helped by the huge success in China of the 2012 slapstick comedy “Lost in Thailand”. About 7.9 million Chinese visited the “Land of Smiles” last year, up 71 percent from 2014, when unrest in Bangkok that preceded the coup scared tourists away, and Thailand expects more this year.

There has been no slowdown in the number of tourists due to the economic deceleration in China, helped by the growth of budget airlines, tour operators say.

“Our products are relatively cheap. We have good food and culture and no political problems with their government, unlike Japan and Taiwan,” Ronnarong Chewinsiriamnuai, president of the Thai-Chinese Tourism Alliance Association.

Thailand is expecting a record 33 million tourists in 2016, with China providing the bulk of the increase from the record set in 2015 of just below 30 million.

“ONE BELT, ONE ROAD”

Xu expects the number of Chinese firms at his park – jointly developed by China’s Holley Group and Thai industrial estate developer Amata Corp <AMATA.BK> – to increase to about 100 this year, from 75 currently, and to 500 in the next five years.

In March, China’s Trina Solar <TSL.N>, the world’s No. 1 solar panel maker, opened a manufacturing facility there.

Moving to Thailand can also help companies in industries such as solar and chemicals sidestep anti-dumping measures, industry experts said.

“China is facing trade barriers from many countries, particularly on solar, so many Chinese firms are coming to invest in Thailand,” said Visnu Limwibul, chairman of a Thai electronics and telecommunications industry group.

State-owned Gang Yan Diamond Tools (Thailand), which makes precision manufacturing blades, followed Beijing’s “One Belt, One Road” policy to rebuild ancient Silk Road trade links with Asia and Europe and set up in Thailand in 2014.

“When we first came, we were concerned about the political situation and social instability. We are still concerned now,” said board chairman Zhao Gang, but added the strength of the Chinese business community in Thailand helped overcome those concerns.

China and Thailand are discussing cooperation on the Thai section of a rail project under the “One Belt, One Road” plan that would eventually connect Kunming in southwest China with Singapore, but have to date failed to agree on terms.

As the expatriate Chinese community grows and more Chinese look for holiday homes in Thailand, real estate investment is on the rise.

Bundit Sirithunyhong runs the Suttangrak Group, which has just joined with Chinese firms to develop housing projects worth 5 billion baht ($140 million) to sell as time-shares to Chinese buyers.

“I think they are not just investing in real estate, but starting to use Thailand as a base for business in Southeast Asia,” he said. “Here they can stay and work as their second homes. It’s a step further in business expansion.”

 (Additional reporting by Pairat Temphairojana, Jutarat Skulpichetrat and Simon Webb in BANGKOK and Kevin Yao in BEIJING; Editing by Simon Webb and Alex Richardson)

The post From car parts to condos, faltering Thailand lures Chinese money appeared first on Ubiq TV | English News Channel.

MELBOURNE (Reuters) – Spot gold steadied on Tuesday after falling for three days, but looked at risk of further weakness as the dollar edged up on comments by a Federal Reserve official that the next U.S. rate rise could come as soon as next month.

The United States may be in line for an interest rate hike as soon as April, Atlanta Fed President Dennis Lockhart said on Monday, another sign that policymakers are comfortable allowing U.S. monetary policy to diverge from other major economies.

Prospects for higher interest rates were already helping the dollar revive from five-months lows touched last week. A stronger dollar makes gold more expensive for investors paying with other currencies.

“There’s a little bit of fatigue in there as well with the strong rally we’ve seen in the past few weeks, so it feels like a bit of profit taking going on sparked by the Fed comments,” said strategist Daniel Hynes of ANZ in Sydney.

Spot gold was trading up 0.1 percent at $1,244.90 an ounce by 0138 GMT. Prices hit the weakest in three sessions at $1,240.30 an ounce on Monday.

U.S. gold was up 0.1 percent at $1,244.80 an ounce.

U.S. home resales fell sharply in February in a potentially troubling sign for America’s economy, which has otherwise looked resilient to the global economic slowdown.

Mali has upgraded its estimated below-ground gold reserves by a third to 800 tonnes, enough to maintain current levels of output for the next 15 years, said the West African nation’s mines minister.

Asian stocks wobbled on Tuesday as the hawkish comments from Fed officials stoked uncertainty about policymakers’ intentions less than a week after Fed Chair Janet Yellen had set out a more cautious path to rate increases this year.

China imported 180,131 kilograms of silver in February, down by 7.4 percent from the same month a year ago, after a jump in imports in January. For the first two months of the year, China’s silver imports jumped 24 percent to 509,085 kgs from a year earlier.

Palladium imports tripled in February to 3,157 kgs, while platinum imports rose by 27 percent to 3,622 kgs.

Platinum at $974.74 an ounce was down half a percent while palladium held 0.3 percent firmer at $598.50.

Silver had edged down by 0.1 percent at $15.811 an ounce.

(Reporting by Melanie Burton; Editing by Joseph Radford and Richard Pullin)

The post Spot gold steadies, but rate hike worries resurface appeared first on Ubiq TV | English News Channel.

SAN FRANCISCO (Reuters) – The Federal Reserve won’t raise interest rates this week, but will likely make clear that as long as U.S. inflation and jobs continue to strengthen, economic weakness overseas won’t stop rates from rising fairly soon.

That will be a big change from the last time the Fed met, when uncertainty over the impact of slower growth in China and Europe drove policymakers to signal it would stay on hold until it could make a better call on the outlook.

That in turn was a setback from just a month earlier, when the Fed raised rates for the first time in nearly a decade and seemed ready to move four more times this year.

This week, fresh forecasts from the Fed’s 17 officials released after the meeting will almost certainly signal a retreat from that pace, to perhaps two or three rate hikes this year, economists predict and Fed officials themselves have suggested.

But the expected downgrade may largely reflect the drag from the oil and stock market slide in January and the Fed’s decision then to put policy on hold, rather than mounting worries over the U.S. or global outlook.

Indeed, since the last Fed meeting U.S. inflation has shown signs of stabilizing, with one measure published by the Dallas Fed rising to 1.9 percent, its closest to the Fed’s 2 percent goal in 2-1/2 years. Meanwhile, the U.S. unemployment rate held at 4.9 percent in February, near the level many Fed officials believe represents full employment.

The European Central Bank’s decision last week to ease policy further may help add to confidence that action has been taken to underpin growth in Europe, helping ensure a stalling of global growth drag on the U.S.

That could mean another U.S. rate hike by mid-year and, depending on economic data, more to come after that.

“June seems certainly like a possibility” for the Fed’s next rate hike, said former Minneapolis Fed President Narayana Kocherlakota, whose own preference is for the Fed to take out “insurance” against a recession by cutting rates back to near zero. Market-based inflation expectations have improved somewhat since the Fed’s last meeting, he said, “a real positive” development.

INFLATION DEBATE

Still, Kocherlakota’s former colleagues will likely spend plenty of time discussing the inflation outlook. That much was clear last week, when two top Fed officials, speaking simultaneously at separate Washington events, gave diverging assessments of recent evidence of rising prices.

More hawkish rate setters worry that if the Fed does not act to preempt inflation, it could end up behind the curve and lose credibility, while the more dovish members believe the economic recovery is still fragile and want to see firm evidence of inflationary pressures.

“That’s probably internally the biggest grounds for debate,” said Regions Financial Corporation economist Richard Moody.

The Fed will also need to tackle how to characterize the “balance of risks” to their baseline outlook, he said, particularly if policymakers want to keep the door open to rate hikes in April or June.

“If they truly want the markets to believe that all the meetings are on the table (for a potential rate hike) then I would think they have to have something in there,” Moody said, predicting they will characterize risks as “nearly balanced,” the same phrase they used before December’s rate hike.

And yet, others say, Fed Chair Janet Yellen will be wary of sending too strong a signal of coming rate hikes, for fear of roiling markets.

“By June they will have a broad clutch of data and that could help them, and even some of the doves the Federal Open Market Committee, to come to a solid conclusion (on the desirability of a rate hike) and a conclusion, by the way, that the market agrees with,” said Quincy Krosby, a market strategist for Prudential Financial.

(Reporting by Ann Saphir; Editing by Meredith Mazzilli)

The post Fed to sit tight on rates at March meet, hint at hikes to come appeared first on Ubiq TV | English News Channel.

SINGAPORE (Reuters) – Gold bounced back on Monday, inching closer to last week’s 13-month high as the dollar remained under pressure ahead of the U.S. Federal Reserve’s policy meeting.

The U.S. dollar was at one-month lows against a basket of major currencies with the Fed seen almost certain to stand pat at this week’s policy review.

Spot gold had risen 0.5 percent to $1,254.70 an ounce by 0212 GMT, while U.S. gold eased 0.3 percent to $1,256 an ounce.

The main focus is the U.S. central bank’s policy meeting on March 15-16, after it lifted rates for the first time in nearly a decade in December.

Investors in the precious metals market are also looking at a Bank of Japan meet.

The BOJ’s policy board is set to discuss this week whether to exempt $90 billion in short-term funds from its newly imposed negative interest rate, people familiar with the matter said, after the securities industry warned that investment money would be driven into bank deposits.

“We have two central bank meetings this week as the BOJ commence a two-day meeting today and the FOMC announce their interest rate decision on Wednesday,” said MKS Group trader Sam Laughlin.

Support at $1,235 should keep the metal buoyant leading into the Fed announcement, while $1,275-$1,280 will likely cap any moves higher, the trader said.

After rolling out bold measures to boost the euro zone economies, including increased asset-buying and a deeper cut to deposit rates, ECB President Mario Draghi on Thursday signalled there would be no further rate cuts.

The relatively weak dollar and a repricing of expectations for U.S. interest rate rises have helped gold rebound by more than 18 percent this year.

Bullion regained its role as a shelter for risk-averse investors, in the face of tumbling equities and fears of a global economic slowdown.

Hedge funds and money managers increased their bullish position in COMEX gold to the highest in 13 months in the week to March 8, U.S. Commodity Futures Trading Commission data showed on Friday, as safe-haven buying lifted prices to the highest since February 2015.

Physical gold demand slowed in top consumer China last week, while a strike by jewellers protesting against the imposition of a tax curbed demand in No. 2 market India.

(Reporting by Naveen Thukral; Editing by Richard Pullin and Joseph Radford)

The post Gold rebounds on weak dollar, market eyes Fed meeting appeared first on Ubiq TV | English News Channel.

By Jan Strupczewski and Gernot Heller

SHANGHAI (Reuters) – The world’s top economies are set to declare on Saturday that they need to look beyond ultra-low interest rates and printing money if the global economy is to shake off its torpor, while promising a new focus on structural reform to spark activity.

A draft of the communique to be issued by the Group of 20 (G20) finance ministers and central bankers at the end of a two-day meeting in Shanghai reflected myriad concerns and policy frictions that have been exacerbated by economic uncertainty and market turbulence in recent months.

“The global recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balanced growth,” the leaders said in a draft seen by Reuters.

“Monetary policies will continue to support economic activity and ensure price stability … but monetary policy alone cannot lead to balanced growth.”

Geopolitics figured prominently, with the draft noting risks and vulnerabilities had risen against a backdrop that includes the shock of a potential British exit from the European Union, which will be decided in a June 23 referendum, rising numbers of refugees and migrants, and downgraded global growth prospects.

But there was no sign of coordinated stimulus spending to spark activity, as some investors had been hoping after the market turmoil that began 2016.

DIVISIONS OVER DEBT, RATES

Divisions have emerged among major economies over the reliance on debt to drive growth and the use of negative interest rates by some central banks, such as in Japan.

Germany had made it clear it was not keen on new stimulus, with Finance Minister Wolfgang Schaeuble saying on Friday the debt-financed growth model had reached its limits.

“It is even causing new problems, raising debt, causing bubbles and excessive risk taking, zombifying the economy,” he said.

The G20, which spans major industrialized economies such as the United States and Japan to the emerging giants of China and Brazil and smaller economies such as Indonesia and Turkey, reiterated in the communique a commitment to refrain from targeting exchange rates for competitive purposes, including through devaluations.

While G20 host China has ruled out another devaluation of the yuan <CNY=CFXS> after surprising markets by lowering its exchange rate last August, there still appeared to be concerns that some members may seek a quick fix to domestic woes through a weaker currency.

Japanese finance minister Taro Aso said late on Friday he had urged China to carry out currency reform and map out a mid-term structural reform plan with a timeframe.

U.S. Treasury Secretary Jack Lew also encouraged China on Friday to shift to a more market-oriented exchange rate in “an orderly way” and “refrain from policies that would be destabilizing and create an unfair advantage”.

(Reporting by Gernot Heller, Jan Strupczewski, Adam Jourdan, Brenda Goh and Kevin Yao in Shanghai, and Tetsushi Kajimoto in Tokyo; Writing by John Ruwitch and Pete Sweeney; Editing by Alex Richardson)

The post G20 to say world needs to look beyond ultra-easy policy for growth appeared first on Ubiq TV | English News Channel.

By Henning Gloystein

SINGAPORE (Reuters) – Crude prices fell on Thursday as strong gasoline demand and lower U.S. crude output failed to counter downward pressure from global overproduction that has left storage facilities swelling with unsold oil.

The international Brent crude benchmark was trading at $34.18 per barrel at 0643 GMT, down 23 cents from its last close, hit by global oversupply that sees 1 million to 2 million barrels of crude produced every day above demand.

U.S. West Texas Intermediate (WTI) crude futures were down 23 cents to $31.92 per barrel.

“The basic overriding position in the oil market at the moment is that the global production exceeds global demand by quite a wide margin,” Said Ric Spooner, chief market analyst at CMC Markets.

In a sign of the excess supply, U.S. crude stockpiles rose 3.5 million barrels last week to reach an all-time peak above 507 million barrels, weighing on crude futures, data from the Department of Energy showed on Wednesday.

A slowing global economy may also increase the likelihood of low prices. Citi said global growth would be just 2.5 percent this year compared to a previous forecast of 2.7 percent.

“Global growth prospects are worsening further, with deterioration across advanced economies alongside previous weakness in emerging markets,” Citi economists wrote in a research note.

Despite the falls, there were some supportive indicators that briefly pushed oil prices on Thursday.

“It may be a little early to call it a trend but we are beginning to see some sign of cuts,” Spooner said, adding that U.S. output had fallen to about 9.1 million barrels per day, the same level as in October 2015.

“If we do start to see that (production) fall gradually from here that… might bring a bit of stability to the market,” he said.

Strong U.S. demand for gasoline supported crude on Wednesday, although analysts said this effect would ease.

U.S. gasoline demand stood at 9.06 million barrels per day (bpd) during the week ending Feb. 19 compared with 8.6 million bpd in the week ending Jan. 22, the Energy Department said.

“In 2015 we saw, 0.4 million barrels per day of demand growth from gasoline because the fall in oil prices is passed on to the consumer. This year, we’ve got growth normalizing to less than 0.1 million barrels per day,” said Virendra Chauhan, oil analyst at Energy Aspects in Singapore.

(Additional reporting by Manesha Pereira; Editing by Joseph Radford and Christian Schmollinger)

The post Oil slips as oversupply, slowing growth outweigh U.S. output drop appeared first on Ubiq TV | English News Channel.

By Charles Lammam
and Hugh MacIntyre
The Fraser Institute

VANCOUVER/ Troy Media: The federal Liberals appear to be considering overhauling Canada’s income support system with the creation of a guaranteed annual income (GAI). Jean-Yves Duclos, the federal minister tasked with the social policy portfolio, mused publically about the benefits of a GAI. In fact, his government has gone so far as to invite experts on GAI to participate in the pre-budget hearings.

There is certainly some merit to the concept of a GAI, and there even seems to be growing public support. The question, however, is what would it take to create an effective GAI? A lot.

A GAI is a cash transfer to individuals or families that ensures a minimum level of income, without conditions such as requiring participants to work or look for work. It’s generally conceived as a single program that would replace all – or at least a significant portion – of the existing income-support system (broadly defined as the complex web of programs and tax measures that increase a recipient’s income through cash or in-kind transfers).

Indeed, this sort of reform appears to be what Duclos has in mind, which is a good sign because being a replacement rather than an add-on is a critical feature of any serious GAI proposal. After all, a main conceptual appeal of the GAI rests on the potential to reduce government administrative costs by simplifying the income support system, which now consists of numerous, often-overlapping programs at the federal, provincial and local government levels.

In theory, the potential for administrative savings is substantial. A non-trivial portion of spending on income support currently goes to administration rather than directly on transfers to people. And many Canadians who need the support often have a hard time getting it due to a complex and potentially overwhelming bureaucracy.

But what would it take to create a GAI in practice?

First, consider the magnitude of a reform that replaces the existing income support system with a single GAI program. In a study published last year, we estimated the cost of the existing system at $185 billion in 2013 or roughly 10 per cent of the economy (this includes spending and tax measures by all levels of government targeting people with low-income, the disabled, the elderly, and parents with young children). By any measure, GAI reform would be a major undertaking, perhaps one of the most fundamental government reforms in Canadian history

Much of that spending is done by the provinces, so a federally administered GAI – as many propose – would require the provincial governments (and local governments to a lesser extent) to agree to relinquish their role in income-support programs such as welfare. Effectively, this means provincial governments would cede some of their powers and responsibilities to the federal government, something that many provinces have traditionally been reluctant to do.

Putting aside the need for federal-provincial agreement, creating a GAI would also require consolidating existing programs, many of which have different specific purposes or target different groups. And there are difficult questions surrounding program design such as the basic benefit amount and whether it should vary depending on people’s circumstances (where they live, how old they are, whether they have kids).

More broadly, a GAI would presumably require the large-scale lay-off of bureaucrats to achieve substantial administrative savings, a move that would obviously face strong internal political opposition.

All that said, there is much to like about the idea of a GAI that would simplify Canada’s income-support system. But in practice, the process would face many hurdles that undermine the case for reform. Perhaps a more realistic path forward is to reform existing income-support programs in ways that improve their functioning and effectivess, with the additional goal of simplifying the system by consolidating existing programs that serve similar purposes.

Charles Lammam and Hugh MacIntyre are co-authors of the Fraser Institute study, The Practical Challenges of Creating a Guaranteed Annual Income in Canada.

© 2016 Distributed by Troy Media

The views, opinions and positions expressed by all Troy Media columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of Ubiq TV/Troy Media.

The post Creating an effective guaranteed annual income challenging appeared first on Ubiq TV | English News Channel.

Ontario’s net debt is projected to reach $298 billion in 2015/16, by far the highest level in its history. This amounts to just over $21,600 in provincial government debt per Ontarian. Ontario’s net debt has increased dramatically since 2003/04, with the province running budget deficits in 10 of the past 13 years. These annual deficits have ranged from $1.6 to $19.3 billion, averaging $9.7 billion over the whole period.

The primary reason for Ontario’s persistent deficits is spending growth over the past decade, which has significantly outstripped key economic metrics. Between 2003/04 and 2015/16, provincial program spending increased by 71.6% from $70.4 billion to $120.9 billion. On average, program spending  increased by 4.7% annually during this period, greatly surpassing the average annual rate of inflation plus population growth (2.8%) and of economic growth (3.2%) in the province.

If the government had restrained program spending growth to the rate of nominal GDP growth since 2003/04, the province would be facing a projected $10.7 billion surplus this fiscal year instead of a $7.5 billion deficit. If program spending had been held to the pace of inflation plus population growth over this period, the surplus in 2015/16 would be even larger.

Under both scenarios of restrained spending growth, Ontario would have run just one budget deficit over the past 13 years instead of 10, and the large-scale run-up in provincial net debt since 2003/04 would have been avoided.

Authors:

Ben Eisen

Associate Director, Provincial Prosperity Studies, Fraser Institute

Charles Lammam

Director, Fiscal Studies, Fraser Institute

Milagros Palacios

Senior Research Economist, Fraser Institute

The post Spending is the Source of Ontario’s Deficit and Debt Problem appeared first on Ubiq TV | English News Channel.

By Charles Lammam
and Ben Eisen
The Fraser Institute

VANCOUVER, Troy Media: Each year the Fraser Institute measures and ranks the performance of Canada’s premiers in terms of how well they managed provincial finances while in office. Premiers who managed spending more prudently, balanced the books and paid down debt, and reduced and maintained competitive tax rates, rank higher. This year, Premier Christy Clark ranked first overall, essentially tied with Quebec Premier Philippe Couillard for the best record, followed closely by Saskatchewan Premier Brad Wall.

Let’s start with what Clark has done well over the period she is evaluated (2011/12 to 2014/15).

Clark managed the growth in government spending more prudently compared to her counterparts. During her tenure, she increased program spending by an average annual rate of 2.1 per cent, just enough to keep pace with the combined rate of inflation and population growth.

BC Premier Christy Clark’s biggest weakness with respect to fiscal policy is in the area of taxation

Importantly, the rate of government spending growth under Clark’s tenure was less than the rate of economic growth (3.7 per cent). As a result, the size of B.C.’s government – measured as spending relative to the provincial economy – decreased, meaning the provincial government now plays a less prominent role in B.C.’s economy.

Another bright spot for Clark is that her government has consistently balanced the books. In recent years, several provinces have consistently run budget deficits while B.C. has posted surpluses. In fact, Clark is one of only two premiers (along with Saskatchewan’s Brad Wall) to maintain a small budget surplus, on average, while in office.

Despite finishing on top, Premier Clark’s record has weaknesses. For example, despite avoiding annual budget deficits, Clark has allowed government debt to grow under her watch – by almost $7 billion. This is mainly the result of substantial capital spending by the B.C. government being financed by debt. As a percentage of the economy, the provincial debt burden has grown from 15.7 per cent to 16.4 per cent.

But Clark’s biggest weakness with respect to fiscal policy is in the area of taxation. Two problems stand out.

First, she increased B.C.’s general corporate income tax rate from 10 to 11 per cent, making the province less competitive for investment compared to other jurisdictions. And this increase came on top of reinstating the economically damaging Provincial Sales Tax, which taxes the business inputs used by entrepreneurs and raises the cost of investment.

Second, Clark presided over, and has so far failed to reform, a relatively complicated personal income tax system with five separate tax brackets – the second most among her provincial counterparts. She also enacted a temporary increase in the top income tax bracket for two years that was ultimately eliminated in the 2016 tax year.

In order to build on the strong elements of B.C.’s fiscal policy framework, and to make the province’s tax system more competitive, the Clark government should reverse the recent corporate income tax rate hike and implement a plan to offset the marked increase in the cost of business investment associated with the re-introduction of the PST, especially since almost all of B.C.’s competitors have moved to a value-added tax like the now-abolished HST.

On personal income taxes, simplifying the system by reducing the number of tax brackets and the existing top rate would give B.C. a key competitive advantage over other jurisdictions.
All told, Premier Clark’s record on fiscal policy is positive. There is still, however, room for improvement.

Charles Lammam is director of fiscal studies and Ben Eisen is associate director of provincial prosperity studies at the Fraser Institute. The study, Measuring the Fiscal Performance of Canada’s Premiers, is available at www.fraserinstitute.org.

Troy Media Marketplace © 2015 – All Rights Reserved
Trusted editorial content provider to media outlets across Canada

The post Premier Clark’s record on fiscal policy is positive appeared first on Ubiq TV | English News Channel.