Federal Finance Minister Joe Oliver arrived in Calgary on Thursday, addressing the Chamber of Commerce about the upcoming federal budget and the effect low oil prices will have.
Oliver said that tough times are ahead for the energy sector, but the federal goverment is taking action to ensure the prosperity of all Albertans.
"The current drop represents the third largest decline in the last four decades," he told the media on Thursday. "I appreciate how hard Calgary has been hit by this reality."
He says that there are many advantages to lower oil prices such as the price at the pumps, energy costs for manufacturing and transport companies, and a decline in the dollar to make businesses more competitive.
However, profits for oil companies will suffer, capital investment will slow down, and royalty payments will fall.
"Bottom line, the intermediate impact on real GDP will be broadly neutral, but the impact on nominal GDP will be negative."
He says balancing the federal budget is not easy. "It takes a rock-solid plan, hard work, and the discipline to follow through. Budgets to do not balance themselves. But, the rewards are great. Because of our fiscal discipline, we're now able to deliver even more tax relief for hard-working Canadian families."
"The overall federal tax burden is at its lowest level in 50 years. Canadians have much to be proud of, we have achieved a great deal together."
As he is consulting with Canadians in the lead up to the federal budget, Oliver wants to make a few things clear. He says the government will not increase taxes or engage in reckless spending that could endanger any kind of economy recovery or the fiscal situation.
"Second, we will remain focused on creating jobs and growth."
Oliver also says that he is not expecting a real estate bubble to appear in Canada, particularly Western Canada, as a result of lagging oil prices.
Also because of oil prices, Oliver says he will be delaying the release of the federal budget by a month. That's because the federal government needs more time to finalize the budget given the new economic climate.
The Finance Minister was in Vancouver on Wednesday, telling the gathering there that the federal government will still show a $1.6B surplus in the budget despite oil prices falling to over half of what they were a year ago.
Oil prices are currently just under $50 US per barrel.
Oliver says Ottawa will be able to make their budget even without scaling back on any of the tax breaks promised over the past few months.
The surplus is in opposition to what many economists have forecasted.
TD Economics released a report on Wednesday, saying the government would be posting a $2.3B deficit in 2015-16, followed by a $600M for 2016-17.
The report estimates that oil prices will average $67.50 US per barrel through this year, rising to $80.25 in 2016.
TD’s forecast won’t see a return to surplus until 2017-18.
(With files from CTVNews.ca)
