This is an appropriate time to make some predictions for 2014.
First, the Harper government will balance the federal budget, but the cost in spending cuts will be the national equivalent of eating the seed corn. That the government is guilty of poor budgeting has already been demonstrated by comic pratfalls in acquisition of major military hardware and a short-sighted selling-off of government assets.
It will become evident as the year progresses that this government has no longer-term strategy - beyond nailing down the additional 10 per cent of voters needed for a majority in the 2015 election.
But, the voters may not be in a happy mood. A rise in domestic interest rates in 2014 will serve to slow the Canadian housing market and also will dampen consumption in Canada.
Also in 2014, I predict the purchase of F-35 fighters will be cancelled. The cost per plane has risen so much, the number of planes Canada can afford will not justify expenditure for parts, servicing and training pilots.
Although recently approved by the National Energy Board, the Northern Gateway pipeline project will die a quiet death due to a doubling of the projected costs of construction. These cost increases are great enough to kill any profit unless bitumen can be sold for well over $100 US, which is unrealistic. Moreover, if the federal government were to approve the project, the resulting action by First Nations opposed to the pipeline would hold up construction for years.Â
I predict that Barack Obama will nix the Keystone pipeline in a bid to shore up Democrat fortunes in the mid-term elections and, in turn, that decision will bring negative momentum to development of the oilsands. The oldest and largest firms, such as Suncor, will survive but many newer entrants will wither and die over the remainder of the decade. Bad news for Alberta and an end to the boom in Fort McMurray.
The U.S. economy will continue to grow in 2014, but only slowly. With the large carve-out of the American middle class of the last few decades, consumption will be lacklustre and that will have a dampening impact here as well.
Closer to home, the much-touted liquid natural gas export strategy being pushed by Premier Christy Clark will be quietly abandoned - perhaps not in 2014, but soon thereafter. International competition is fierce and already well established. Therefore, expected prices for LNG will not be sufficient to warrant the investments required to build pipelines to salt water.
British Columbians will begin to understand that the Liberal government's energy-export and concomitant jobs-creation policy is more smoke and mirrors than reality. One has to wonder who is advising this government and why senior officials appear to be unable or unwilling to ask probing questions of the energy sector.
Railroads will begin in earnest to convert their engines to using LNG. It's cheaper and causes less pollution. There are more than 18,000 rail engines in North America, so the potential market is huge. Also expect major truck fleets to begin converting as well. (LNG may have more potential at home than abroad, and at a better price.)
Sooner rather than later, Alberta and B.C. will have to consider increasing taxes just to cover minimal operating costs. Services have been cut in B.C. to such an extent, the justice system is close to breakdown and public health challenges cannot be ignored much longer.Â
I would love to predict the B.C. government will begin to appreciate the fiscal bind we are in and develop new policies that will involve minimal costs and stimulate long-term growth. I am less confident of this prediction.Â
Of course, I may be wrong on all counts. We will see come Jan. 1, 2015.
David Bond is an author and retired bank economist.