Searching for Optimism in Canada’s Upcoming Budget

By Kate Jackman-Atkinson, myWestman

Next week, the federal government will unveil the 2015 budget. New finance minister Joe Oliver is expected to release a balanced budget that also includes tax breaks, particularly ones for families, and no cuts to the services currently used by Canadians. For many Canadians, there is lots to be optimistic about in the coming months.

But that doesn’t seem to be the case for Manitoba’s businesses owners.

Last month, the Canadian Federation of Independent Business (CFIB) released their latest Business Barometer Index. Scored between 0 and 100, the index measures optimism among the nation’s small business owners. An index level over 50 means that business owners expecting their company’s performance in the coming year to be stronger than in the last year outnumber those expecting a weaker performance. When the economy is growing at its potential, index levels generally fall between 65 and 70.
In March, Manitoba’s index was 54.6, virtually unchanged from February and well below the national average of 61.5. In fact, only Albert and Saskatchewan, both deeply impacted by declining oil prices, had lower index levels. This is Manitoba’s lowest level since 2010.

After adjusting for seasonality, only 14 per cent of Manitoba business owners are expecting to add full-time staff in the next few months, 11 per cent are planning to cut back. There isn’t a lot of optimism there.

According to the respondents, the biggest limitations faced by Manitoba businesses were insufficient domestic demand, a shortage of skilled labour and constraints on management skills and time. These seem to be common issues faced by Canadian businesses.

When it comes to cost constraints, by far the most prevalent among respondents was tax and regulatory costs. This was cited by 69 per cent of respondents. It was followed by wage costs, cited by 50 per cent of respondents. Insurance costs came third, cited by 48 per cent of business owners.

What stands out about these cost constraints is the obvious role the government plays in creating them. Business owners weren’t concerned about input costs, or the cost of getting their goods to market; their profitability was most impacted by the high cost of taxes and regulations. We may suspect that high taxes make our province less competitive, but business owners know this to be true.

In some ways, the lack of optimism is surprising. Manitoba’s economy is heavily dependant on exports and the sagging Canadian dollar helps to make us more competitive in the world market. In 2012, Manitoba exported $11.4 billion worth of products and over $7.6 billion of that was headed to the United States. In that year, on average, the Canadian dollar traded at par with the US dollar. In 2013, our exports climbed to $12.7 billion and $8.4 billion of that was headed south. In that year, our dollar had lost some of its value, trading just below par.

Recently, we have seen the value of the Canadian dollar slide and in March of this year, it took on average $1.26 Canadian to buy $1 US. This change makes our exports, the major ones being agricultural crops, predominantly oilseeds and cereals, and energy, much cheaper for international buyers. Manitoba’s exporters should be expecting a good year.

This lack of optimism among Manitoba’s small businesses should be cause for concern among all of us. And while many of the factors that determine the success or failure of a business are out of our control, many factors, it would appear, are within the control of our governments. The health of our province’s businesses is vital to our success and it’s time governments recognized the key role they play.