Sunday, 3 June 2012

Alberta Budget Office: Dutch Disease is Real

The Provincial Budget Office of Alberta recognizes that the commodity boom is pushing up the dollar and hurting manufacturing.

A section of the provincial government's spring budget, titled Risks to Alberta's Economic Outlook, refers positively to the importance of the oilsands to Alberta's economy.

But the report notes that the province's manufacturing sector is challenged by the high Canadian dollar, which in turn is linked to natural resource exports.

"The Canadian dollar remains elevated, buoyed by high commodity prices. An appreciation of the Canadian dollar could hurt exporters," it states.

In another section the authors noted that "manufacturing companies will continue to be challenged by a strong Canadian dollar and moderate external demand," though it added that "they should benefit from growth in energy and agricultural sectors."


While Alberta is known for its oil and gas industry it also has a robust manufacturing sector, dominated by petroleum products, food, chemicals, machinery and fabricated metal products, according to Statistics Canada.
          ("Alberta's own budget backs "Dutch Disease" theory: NDP." Peter O'Neil (June 1, 2012).
           Postmedia   News)

Despite shameless energy McCarthyists trying to paint this as an "East-West" issue, Dutch Disease really is a "trans-Canadian manufacturing issue"  and a "heavily resource-based economy" vs "industrially balanced economy" issue. Sadly, Canada's chattering class doesn't seem to realize this (witness a particularly odious column by Diane Francis).

It's becoming increasingly apparent that pundits who're accusing Tom Mulcair of pitting West against East are projecting. This has been framed as an East-West issue despite the decline of manufacturing in prairie cities, along the West coast, and despite the fact that more British Columbians agree with Tom Mulcair than Ontarians. For the shake of intellectual honesty and journalistic integrity this nonsense has got to stop.  

(Hat tip to Buckdog)

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