• New Brunswick projects a small surplus of $40.3 million in FY 2023-2024.
  • Tax cuts and weakening economic environment to shrink revenues in FY 2023-2024 (-1.8%) before picking up again towards the end of the planning horizon.
  • Budget 2023 dedicates $1.0 billion in capital spending for FY 2023 – 2024 to accommodate its larger population base.
  • The province’s net debt-to-GDP ratio to track lower, reaching 23.4% by FY 2025 – 2026.

Tax cuts bring down surplus projections

After widely undershooting its surplus positions for two straight years, the New Brunswick government has announced yet another surplus (albeit a small one) of $40.3 million in FY 2023 – 2024. As announced in the Fall Fiscal Update, cuts to personal income taxes (effective tax year 2023) were a reiterated promise in this year’s budget. Costing the government an estimated $70 million in potential revenue, the tax break paired with a weakening economic outlook are expected to shave 5% off revenues this fiscal year compared to FY 2022 – 2023. The adoption of the federal backstop for carbon taxation, provincial property tax rate reductions, and reductions to gasoline & motive fuel tax rates are other notable cuts to provincial revenues in FY 2023 – 2024 (-1.8%).

Investing in capacity-enhancing services & infrastructure

With the larger population base adding strain to provincial services and infrastructure, New Brunswick’s 2023 budget has allocated $1.0 billion of capital spending in FY 2023 – 2024 to capacity enhancing services and infrastructure. Capital investments will be going largely to transportation and infrastructure ($850 million), regional development corporation for economic development ($57 million), and health ($39 million) to build and renovate new buildings and transit networks. Although the proposed capital investment for FY 2023 – 2024 represents an increase of $183 million (+22%) from the previous fiscal year, sharply increased revenue levels (following windfalls in the past two years) have made it possible to invest in capacity enhancing projects without jeopardizing its bottom line. 

Conservative population assumptions offer upside to revenue outlook

With more people moving to the province, the New Brunswick government has enjoyed two consecutive years of stunning revenue windfalls thanks to higher income tax revenue and increased transfers from the Federal Government. Given the novelty of the population surge, however, New Brunswick’s assumptions regarding future population growth adds a layer of uncertainty to its medium-term outlook. After boasting a 2.7% increase in 2022 (New Brunswick’s highest annual increase on record), Budget 2023 assumes a dramatically lower trajectory for population growth, averaging just 1.6% over the next two years before returning to its pre-pandemic average of 0.9%. Although prudent, the conservative population projections could result in another dramatic underestimation of its surplus if demographic trends remain strong. 

On track for longer-term fiscal sustainability

New Brunswick’s fiscal position has undergone a massive turnaround over the last ten years. Now boasting one of the lowest net debt-to-GDP ratios in the country, Budget 2023 made a clear commitment to maintain its financial flexibility moving forward. The positive fiscal situation has allowed the province to out-perform its previous goal of reaching a 28% net debt-to-GDP ratio by FY 2024 – 25. Now reporting an expected net debt-to-GDP ratio of 23.4% by FY 2025 – 2026, the provincial debt burden is projected to continue shrinking over the fiscal planning horizon. We see this as a position of strength to face uncertain economic times in the years ahead.

New Brunswick’s Consolidated Fiscal Plan
($ billions)ForecastEstimateEstimateEstimate
Total revenues12.412.212.412.8
Total expenditures11.612.212.412.8
Net debt-to-GDP25.1%24.9%24.2%23.4%

Source: New Brunswick Department of Finance, RBC Economics

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