Seven of the thirteen economic forecasters who make up BC's Economic Forecast Council predict that growth in 2005 will be lower than in 2004. When you look at the forecasts that should be no surprise as the seven are in the top eight for their high forecasts for 2004; in other words, they might be overly optimistic for 2004. Nevertheless, the average forecast for 2004 is real growth of 3.4%, followed by 3.3% in 2005. If true, that is good but not as good as the 4.6% real growth experienced in 2000.

It will be late April 2005 before Statistics Canada releases its preliminary estimates of provincial GDP in 2004, and it will be November 2005 before the preliminary estimates are revised. Those who follow the numbers know that Statistics Canada pushed BC from slow growth, to recession, and back to slow growth in three revisions of its GDP estimates for 2001.

If BC's GDP did grow by 3.4% in 2004, it means a jump in labour productivity, since employment grew by 1 to 2 percent less than GDP depending on how one measures employment growth. Normally that would mean upward pressure on wages, but the average hourly wage rate as measured by the Labour Force Survey has fallen by 0.4% so far 2004 compared to the first 11 months of 2003.

All forecasters may soon be lowering their estimates. The rising Canadian dollar (falling US dollar) is producing layoffs in BC's forest industry and major concerns in the film industry. Hits to tourism cannot be far behind. The good news is that the Bank of Canada did not raise the interest rate in its December 7th window because a higher rate would put more upward pressure on the dollar and dampen the construction boom. Sooner or later that is bound to happen as a 2.5% overnight rate runs up against a "liquidity trap", i.e. there's not much room to go lower, and rising consumer debt has to put upward pressure on interest rates.

The Campbell government would have you believe that BC's economic growth is the result of its policies, but even the BC Liberal party website states that B.C.'s economic growth reflects "… near record lumber prices, higher energy and mineral prices, sustained housing market activity and stronger retail sales." High resource prices and low interest rates are propping up BC's growth; it doesn't have anything to do with government policies. A minor hiccup in those external forces could cause serious problems for our boom-bust economy. As Finance Minister Gary Collins prepares for his February 15, 2005, budget speech, the question will be whether it is a pre-election kick-off or an accurate reflection of our delicate economic balancing act.