Nunatsiaq News
NEWS: Nunavut May 07, 2018 - 9:30 am

Nunavut economic forecast predicts boom, followed by bust

Aging population may lead to territorial government deficits by 2018

JANE GEORGE
There's lots of economic number-crunching to be found in this report from the Conference Board of Canada, which reveals that the benefits of resource development now underway will not be able to sustain Nunavut over the long term.
There's lots of economic number-crunching to be found in this report from the Conference Board of Canada, which reveals that the benefits of resource development now underway will not be able to sustain Nunavut over the long term.

Things are looking mostly up for Nunavut’s finances—at least for the next few years.

That’s when job creation and public spending likely won’t keep pace with the growth of the population by 2028, a situation that’s bound to worsen by 2040.

However, in 2018, the territory is on the cusp of an unprecedented economic growth spurt and a mining boom, says the recently released report, “Economic outlook for Nunavut, the Northwest Territories, and Yukon,” prepared by the Conference Board of Canada’s Centre for the North.

Its detailed forecasts, based on hundreds on indicators, show mining projects are poised to pump $2.6 billion worth of capital spending into Nunavut, with most of that coming before 2020.

At the same time, average wages and salaries per employee are expected to grow at a pace slightly above inflation.

And surging gold production will push Nunavut’s trade balance into a short-lived surplus in 2023, the report said.

But by 2028, the Nunavut government’s financial position is predicted to get weaker, and by 2040 the report’s forecast looks downright challenging, as the need for public services, such as health care and education, outstrips the territorial government’s ability to pay.

By 2040, Nunavut’s workers will be left with the responsibility of supporting a larger number of dependents than ever before, the report said.

This will accompany a growing demand for services which will force the Nunavut government to increase spending on health care every year by 5.1 per cent.

“At that pace, it will eat up one-quarter of the entire territorial budget in 2040,” said the authors, economists Stephen Spence and Daniel Lam, of the Nunavut section of the report.

“Our estimates show that without a change in federal transfers or in Nunavut’s tax system, the rising costs of supporting the territory’s young people and seniors will cause the government to slip into deficit after 2028.”

For now, it’s all fairly promising: metals markets are heating up, igniting renewed interest in Nunavut and Yukon the most, said the 80-page report.

Nunavut’s gold output will quadruple when mining capacity increases at Sabina Gold and Silver Corp., TMAC Resources Inc. and Agnico Eagle Ltd.

This will see Nunavut’s real gross domestic product grow 4.4 per cent in 2018 and 9.1 per cent in 2019, due to the new gold production.

Despite that growth, the report found the territory’s unemployment rate will remain higher than in the N.W.T. and Yukon, but will gradually decline, falling to 11.7 per cent in 2040.

“Still, Nunavut will continue to have the highest unemployment rate of any province or territory,” said the report, which notes the benefits of the boom won’t be shared equally.

Overall, the reliance on fly-in, fly-out workers for construction and mining jobs will limit job creation in the territory for Nunavut workers.

Only about one-quarter of the job gains forecast for the next five years will be filled by people living in Nunavut, the report said.

More than half of the 2,200 jobs created between now and 2021 will be in the mining sector, and less than half of those will be filled by workers from Nunavut, the report said.

From 2020 to 2040 nearly all job creation will come from the public sector as the government tries to ramp up its services in health care and education for the population of 19,300 school-aged residents and seniors, whose numbers will nearly triple by 2040.

“Without solid job creation outside the public sector, territorial revenues will struggle to keep up, eroding the budget balance,” the report said.

The report, which can be ordered online, proposes no solutions to the greater need for spending, although it suggests more money from the federal government or development in the territory will be necessary.

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(20) Comments:

#1. Posted by Northern Guy on May 07, 2018

The GN, NTI and the RIAs have had almost 20 years to prepare for the current boom cycle in mining and still we see that only 25% of all mining-related jobs will be held by Nunavummiut. It isn’t that hard to implement industry-specific training programs aimed at a population of less than 30,000 people so what gives?!? I guess the GN is more interested in training lawyers than heavy equipment operators.

#2. Posted by george on May 07, 2018

The conference board cover is quite confidence instilling. A panting desperate fox. Anywho once we all trained in languages then the economy will really start booming. LOL

#3. Posted by Logical Fallacy on May 07, 2018

Consider the following:

“…the reliance on fly-in, fly-out workers for construction and mining jobs will limit job creation in the territory for Nunavut workers.”

The term reliance implies that this is a necessity. Therefore the premise demands an explanation, why is there a reliance on fly in workers?

The only reasonable answer is that there must be a deficit of skilled local labour.

If true, there’s nothing about a reliance on fly in workers that implies it will impede job opportunities for local labour, in fact the opposite is true and this is circular reasoning (and poor journalism).

#4. Posted by Plan?? on May 07, 2018

Plan??  has the GN planned for it’s present Elders other than being caught flat-footed and shipping them all out?

With a number of Premiers and Finance Ministers, how do they keep to a plan for this challenging reality?

Better start now people!  Enshrine it somehow in all future budgets.

#5. Posted by Jeff on May 07, 2018

If waiting for GN elected mlas to solve NU’s issues stop waiting. All elected officials see is big pay, stay long enough get big pension, travel on job, plug holes in NU as best can while elected. That’s it.

#6. Posted by Johns on May 07, 2018

The GN needs much more training programs and mentorships to help fill the gaps, it is only going to get worse and Nunavut will be paying more for fly-in fly-out workers, which we are currently into today.

#7. Posted by Training Ruse on May 07, 2018

Training doesn’t guarantee local hires. Soon after the creation of Nunavut, training was offered in many different fields at Arctic College and beneficiaries were paid to attend classes. The unfortunate result, students attended for the money but not for the career opportunity it provided. To add insult to injury, grading bench marks were lowered so that no one failed. It would be interesting to see how many, if any, ever entered the work force in the fields they were trained.

#8. Posted by Former NAC Instructor on May 07, 2018

#7 You are bang on. I did the best I could with the different programs I taught, but there were considerable problems with all of them (no curriculum in place for example). It is as you said. Standards were not clearly laid out and there was definitely pressure to pass everyone.

Also, the lure of pay was definitely a motivating factor for some of the students. Not that I am opposed to students being given a stipend, but it was obvious that for some this was the only real reason to be there.

In the end, none of the students were even close to a level where they could function in a professional workplace. You can blame me if you wish, but the foundations for success even in school itself were simply not there for the majority of the students.

Basic reading skills, basic math skills were not in place. Even simple things like consistent tardiness were a problem.

#9. Posted by Johns on May 07, 2018

So are you saying never mind with training and mentorship? Stay in the status qua? How long have the GN been in place now?

We still do not have a lot of things in place such as curriculum, proper standards in place, the GN really needs to get working on this.

Enough of the can’t be done mentality, get the curriculum that is needed, teaching materials, high standard programs and resources. How much longer are we going to go on this path?

Is Nunavut going to be like this forever?

#10. Posted by Jobi on May 07, 2018

Tired worn out looking Fox. Just like Nunavut. New territory but worn out already. Wrong people leading and running it. I don’t know the solution.

#11. Posted by Former NAC Instructor on May 07, 2018

#9 No, I don’t think anyone is saying that.

#12. Posted by Figures Never Lie on May 07, 2018

“mining projects are poised to pump $2.6 billion worth of capital spending into Nunavut”.

Jane, this is simply not true.

How much of that money will be wages paid to people who live all year in Nunavut?

How much will be paid to businesses with an address in Nunavut? Of the money paid to those Nunavut based businesses, how much will remain, after they pay their out-of-territory suppliers and sub-contractors?

The sum of those two figures will be the money “pumped into Nunavut” by the mines.  Let me guess somewhere between $10,000,000 and $50,000,000 - and probably closer to the low end of that range.  EDT and Department of Finance should have those estimates, but they sure have not shared them with me.

The rest of that money will go to southern suppliers for equipment, services and supplies. What will Nunavut have when the mine is finished?  It won’t have usable infrastructure because the mine construction is being done to leave the land as it was, plus tailing ponds.

#13. Posted by Northern Guy on May 08, 2018

#12 please read the article again it notes “$2.6B in CAPITAL spending” so that amount is likely very accurate. Capital is direct spending on mine-related infrastructure like: buildings, roads, processing facilities, mine camps vehicles etc. This money will NOT be spent on wages, services or supplies (which is operations and maintenance spending and NOT CAPITAL).

Obviously some of that spending will leak out of the territory as Nunavut does not produce the specialized types of capital equipment needed by most mines. However there should still be plenty of opportunities for Nunavut companies to benefit through contracts to construct roads, buildings and other mine-related infrastructure.

#14. Posted by Transient or Nomad? on May 08, 2018

@#13 You are right to correct #12’s misunderstanding of capital spending, but then you add your own layer of misunderstanding (more likely just not thinking things through).

A lot of that capital spending WILL be spent on wages, services, etc. That infrastructure does not just spring fully formed from the earth.

But the key point of many comments here is valid - Numavut people aren’t benefitting enough. The explanation is complex - I don’t pretend to understand it. But as long as Nunavummiut still want industrial goods and services they should be given the opportunity to earn the money to buy them.

#15. Posted by Figures Never Lie on May 08, 2018

Northern Guy:

The $2.6 billion of spending will buy “buildings, roads, processing facilities, mine camps vehicles” and other assets.

But the money to pay for each of those will ultimately go into only 4 end points, either directly or indirectly: wages, taxes, royalties and profit.

The cost of a building, for example, includes the price of the material, the cost to transport it to the site, the labour to assemble it and the profit to the companies involved.

The cost of the materials will similarly be divided into cost of raw material, cost of transportation to factory, labour in the factory, and profit for the company. etc.

So tell us how much of each of wages, taxes, royalties and profit will remain in the hands of Nunavummiut.  My best estimate remains $10,000,000 to $50,000,000. 

I expect Nunavummiut to end up with less than 1% of that $2.6 billion. The other 99%+ will be “pumped” into southern Canada and the rest of the world.

#16. Posted by Question on May 09, 2018

To everyone complaining that these monies will be pumped into Southern Canada, ask yourself, where is it being pumped in from?

#17. Posted by Real question on May 09, 2018

#16 so does that make it ok to send the money back to southern Canada? Never mind the north? So much for true north strong and free.

#18. Posted by Question on May 09, 2018

#17 In open economic systems money flows freely, regardless of borders or geography. Why shouldn’t it flow south? Maybe the better question is, why wouldn’t it? And if you want more if it to flow through your hands before making its way back south, then how can you capture some of it?

#19. Posted by Northern Guy on May 10, 2018

#15 again you are conflating very different and separate issues. There are no royalty payments associated with capital investment and expenditure. Royalties are only paid to the DIO as a percentage of the value of whatever resource is being mined (Gold most likely). While there is a wage component linked to some capital projects (almost exclusively construction activities)they are infinitesimally small when compared to actual capital costs related to project completion. Your other end point (taxes) can be taxes related to wages or taxes related to the purchase of equipment. Since I am not sure which you are referring to it is difficult to assess if it will or won’t provide net benefit to Nunavut. Suffice it to say, that (dependent upon the terms and conditions of project-specific IIBAs) your estimate of net benefit from capital investment is way off.

#20. Posted by Figures Never Lie on May 10, 2018

#19 Northern Guy - I’m trying to ‘follow the money’.

There could be royalties associated with a capital project (they are money paid for the right to use something, and could be in an IIBA), but usually there aren’t, so I’ll accept your Royalties = $0.

You say that wages “are infinitesimally small when compared to actual capital costs related to project completion”. So what’s you estimate of the “infinitesimally small” portion of the $2.6 Billion?  I’m willing to count the labour of the auto workers who assembled the truck (that will be used at the mine) as labour, and also the labour of those who made the parts that were assembled.

You claim to not be sure if I’m talking about taxes related to wages or to the purchase of equipment, and then you provide no estimate of either.  I’m looking for the total of all taxes.

Then you ignore profit.

So where will all the $2.6 Billion go?  I’m not asking whose hands it will pass through.  I’m asking whose pockets it will end up in.

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