Strong economic activity this year will see Alberta make historic investments in savings and debt reduction.

High revenue forecast for bitumen royalties, other resource revenue and corporate income taxes have increased the province’s forecast surplus to $13.2 billion for 2022-23.

This year’s surplus enables the government to make the largest single-year debt repayment in Alberta’s history, repaying $13.4 billion in debt that comes due this fiscal year. The government will also allocate $5.2 billion to debt coming due in 2023-24.

The government will make the largest ever single-year investment in the Heritage Fund, retaining the fund’s remaining 2021-22 net investment income of $1.2 billion and allocating $1.7 billion, for a total investment of $2.9 billion. This is over and above the $705 million retained for inflation-proofing last year.

“Alberta’s commitment to fiscal discipline and our unrelenting focus on economic growth has helped bring about an extraordinary turnaround in our financial situation. We promised Albertans we would get our fiscal house in order and that’s exactly what we’ve done. Now, we’re paying down debt so future generations won’t have to, saving more for a rainy day, and putting more money in Albertans’ pockets.”

“For too long, governments in Alberta refused to exercise fiscal discipline during boom times. Those days are over. Alberta’s government is making the prudent decision to save and invest surplus revenues so future generations can benefit from the prosperity of today.”

Indexing personal income taxes

The province is fulfilling a commitment made in 2019 to index personal income taxes to inflation, retroactive to the 2022 tax year. The basic personal tax amount is rising to $19,814 and will rise again in 2023.

An additional 80,000 to 95,000 Albertans will pay no provincial personal income tax by 2023, on top of the approximately 1.3 million tax filers who already pay no provincial personal income tax.

Many Albertans will first see the benefit of indexation through lower tax withholdings on their first paycheques of 2023. In addition, since indexation will resume for 2022, Albertans will receive larger refunds or owe less tax when they file their 2022 tax returns in spring 2023. In total, resuming indexation for 2022 and subsequent years will save Albertans an estimated $304 million in 2022-23, $680 million in 2023-24 and $980 million in 2024-25.

Indexing personal income taxes to inflation will contribute further to Alberta’s strong tax advantage: Albertans already pay less in overall taxes, with no PST, no payroll tax and no health premiums.

Alberta’s government has already introduced some of the most generous measures to keep more money in the pockets of Albertans, committing $2.4 billion in relief for rising prices, inflation and cost of living, including:

• Providing $300 in relief for 1.9 million homeowners, business operators and farmers over six months through the Electricity Rebate Program.
• Eliminating the 13-cent-per-litre provincial fuel tax until at least the end of September.
• Helping school authorities cover high fuel costs for buses under the Fuel Price Contingency Program.
• Providing natural gas rebates from October 2022 to March 2023 to shield consumers from natural gas price spikes.
• Maintaining Alberta senior benefits for those over 75 years of age, exempting them from the Federal Old Age Security increase.

Other economic growth indicators

Momentum has picked up in Alberta’s labour market. The province has added 68,200 jobs since the beginning of the year and most industries have surpassed employment levels from early 2020, before the pandemic first took hold of the province. Alberta’s unemployment rate fell to 4.8 per cent, the lowest since early 2015. In response to these positive developments, the province has revised its forecast for employment growth to 5.3 per cent, up from 4.1 per cent at budget. The unemployment rate has also been revised down to 5.9 per cent in 2022 from the budget forecast of 6.6 per cent.

Business output has surged in the province on the back of higher demand and prices. While energy products have led the increase, there have been gains across most industries including chemical and forestry products, food manufacturing and machinery. Merchandise exports have risen more than 60 per cent so far this year, while manufacturing shipments are up over 30 per cent.

Higher energy prices are boosting revenues and spending in the oil and gas sector. Strong drilling activity has lifted crude oil production to 3.6 million barrels per day so far this year and is expected to reach a record high this year. Outside the oil and gas sector, companies are proceeding with investment plans, buoyed by solid corporate profits.

Real gross domestic product (GDP) is expected to grow by 4.9 per cent in 2022. This is down slightly from the budget forecast of 5.4 per cent, reflecting softer expectations for growth in consumer spending and residential investment as a result of higher inflation and interest rates. Even so, real GDP is expected to fully recover from the COVID-19 downturn and surpass the 2014 peak for the first time this year. Private sector forecasters are expecting Alberta to have among the highest economic growth in the country this year and in 2023.

Quick facts

• The surplus for 2022-23 is forecast at $13.2 billion, $12.6 billion more than what was estimated in Budget 2022.
• The revenue forecast for 2022-23 is $75.9 billion, $13.3 billion higher than reported in the budget.
  • Non-renewable resource revenue is forecast at $28.4 billion in 2022-23, up $14.6 billion from budget’s $13.8 billion forecast.
  • Corporate income taxes are up $2 billion from the budget, with a new forecast of $6.1 billion for 2022-23.
  • Revenue from personal income taxes is forecast to be $13.3 billion in 2022-23, down $116 million from budget. Indexation of the personal income tax system, retroactive to Jan. 1, 2022, is forecast to lower revenue by $304 million. This is partially offset by increased revenue from rising primary household income.
• Total expense is forecast at $62.7 billion, up slightly from the $62.1 billion estimated at budget.
  • Education is receiving an extra $52 million to support the new teachers agreement and to help school authorities pay for bus fuel.
  • $279 million the province received from the federal government for the Site Rehabilitation Program is being spent this year instead of next year.
  • $277 million is needed to cover the cost of selling oil due to higher prices and volumes.
• The Capital Plan in 2022-23 has increased by $389 million mainly due to carry-over of unspent funds from last fiscal year and an increase of $78 million for highway expansion.
• Taxpayer-supported debt is forecast at $79.8 billion on March 31, 2023, which is $10.4 billion lower than estimated in the budget.
• The net debt-to-GDP ratio is estimated at 10.3 per cent for the end of the fiscal year.