Nfld. & Labrador·Weekend Briefing

This ain't no blood type: Why our new credit rating is no reason to smile

The credit rating agency Moody's had a curious reaction to Newfoundland and Labrador's plans to have a balanced budget in four short years, writes John Gushue.

A downturn in N.L.'s credit rating is a dent in the Liberal recovery plan

Finance Minister Tom Osborne says there is no reason to be alarmed by a downgrade in Newfoundland and Labrador's credit rating. (Bruce Tilley/CBC)

When the financial credit rating agency Moody's took a look at Newfoundland and Labrador's plans to deliver a balanced budget in the next four years, it came up with a curious two-word description.

"Highly ambitious."

The tone there reminds of the polite way that adults with raised eyebrows respond to young kids' dreams, like building a rocket or scoring a home run in the World Series.

Moody's is one of several companies that reviews the fiscal health of governments like ours, and then tells lenders about the risks of lending to us.

On Thursday, Moody's told the markets that we're a higher risk. Not hugely higher, but higher. That means — as it would for me or you if we were applying for a loan or mortgage — we'll have to pay more in interest, and some lenders might think harder about making the loan in the first place.

No big whoop, telegraphed Finance Minister Tom Osborne, who has found a knack of smiling while delivering budgets with increasingly mounting debt burdens. Not an easy thing, necessarily, but it does visually convey confidence even when the bottom line has deeply red ink, and the costs of Muskrat Falls become heavier by the day.

"Our lenders are telling us this is nothing to be alarmed with," Osborne told reporters outside the legislature on Thursday.

If only it were just a blood type

Credit rating jargon is hard for mere mortals to understand. Our former rating was what the agency calls AA3 negative — which might sound more like a blood type than a rating of fiscal health. The new, lower rating is called A1 stable.

I imagine many people would not know intuitively which one is better or worse by looking at them.


But money people do know, and — frankly — they're worried.

You may remember that the government revealed a budget in April that surprisingly posted a surplus (on paper, if not reality) of $1.9 billion. The money unfortunately was not genuine, but an accounting practice to account for a change in the Atlantic Accord; the actual cash will show up over the years to come.

We're still very much in a deficit position, and to get to surplus — and in four short years — will likely require a different tack than the Liberals have been sailing with.

Premier Dwight Ball has shown no appetite at all for layoffs, at least on the scale that would make the news. The government has been eliminating hundreds of positions over the last few years, but largely through attrition.

Getting to the point of cutting actual spending by seven per cent per year (this is the "highly ambitious" goal that Moody's was talking about) will almost certainly require actual cutting. Actually eliminating services, and actually showing public servants the door.

Meanwhile, the news from Moody's was enough to cause the NDP, the party always most likely to highlight an underfunded service, to think about its priorities.

Leader Alison Coffin — who is, let's remember, an economist — said the Moody's news has led her to hold off on calling for new spending, at least "for now," as she put it. Instead, she wants to focus on overall government priorities. (It's also worth remembering that Coffin, with a caucus of three, plays a critical role in the legislature where the Liberals are a seat shy of a majority.)

So, there will be less pressure from at least one side of the house to spend more. One wonders if any MHAs will be openly pressing for cutting spending.

Speaking of spending …

Quote of the week

Financial advisor Larry Short is worried that Newfoundland and Labrador's spending continues to outpace its sources of revenue. (Stephanie Tobin/CBC)

"Any household, any person, any province that is spending $8 billion but only taking in $7 billion, that spells that we are going to be continue to be downgraded until we do something significant to cut our expenses or increase that revenue."

— Financial analyst Larry Short, speaking to us about all of the above. 

Like a bolt of blue

A short dashcam video of a moose collision earlier this month is a stark reminder of just how quickly everything can change. (The driver is fine, by the way; he just doesn't want to talk about it.)

A moose runs out from the shadows of a ditch and strikes a vehicle travelling on the Trans-Canada Highway 0:09

A jolting moose can be like a bolt of blue … but they're not the only risk on the road.

The video reminded me of a similar out-of-nowhere scare I encountered last week on the Prince Philip Parkway, when a truck swerved at high speed into a lane, and then back again. The speed was high, and what intensified the experience was that the pickup was towing a large trailer stacked with a riding mower and lawn-care tools.

We were fine, but one of the drivers ahead of us was clearly rattled.

And here's the punchline: after watching this driver do it again, and again, we kept catching up with him at successive red lights.

Sure, moose scare me. They're wild animals, after all.

Wild drivers, though, scare me more.

Read more from CBC Newfoundland and Labrador

About the Author

John Gushue

CBC News

John Gushue is the digital senior producer with CBC News in St. John's.


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