The New Year is the traditional time for pundits to prognosticate on the coming year.
It can be a humbling time for columnists who go back and read what they told people on previous New Years.
For every dart that lands somewhere near the dartboard (“pandemic scenarios [are] particularly scary” - January 9, 2020), there are two that hit the drywall or go right out the window (“risk events to think about are a prolonged power outage and a massive Fort-McMurray-style wildfire” - January 1, 2023).
There are many scary global risks you could open a New Year’s column with, from a US-China conflict in the South China Sea to another pandemic. You could even add a few cosmic risks, such as a repeat of the 1859 Carrington Event where a solar mega-flare and the associated geomagnetic storm fry our electronic devices and wreck the power grid.
Such risks are fascinating to doom-scroll, but not very useful. Assuming you have an emergency kit and two weeks of oatmeal and Spam cached in your basement, there is not much else you can do about them.
Instead, let’s look at some risks closer to home that have a solid likelihood of occurring, and which you can do something to prepare for. Let’s remember that many risks have upsides, not just downsides, and that the savvy entrepreneur or policymaker can watch for signposts that these upsides or downsides might occur. And let’s look at just three risks, so you have time to get back to fulfilling all those ambitious New Year’s resolutions you made.
First, let’s look at Eagle Gold. The most likely outcome is that the Yukon government keeps pumping money into the property to repair the mine, but that the mine does not re-open in 2025 (the Yukon Department of Finance’s latest economic outlook includes the assumption that Eagle does not reopen in the next five years).
The upside risk is that the Yukon government and the receiver fix the mine, sell it to a credible gold company in partnership with the Na-Cho Nyäk Dun First Nation, and that the mine re-hires 450 people and restarts. The downside risk is that the Yukon government and the First Nation decide the mine is not worth fixing, and put it into permanent closure.
The signposts for the mine reopening include gold prices soaring even higher than recent record highs of around US$2600 per ounce, the First Nation signing a partnership agreement with a major mining company or press releases from the receiver suggesting the repairs are cheaper and faster than previously thought.
The downside signposts to watch for are further bad news when spring runoff tests the mine’s water management system, slow progress on the receiver’s remediation efforts or the First Nation further signalling opposition to re-opening.
Second, and actually more important for the Yukon economy in terms of dollar impact, let’s look at the outlook for Yukon government spending. Here, the central assumption would be an increase in operations and maintenance spending of about six percent. This is a point or so above combined inflation and population growth, and in line with the 2007-23 average increase calculated by the Department of Finance. As for the capital budget, you could assume spending roughly the same as this year, as suggested in last spring’s budget.
The downside risk is an outburst of cost control. Rumours of a post-Victoria-Gold clampdown on spending occasionally sweep through the capital, but significant cuts in total spending seem improbable with an election scheduled for 2025. Plus, the receivers reported last month that another $55 million needed to be spent on Eagle by March 2025. The signposts for the downside, in theory, would be Eagle getting remediated early and below budget, and major political parties competing on promises to cut spending. The upside risk is an election year ramp up in spending. One early-warning signpost for this would be the Yukon government seeking a higher credit limit from Ottawa, which indeed occurred when the Yukon government announced on the Friday before the holidays that Ottawa had raised its credit limit from $800 million to $1.2 billion.
The third risk is of a stingier federal government. Ottawa’s money plane is currently scheduled to deliver $30,004 per Yukoner next fiscal year. And that doesn’t count direct federal spending on local programs such as Fisheries or Environment, or direct payments to First Nations and municipalities, or special cash flows from agencies such as the federal infrastructure bank.
The central forecast here is probably something similar to the status quo, but with programs renamed and priorities moved around after the next federal election. The downside risk is austerity in Ottawa flowing through to our transfers, either because the winners of next year’s election want to cut the federal deficit or because they are forced to by US tariffs hurting the Canadian economy. The upside is the status quo, plus a new layer of Northern defence spending layered on top.
The signposts to watch are policy promises from the federal Conservatives, who are currently way ahead in the national polls, as well as what happens in the trade negotiations between Ottawa and the new US presidential administration.
As you watch for stories on the signposts in the Yukon News, you can also start thinking about what these risks mean for you and your organization. While a prolonged and expensive remediation of Eagle combined with tight government budgets in other departments would be painful for many in the medium term, an election-year spending spree also creates opportunities for those able to pitch a convincing proposal to our political leaders.
Keith Halliday is a Yukon economist and the winner of the 2022 Canadian Community Newspaper Award for Outstanding Columnist. His most recent book Moonshadows, a Yukon-noir thriller, is available in Yukon bookstores.
