In any other time, the combination of an ongoing Canada-U.S. softwood lumber dispute and the mountain pine beetle’s plague-like infestation easily would have brought British Columbia’s economy crashing down like a falling Douglas fir.

Not this time, though. Despite these troubles in the forestry sector, B.C.’s economy is on a growth spurt that not many would have imagined a few years ago.

Since 2004, the province’s economy has soared in the same high-altitude atmosphere as oil-rich Alberta’s. In fact, RBC Financial Group’s 2006 Provincial Outlook pegged the West Coast province’s economic growth at 4% this year, compared with Alberta’s 5% and Newfoundland’s 6.5%. Next year, B.C. is predicted to grow by 3.9%, second only to Alberta’s expected 4% growth.

And to top it off, B.C.’s boom is not a fleeting abnormality. A recent analysis by Credit Union Central of British Columbia notes that the province is now entering the best five-year growth period in more than two decades.

“Higher investment spending will be a key driver of this growth,” the analysis states. “It will be spurred by high energy and metals prices, growing trade with Asia and rising demand for commercial and industrial space.”

Of course, another driver is the infrastructure buildup for the Vancouver-Whistler 2010 Winter Olympic Games.

Success on the economic front, however, is also bringing challenges. “By far, the single biggest risk facing the B.C. economy is that it starts to trip over its own success by overheating,” the RBC report notes.

“The good news that has brought just about every sector together in a widespread expansion has sparked significant labour shortages,” it also warns.

Consequently, public- and private-sector wage demands are increasing. So are building materials costs, which have contributed to Greater Vancouver having the country’s highest house prices.

Alarm bells are already ringing over cost overruns on Olympic-related building and other construction projects, such as the new rapid transit line in metro Vancouver.

The hot economy also presents problems for Victoria’s politicians. B.C. Finance Minister Carole Taylor brings down the first budget of the Gordon Campbell government’s second term on Feb. 21. In its first term, the provincial Liberals used significant spending and service cuts to bring B.C.’s books back into surplus.

Now, many here feel it’s payback time — especially those in the province’s still powerful public-sector unions. The contracts for virtually all of B.C.’s 235,000 unionized provincial public-sector workers expire this spring. And the workers are just coming off several years of budget cuts, layoffs and wage freezes.

But, unlike its first-time “tough love” policy, the Campbell government is now trying a softer approach. Taylor recently set aside about $6 billion for wage increases and other benefits. That figure includes $1 billion for those unions that can settle their contracts before the 2005-06 fiscal yearend on March 31. Also, the traditional across-the-board settlement practice has been abandoned to allow some public sectors to catch up with the private sector.

The minister must also deal with growing taxpayer “payback” expectations. With the federal Conservative promise to cut the GST by 1% fresh in their minds, B.C. taxpayers are looking for a cut in the 7% PST on Feb. 21.

Victoria is also under pressure from business groups to keep its spending under control while directing more dollars into post-secondary education and training to help alleviate B.C.’s growing skilled-labour shortage.

The Canadian Taxpayers Federation is also calling on Victoria to streamline B.C.’s income tax system by eliminating the top two marginal tax rates and increasing the basic personal exemption for all income earners to $15,000.

Although Taylor isn’t tipping her hand, she has said her budget will be a cautious one because much of B.C.’s current hot economy is being driven by record-high global commodity prices.

And she knows full well that commodities are cyclical — what goes up eventually comes down. IE