Public Accounts Committee on May 7th, 2024

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

What about in 2020-21?

[Carolyn Rogers]

There was a surplus.

[Coralia Bulhoes]

There was a surplus.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

I see. There was a surplus for 2021, 2022 and 2023.

[Coralia Bulhoes]

I'm sorry. The public accounts fiscal year is from April 1 to March 31. For the 2021-22 year of the public accounts, there was a surplus of $2.3 billion. For the year from April 2022 to March 2023, there was a loss of $3.1 billion.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

I understand. Thank you for that.

In terms of the impact of COVID-19 on the policies of the Bank of Canada, in addition to the supply concerns that were just mentioned in the question of our Bloc colleague, what other concerns influenced those decisions that were made?

[Carolyn Rogers]

What were the contributing factors to our decisions to take extraordinary policy steps? I would characterize our policy decisions in two phases.

The first was in March 2020. This was at the very beginning of the pandemic. At that point in time, what we were facing was extreme market volatility. What often happens when there is a big shock to the economy is that everyone—investors, companies and households—wants to be cash rich. They want to liquidate investments into cash, so there was what we called a dash for cash. The market was swamped with people looking to liquidate investments.

What the bank did was intervene and ensure that there was enough liquidity in the market to keep markets moving and make sure that this dash for cash didn't result in a downward spiral in the price of assets. That is a role that central banks around the world play. We intervene in markets when there is a severe disruption that makes the markets not function effectively to support the economy.

That was the first phase of our response.

I think somewhere around May or June of 2020, the market volatility started to normalize and settle down, so markets went back to a more functioning condition. However, at that point, the GDP had plunged. There were about three million Canadians unemployed, and many more were not working as much as they wanted or needed to. There was no vaccine in sight at that point in time. We were still in lockdown. We were all locked in our houses. I think that at that time, the view was that were were staring down the potential for something on the scale of the Great Depression.

The other thing I remember distinctly is that oil was trading at about $18 and oil futures were negative. I had never seen that in my lifetime. Those were the conditions in June.

The judgment of the Bank of Canada and central banks around the world was that we needed to take extraordinary measures to support the economy. Just as in March 2020, it was our judgment that on top of a health crisis, Canadians didn't want to face a financial crisis. In June 2020, in addition to a health crisis, we didn't think Canadians should have to face an economic crisis. Therefore, we intervened to provide stimulus to the economy by ensuring that long-term rates stayed low and Canadians could access credit to keep the economy running.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thanks for that.

This is for the Department of Finance. In that same period of time during the pandemic, we saw governments and particularly ministries of finance—I'll note the United Kingdom—bring in a windfall tax, especially during the period of recovery. This was largely when the vaccine had been developed and when governments were looking to stabilize prices, as well as revenues. We saw the United Kingdom bring in a windfall tax, for example.

Was there ever a moment when the Department of Finance considered recommendations toward a windfall tax?

I'm sorry. Did anyone hear that?

[The Chair, Conservative, John Williamson]

Yes. They're getting organized.

Go ahead.

[Evelyn Dancey]

We were conferring amongst ourselves. Neither of us is likely the correct finance official to speak on tax issues. What I had whispered to my colleague was whether we had sufficient knowledge about the Canada recovery dividend to at least offer that explanation to you, but there have been measures coming out of the postpandemic context that have been particularly focused on financial institutions.

[The Chair, Conservative, John Williamson]

Thank you very much.

That is your time, Mr. Desjarlais. We'll come back to you shortly.

Beginning our second round, Mr. Scheer, you have the floor for five minutes, please.

[Andrew Scheer, Conservative, Regina—Qu'Appelle, SK]

Thanks very much, Mr. Chair.

Ms. Rogers, you gave a speech a little while ago about productivity, and I just want to make sure that I totally understand what productivity means, because I know that there's a lot of jargon and terms that get thrown around here.

Productivity, as I understand it, is how much Canadians produce—how many trees they turn into lumber, how much grain they grow or how many cars roll off the assembly line. It's basically the things that individual Canadians make. Is that correct?

[Carolyn Rogers]

Yes. It's a function of the inputs it takes to make them.

[Andrew Scheer, Conservative, Regina—Qu'Appelle, SK]

I think you also said in your speech that low productivity has a negative effect on inflation. In other words, low productivity will have the effect of higher inflation for longer if Canada doesn't start to produce more. Is that an accurate summary?

[Carolyn Rogers]

It's not exactly that. What I said in my speech is that improving productivity would help us buffer the Canadian economy against what we expect to be a potentially less benign inflationary environment going forward.

[Andrew Scheer, Conservative, Regina—Qu'Appelle, SK]

In terms of policy tools that would help productivity, can you think of some things that would encourage or facilitate Canadians' being more productive, producing more things and having more goods in an economy?

[Carolyn Rogers]

Sure. I talked about a couple of them in my speech.

These are things that equip workers to be more productive in each hour they're at work, such as additional training or additional tools that help workers produce more per hour. Additional investment in infrastructure, a competitive environment and ensuring that we have an efficient regulatory approval process are some of the examples that I used.

[Andrew Scheer, Conservative, Regina—Qu'Appelle, SK]

Would investments in capital also help with productivity?

[Carolyn Rogers]

Yes.

[Andrew Scheer, Conservative, Regina—Qu'Appelle, SK]

Things that would be disincentives—in other words, policy tools that would punish investments in capital—I would assume would then have the opposite effect. Would that lower productivity?

[Carolyn Rogers]

With all policies in, you want to have an environment that encourages investment in capital, absolutely.

[Andrew Scheer, Conservative, Regina—Qu'Appelle, SK]

We want to encourage investing in capital. Okay.

How long ago was it that you gave that speech? Was it about a month?

[Carolyn Rogers]

I think so. That sounds about right.

[Andrew Scheer, Conservative, Regina—Qu'Appelle, SK]

Do you think that it's still time to break the glass?

[Carolyn Rogers]

We haven't fixed it in the last month, if that's your question.