Evidence of meeting #119 for Public Accounts in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was inflation.
A video is available from Parliament.
4:45 p.m.
Conservative
The Chair Conservative John Williamson
Thank you. That is your time, Ms. Bradford.
We'll turn now to Mr. Nater for our third round.
You have the floor for five minutes, please.
4:50 p.m.
Conservative
John Nater Conservative Perth—Wellington, ON
Thank you, Mr. Chair, and through you, thank you to our witnesses for joining us.
I'm going to begin with the Bank of Canada, and I hope we can get some general questions out of the way off the bat.
Reviewing what is currently there in terms of treasury bills and domestic marketable bonds, my understanding is that about $276 billion is outstanding in treasury bills and a little over a trillion dollars in bonds.
Am I right to assume that as these mature, they are reallocated and put out again for purchase at whatever the rate would be at the current time? Am I right in assuming that?
4:50 p.m.
Senior Deputy Governor, Bank of Canada
I'm going to start by asking Coralia to clarify the numbers.
4:50 p.m.
Managing Director and Chief Financial Officer, Bank of Canada
The numbers you're citing are on the government statements, so I will let the Department of Finance respond.
4:50 p.m.
Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
Those numbers are accurate. Basically we have around $270 billion in T-bills.
The way it works is that our debt will come to maturity. We issue our debt through auctions, and it's basically a priority dealer distribution. We have a number of dates that are already set up that we announce at the beginning of the quarter.
Most of the debt that we're showing is debt that's rolling over, as we call it. I think that this year 85% of the overall envelope as debt will be rolling over and will need to be reissued in the market.
4:50 p.m.
Conservative
John Nater Conservative Perth—Wellington, ON
When it's reissued in the market, if it's at a higher rate than it was prior to maturity, does that increases our costs?
4:50 p.m.
Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
Of course. It will be issued at the market rate. Wherever the rate is will impact the interest and the debt charges that we'll have on that debt.
4:50 p.m.
Conservative
John Nater Conservative Perth—Wellington, ON
That's exactly it. As it matures, if it stays high, it costs Canadians more money.
I want to look at the analysis of the bonds. Would you be able to tell us...or could you provide the committee with a breakdown of who owns those bonds, whether it's domestic ownership or international ownership?
4:50 p.m.
Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
Yes, I can.
In Canada, first of all, our debt is all issued in Canadian dollars. Most of the debt is owned by Canadians. About 30% of our debt is owned by foreigners. When we compare this share to other G7 countries. we're in the low range, which is really positive for Canada.
Otherwise, we have around 25% that's currently owned by the Bank of Canada. The rest of it will be owned by institutional investors through savings that individual Canadians will put in banks and be funnelled through an instrument that will include the Government of Canada debt.
4:50 p.m.
Conservative
John Nater Conservative Perth—Wellington, ON
Looking at the international number, which is about 30%, give or take, how much of that is owned by foreign states? How much is that owned by foreign individuals or foreign entities?
4:50 p.m.
Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
That's a good question. I don't have have the exact number.
What we know is that a lot of our debt is owned by foreign banks. That's part of a portfolio that's highly recognized around the world, whereby banks will buy a set number of different commodities, including the Canadian dollar. In order to meet that target, they will buy GOC. Most of our debt that's on the foreign side is owned by central banks.
4:50 p.m.
Conservative
John Nater Conservative Perth—Wellington, ON
Would you be able to—not today—provide the committee with a breakdown of which entities own that foreign debt?
4:50 p.m.
Associate Assistant Deputy Minister, Financial Sector Policy Branch, Department of Finance
We could try, but one thing that you should be aware of is that once we issue our debt through the foreign market, it's distributed in the security market, so we don't know exactly who owns our debt.
There's data available to Statistics Canada, and that's what I've been able to provide to you. I can validate if there's more information available, but I don't think we'll be able to provide a disaggregated number on this.
4:50 p.m.
Conservative
John Nater Conservative Perth—Wellington, ON
I appreciate that. Anything you can provide would be useful for my own personal interest.
In the short time I may have left, I want to go back to the GDP per capita. Perhaps we'll go to Ms. Rogers with this one.
Can you compare our decline in GDP per capita with our peer countries? I'm thinking mainly about the United States, where we've seen their increase in per capita GDP growth compared to Canada's. Could you comment on that?
4:50 p.m.
Senior Deputy Governor, Bank of Canada
I don't have exact numbers in front of me, if you're asking me to give you exact data.
4:50 p.m.
Conservative
John Nater Conservative Perth—Wellington, ON
I'm not asking for exact data, just how we compare to our friends south of the border.
4:55 p.m.
Senior Deputy Governor, Bank of Canada
Well, I think you characterized it accurately. Quite honestly, I don't have the GDP per capita in the U.S. and the GDP per capita in Canada, so it's difficult for me to give you a comparison.
4:55 p.m.
Conservative
The Chair Conservative John Williamson
That is your time, Mr. Nater. Thank you.
I'm turning now to Ms. Shanahan. You have the floor for five minutes, please.
May 7th, 2024 / 4:55 p.m.
Liberal
Brenda Shanahan Liberal Châteauguay—Lacolle, QC
Thank you very much, Chair.
I thank our witnesses for being here today, for answering our questions and for being very patient with questions coming from all over the field.
That's why my first question to you, Ms. Rogers, is around your mandate. There does seem to be some confusion in what we hear in the House of Commons and so on between monetary policy, fiscal policy, economic policy, social policy and so forth.
What is your mandate at the Bank of Canada? What is the Bank of Canada responsible for?
4:55 p.m.
Senior Deputy Governor, Bank of Canada
The Bank of Canada's mandate is to steer the Canadian economy in the long-term best interest of Canadians by keeping inflation low and stable, so we're responsible for monetary policy.
4:55 p.m.
Liberal
Brenda Shanahan Liberal Châteauguay—Lacolle, QC
Does the Government of Canada have anything to do, then, with monetary policy? The executive, I'm saying—the Prime Minister, the Minister of Finance—do any of those roles have anything to do with it?
4:55 p.m.
Senior Deputy Governor, Bank of Canada
Certainly there are a number of accountability mechanisms that are in place, the most important of which, or the cornerstone, is what we call our inflation target renewal agreement, which is an agreement that sets the bank's objectives, including the target rate of inflation. It also outlines the broad policy tool kit available to the bank.
That is an agreement that is renewed once every five years, following a broad round of consultation with the Canadian public. That process will get under way soon, because the next renewal date for the agreement is in 2026. We consider that to be our cornerstone mandate document, the agreement that we have with the government on what our objectives are.
Beyond that, there are a whole series of what I would call accountability mechanisms that support the independence of the Bank of Canada. We have an independent board of directors. We are audited annually by two separate audit firms. The Minister of Finance can, at any time, request an expansion of the scope of those audits or order a special audit.
The governor and I appear regularly before your colleagues at the House finance committee, at the Senate bank and finance committee and, of course, here today. At every rate decision, the governor and I hold a press conference and a press availability event. We also recently started publishing a summary of our deliberations that underpin each of our rate decisions. We annually publish an assessment of financial stability and hold a press availability event—we'll be doing that for this year on Thursday this week—and we publish an annual report.
Have I forgotten anything, Coralia? I think that's the long list of what I would call accountability mechanisms in place to support our mandate and our independence.
4:55 p.m.
Liberal
Brenda Shanahan Liberal Châteauguay—Lacolle, QC
If the Prime Minister doesn't like what you are doing, should the Prime Minister just be able to dismiss the governor of the Bank of Canada and interfere in that decision-making process?
4:55 p.m.
Senior Deputy Governor, Bank of Canada
The legislation puts the governor, as well as me, in place for a period of seven years. We're in for a term of seven years. The Prime Minister does not.... In that legislation, the dismissal of the governor does not occur by directive, no.
4:55 p.m.
Liberal
Brenda Shanahan Liberal Châteauguay—Lacolle, QC
Thank you very much for that comprehensive answer.
Can you explain how the Bank of Canada's financial results are presented in the Public Accounts of Canada 2023, given that it is the topic we are here today to discuss?