Thank you, Mr. Chairman.
We titled our submission to the committee “Reinforcing the Foundations for Growth and Prosperity”. For us the formula is clear: more investment in people and assets leads to economic growth, and economic growth raises the standard of living of all Canadians.
First let me describe briefly what our industry does and the role it plays in Canada's prosperity agenda. The core of what we do is asset-based financing. After the banks and credit unions, our members are the largest providers of debt financing to Canadian businesses and consumers. Our focus is financing specific assets—essentially equipment and vehicles. Our industry has over $106 billion worth of financing in Canada today, an amount that has doubled over the last seven years.
Our members lease everything from aircraft to big rig trucks, cars, recreational vehicles, photocopiers, office equipment, and the printing presses you see in corner printing shops.
Our key message is that the very nature of what we do targets productive assets. The growth in leasing is not a tax-driven phenomenon but efficiency-driven.
So how does our industry specifically fit in the national prosperity agenda? How about the fact that our industry contributed 8% of the total increase in living standards of Canadians over the period of 1992 to 2002, the most recent period studied by an independent economic research firm that does work for the Department of Finance as well. This first-of-its-kind research demonstrated that our industry has a significant impact on raising the standard of living of all Canadians. Specifically, the study found that the “rise in asset-based financing from 1992 to 2002 improved living standards in Canada by 2.3%”.
We asked two noted economists to review this research, Dr. Jack Mintz, then head of the C. D. Howe Institute, and Jim Stanford, chief economist of the Canadian Auto Workers Union. Both of them reviewed the research and supported its conclusions. Dr. Mintz said that the industry “contributes a disproportionate share to higher living standards”.
So we're here today because we believe our industry is an important part of Canada's productivity, economic growth, and national prosperity. We'd like to share with you five messages as you proceed with your work.
The first message is that the public and private sectors must, in our view, concentrate their efforts on growing the economy. The demographics are clear: Canada is getting older and the workforce is getting smaller. How can fewer people generate more wealth to support more people and services? It's through improved productivity.
To do so, Canada must have a highly educated workforce, an efficient public infrastructure, and productive capital assets. A highly educated workforce is mobile and will go where the jobs are. To keep the jobs here, we need efficient infrastructure and capital assets.
Our second message is that investment in equipment is key to greater efficiency and enhanced productivity in today's more competitive marketplace. The appreciation of the Canadian dollar has forced some sectors of the Canadian economy, notably those that depend on export markets, to invest more heavily in machinery and equipment over the last five or six years. Productivity in the manufacturing export sector has seen a cumulative increase of nearly 11% since 2001. New equipment has allowed manufacturers to boost output while reducing factory hours. The high dollar has forced these trade-oriented sectors in Canada to work smarter; domestically focused sectors have not followed suit.
Our third message is that we should enhance the positive strengths of the competitive marketplace in Canada. When I ask my colleagues south of the border what motivates their customers to acquire new equipment to make their businesses more efficient, it comes down to essentially one thing: it's competition, a question of looking over their shoulders at their competition in Florida or Texas or California. If they don't equip themselves with the smartest people and the best equipment, they're not going to be able to compete.
The U.S. experience shows that a competitive national marketplace stimulates innovation, investment, and productivity across the domestic economy. This is a greater motivating force for investment in innovation than any number of complicated government financial incentives. Efforts to encourage more competition in Canada have been less successful, with too many entrenched interests not wanting them to succeed. Government policy still inhibits capital investment, and Canadian companies too often seem slower to invest than their foreign competitors.
Our fourth message is that the federal government should lead a national coalition for growth and prosperity serving as a catalyst and its champion. This is our primary message.
We should focus tax policy on investments and productive assets. Tax policy is critical to capital investment. The government should be congratulated for encouraging capital investment in its 2006 and 2007 budgets. We applaud the intent to provide a more favourable climate for businesses to accelerate or increase their investment in machinery and equipment.
Thank you.