Finance Committee on March 12th, 2015

[Some hon. members]

Oh, oh!

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you very much to each of you for joining us today.

I'd like to start with Your Worship Mayor Blake.

We heard Mr. Cullen refer to housing prices in your community earlier. What is the impact of the precipitous decline in oil prices on the housing market in Alberta and in your community?

[Melissa Blake]

I have a couple of quick perspectives.

We have had significant difficulty in having enough land to keep pace with the growth that we've experienced. In recent times, last year basically, we were able to secure more land, so we took that out of the equation. What was happening in the housing market preceded the price drop in oil, but we were getting to a point of stabilization.

Houses are still very expensive here; if I can recall, I think they're still over $700,000. The marketplace has seen more people putting houses on the market, and it is taking longer to move those houses, but the prices have not had a significant decline at this point.

[Scott Brison, Liberal, Kings—Hants, NS]

Is there a sense of concern over the level of leverage around houses and the potential that as these oil prices continue at least well into 2015, according to the private sector economists, this could create a significant drop in housing prices?

[Melissa Blake]

I think market influence would have more effect on that. If we undergo significant layoffs in the community, we will have more people who are forced to put product on to the marketplace. That's when you would see an impact directly correlated. At this point, we're not actually seeing that to any great extent at all.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you.

Mr. Watkins, we have a period now of slow growth and lower commodity prices. These things are being predicted now to at least go into the mid-term of 2015 for certain. With bond yields at historic lows, real interest rates actually being negative, a slow-growth economy and stagnant job growth, is this a good time to invest in the kind of public infrastructure that can create jobs and growth today and also a more competitive economy to create more jobs and growth in the future?

[Ron Watkins]

From the point of view of the affordability for government, that's a different question, but on the point of the value and importance of infrastructure investment to our industry, it's a very important segment for producers of products like rebar, and structural steel, and so on. Basically our end-use customers in automotive and energy are very much in the same rough percentages, the 33% range, maybe 35% range, and construction would be the third next big market that we serve. Construction uses a lot of steel in a lot of different ways, so it is an important market for us.

[Scott Brison, Liberal, Kings—Hants, NS]

Ms. Cobden, you mentioned the importance of the U.S. economy and the potential recovery, and of course market access to that economy is important.

The softwood lumber agreement with the U.S. is to expire in October 2015. I think there may be some other events in October. I'm not certain, but with that, are you concerned about that softwood lumber agreement and the fact that the Americans have not indicated a positive interest in renewing it?

[Catherine Cobden]

The softwood lumber agreement has been a terrific agreement for the Canadian forest industry. The prevailing view, of course, is we're hoping for renewal. I think we want to hang onto that view. It is important that the Department of Foreign Affairs, Trade and Development spend time on every scenario and be ready. We really must do whatever we can to assure trade flows to the U.S. and is not encumbered. We hope for a successful outcome.

I know that DFATD is watching this very closely. I think we must be vigilant here.

[Scott Brison, Liberal, Kings—Hants, NS]

DFATD was watching the Keystone XL pipeline quite closely as well; it might be helpful if we had a personal relationship between the U.S. President and the Prime Minister of Canada.

Mr. Volpe, it's great to have you join us today.

Compared to previous downturns or drops in the oil industry and commensurate production and the Canadian dollar, there has been a difference in the competitive environment around the auto industry in terms of the importance of Mexico today compared to the past. Given that our dollar has basically kept on track with the peso and has dropped relative to the yen, is it possible that policy-makers are overestimating the positive impact of the lower dollar this time around for the industry?

[Flavio Volpe]

I think that's possibly correct. From the final assembly point of view, the growth in the auto sector in North America has been southward, in the U.S. southeast but mostly in Mexico, and so if you want to service a customer in this business, as my members do, you have to usually go to that market. Fifty-five Canadian companies have established 110 production facilities in Mexico. They serve their customers from there, and in those cases there is no advantage to a Canadian versus U.S. currency exchange.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you very much.

Ms. MacEwen, given the slow-growth economy we're in and the Bank of Canada affirming, along with CIBC economists, the quality of jobs today and the soft nature of unemployment and the reality of underemployment, should we be investing more and taking advantage of this opportunity to build the kinds of public and economic infrastructure we need to create jobs and growth today?

[The Chair, Conservative, James Rajotte]

Just a brief response, please.

[Angella MacEwen]

Yes.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you.

[The Chair, Conservative, James Rajotte]

Mr. Brison, it's Mr. Cannan's round. There remains 14 minutes until the vote, and he can only stay if you stay, so can you stay for his round?

[Scott Brison, Liberal, Kings—Hants, NS]

We have been told to return unless there's—

[The Chair, Conservative, James Rajotte]

I'm paired with Nathan, and Raymond is paired with—

[Scott Brison, Liberal, Kings—Hants, NS]

Yes, but our whip makes those decisions.

[The Chair, Conservative, James Rajotte]

That's fine. If you're leaving, then probably he has to go then, too.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I'll be really quick. I have one quick question for Mr. Volpe.

Congratulations on your first six months of the presidency. It's been a big curve, and a very busy one for you.

I used to be in the auto industry, and I know the new manufacturers work with your OEMs in the aftermarkets three or four years out planning for a model year, so how does the price of today's oil affect your agreements for the long term, and from government's perspective, how have our policies helped your members prepare for the drop in oil prices?

[Flavio Volpe]

You're correct that planning for supply to an OEM usually starts 24 to 36 months out as you bid on a program. There are very sophisticated hedging programs, and OEMs have engaged in the practice of pricing in Canadian dollars to purchase. The fluctuation in currency right now is probably a momentary capture, and for long-term planning it's a less significant factor. The more significant factor is whether we have retained or can retain OEM assembler customers close enough to Canadian suppliers to be able to supply them from a logistics point of view. This government has been active in the retention of those customers here.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I represent Kelowna—Lake Country in the Okanagan, where we have Tolko and the forest industry. I appreciate, Ms. Cobden, your work in the industry and your comments today. We have 38 new trade agreements, and I know that especially the Asian market is big for your clients and your members. I just wanted to know the employment situation. Where are we at right now, and what are the trends? Do you have sufficient or can you see a shortage, or where are we?

[Catherine Cobden]

Yes, we definitely can. It's a bit of a patchwork quilt across the country, but overall for sure, everyone is looking at hiring again, which is very encouraging. We're aiming for 60,000 new jobs by 2020. We're well on our way. We've had 8,000 in the last year or two, and we are definitely still hiring today. Given the circumstances and all the questions, I think it's important to reiterate that. It's a big focus for us for sure.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thanks.

I have a quick question for Mr. Watkins.

We chatted briefly before the meeting. Coming from British Columbia, you mentioned that the price of oil is not the silver bullet that's going to help lower some of the costs and that one of the issues for the housing industry in British Columbia is the “r“ word, the price of rebar. Is there any indication that a Manitoba supplier or any of your members could provide a more affordable supply of rebar to the British Columbia housing industry?