Evidence of meeting #2 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was 2009.
A recording is available from Parliament.
Parliamentary Budget Officer, Library of Parliament
No, that is our position, based, again, on economic projections from international organizations.
Conservative
Mike Wallace Conservative Burlington, ON
So of the economic projections—I think you mentioned about 11 or 12 that you deal with—you take the average of those in your economic model.
Parliamentary Budget Officer, Library of Parliament
We take averages, and also to help enhance understanding, we'll also look at ranges for you, sir. We'll take the lowest and highest as well.
Conservative
Mike Wallace Conservative Burlington, ON
So there will be projections by economists that would, say, have a more positive outlook and then some that are more negative, and you're averaging those. Is that correct?
Parliamentary Budget Officer, Library of Parliament
We will provide you a projection and a fiscal response based on an average projection, and we also give you the lows and the highs, sir.
Conservative
Mike Wallace Conservative Burlington, ON
Right, and then in another report back in November, you talked about what government could do in the current downturn. You talked about fiscal policy. You talked about the issue of balanced budgets and so on in the short run, things that are timely, temporary, and targeted.
What role does monetary policy play in your analysis? And are you there just to look at the actual pros and cons of what's happening and what the government, or whoever, presents, and not comment on the actual public policy side of the issue?
Conservative
The Chair Conservative James Rajotte
Okay, thank you.
You have 30 seconds to answer those questions.
Parliamentary Budget Officer, Library of Parliament
A 30-second answer, sir, is that monetary policy plays a huge role in terms of providing stimulus.
We are in a very different period of time from what we have been in the past. We're looking at historic policy rates from our central bank in Canada and other parts of the world. Economists use these terms like liquidity traps. People are becoming concerned about monetary policy providing further stimulus, given the low rates.
As to the second part of your question, I apologize....
Conservative
Mike Wallace Conservative Burlington, ON
Can you comment on what public policy action is and its pros and cons? You don't comment on what's good public policy or not.
Parliamentary Budget Officer, Library of Parliament
We provide financial analysis on policy proposals, sir. We'll stay away from.... We'll let you folks decide on—
Conservative
The Chair Conservative James Rajotte
Okay, thank you.
Members, I know this has been a short time; it's been an hour.
I have two members on the list. I'd like to take those two members, if possible. I have Mr. Pacetti and Mr. Kramp.
I don't want to impose further on your time, Mr. Page, but if we can take those two further members, then we'll wrap it up. I know it's a bit of an extension.
Mr. Pacetti, please.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you, Mr. Chair.
Thank you, Mr. Page, and your office, for coming forward. I think we're going to have to discuss what we see as your role for this committee. I think it's going to be interesting as to what we can use your office for.
I just have two quick questions. My first question is in terms of economic growth. We'll try to have Mr. Carney here; obviously, he's one of the forecasters who's predicting strong growth in the third or fourth quarter, I think it is, but nobody else is going there. I just want to know what your opinion is of that, because I'll be asking him the same question.
Parliamentary Budget Officer, Library of Parliament
Right now, the bank is forecasting a decline in 2009 of about 1.2%. That's in real GDP terms, sir. They're forecasting a relatively strong growth in 2010 of about 3.8%, again in real GDP terms. The 1.2% decline is kind of in our band of private sector forecasts for 2009.
Parliamentary Budget Officer, Library of Parliament
The 1.2% decline, sir.
Basically, he has a fairly sharp decline built in for the fourth quarter of 2008 and then significant declines in the first quarter and second quarter, with, as you say, sir, a relatively healthy pickup starting in the second half of this year and then really accelerating in 2010. That forecast, by pure comparisons with other private sector forecasts and the recent forecast by the International Monetary Fund for 2010, is very positive. It's optimistic relative to the average.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
I think his comment was based on the fact that he believes the stimulus package in the States is going to work and it's going to spin off here in Canada. Why does he feel that way, and why doesn't anybody else? What does he know that nobody else does?
Parliamentary Budget Officer, Library of Parliament
That's the right question, actually, and it's probably best put to Mr. Carney and the Bank of Canada as to why he thinks the stimulus will be so much stronger. There's no question—
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Let me ask it in reverse. Why don't you feel that way?
Parliamentary Budget Officer, Library of Parliament
I think, sir, the work done by the International Monetary Fund, and also by some academics in the United States in looking at previous recession experiences, where you've had asset price bubbles in the housing sector and in the stock markets, followed by a credit crunch, kind of shows that you have a very deep and a relatively protracted recession that follows. I think that's behind a lot of the more private-sector, IMF-style forecasts that see—
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Sorry to interrupt, but because time is limited, do you or do you not believe that stimulus packages work that quickly?
Parliamentary Budget Officer, Library of Parliament
Again, the question that you will probably have for Mr. Carney will be what will be the relative impact of the monetary stimulus that's been put into the economy relative to his actions that have taken place in 2008? As well, I think, in that assumption he was probably assuming, although it wasn't transparent, a relatively large stimulus package by the Government of Canada on the fiscal side.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Okay. My other question is more technical, in that I'm trying to understand a little bit your chart on the economic outlook for risks. I think you mentioned that the number for 2009 looks reasonable. I'm not sure how to read this, because it looks like it's flat. You don't seem to believe that there's any risk from year two to year seven. I'm not sure if I read the chart correctly.
Parliamentary Budget Officer, Library of Parliament
Sir, is this the chart on corporate tax revenues?
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
No, it's the one on page 3, “Economic Outlooks and Risks” , and figure 1, “Projected Output Gap and Past Recessionary Periods”, where you don't feel there's any risk between year two and year seven.