Finance Committee on Feb. 5th, 2009

[Kevin Page]

Sir, maybe I'll do just a quick background on what this graph actually shows. What this graph measures, effectively, is the difference between what we call “potential output growth“ and “actual growth”. Potential growth is a number that the Department of Finance and the Bank of Canada actually provide numbers on, so we look at their numbers.

They're basically working on the assumption that the economy reached its potential level in 2007, for the most part. Then what we've seen, basically, is weak growth in 2008, with the economy actually falling off in 2009. What we're actually showing here, sir, in terms of the darker line, is the difference between potential growth and actual growth. What you see, sir, is an experience that looks a lot more like the 1990s experience we had, unfortunately, where you have a fairly significant output gap that doesn't close very quickly.

I think that's pretty much consistent with the numbers that would be used by the Department of Finance, because they're using the same private sector numbers we're using--

[The Chair, Conservative, James Rajotte]

Okay. Just very briefly wrap up.

Thank you.

Thank you, Mr. Pacetti.

We'll go to Mr. Kramp for five minutes, please.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

I welcome you as well.

Without question, quite obviously, the Canadian and U.S. economies are integrated in a number of facets, whether it's auto, etc., but in your opening statement you made an obvious statement that most of us recognized, which is that our fundamentals are stronger than those of the U.S. at this particular point.

Here's what I would like to know. Could you provide to this committee, as soon as possible, clearly what you identify as those fundamentals, exactly what they are, particularly with the comparative analysis, so that as we go forward we have these direct fundamentals that we can identify and use as benchmarks to see how much of an impact the economic circumstances down there are having on us?

[Kevin Page]

Thank you, sir.

In terms of the fundamentals we would be looking at that are behind that statement and that actually provide reason for optimism, actually, in terms of going forward, and which I think the current government and the previous government should take credit for, we have a very strong employment-to-population ratio in Canada right now. We have an unemployment rate, mind you, that's been rising, at 6.6%, but we have a historic high employment-to-population ratio. We have a labour force that, in historic terms, is actually employed. We have key indicators, such as inflation, which erodes consumer purchasing power, effectively at a very comfortable rate of just over 1%, sir. It's a very different experience from what we had during some previous recessions, such as in the early 1980s, when it was climbing up to 13%.

We have financial market indicators as well, such as interest rates, macro-economic interest rates, that are relatively low in historic terms. Canada, unlike some of the other countries, hasn't experienced quite the same bubble types of experiences that are eroding their consumer balance sheets and even their corporate-sector balance sheets as a result of bad loan losses. We're in much healthier shape from that perspective. We look roughly at those balance sheets.

Also, on a fiscal basis, the Canadian government and the provincial governments are much healthier than even our counterparts in the United States. So those are the kinds of indicators we're looking at that are actually behind what we see. We're well positioned going into this downturn period.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thanks.

I had a number of other questions, but with the time today, we obviously won't pursue them. I thank the chair, and I certainly thank you for coming here. Perhaps Mr. Bernier might want to add something.

[The Chair, Conservative, James Rajotte]

You have two minutes on your time, Mr. Bernier.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

I'll let Mr. Bernier have a question. I'll just go ahead and provide that courtesy for him today.

[Maxime Bernier, Conservative, Beauce, QC]

Thanks, I appreciate that.

Thank you for being here this morning. We have spoken extensively about your economic forecasts. These discussions call to mind a renowned economist who is now deceased, Mr. Friedrich von Hayek, winner of the Nobel prize for economics in 1974. In his acceptance speech, he spoke of the presumption of knowledge. Mr. Hayek said that it is very difficult to make economic forecasts because economics is a social science. The economy is made up of thousands of individuals who buy and sell goods every day, and thus society at large engages in the consumption of goods. It is very difficult to use mathematical models to anticipate human behaviour. For that reason, economic projections usually have to take into account the fact that economics is not a hard science, but a social science. That is why it is very difficult to foresee human behaviour.

My question is very straightforward. Do you agree with me and with Friedrich von Hayek that economics is a social science, and that economic forecasts are therefore very haphazard?

[Kevin Page]

To my mind, yes, the art of making forecasts is indeed a social science. It is true that we use equations and models to develop our forecasts.

We prepare these projections, again, not to say that at the end of the year we're going to provide a more accurate projection than somebody else. We do this so that you have a planning environment. We're going into recession right now. We know that parliamentarians are making very important decisions about how to support the labour market and how to support growth. We prepare these projections so that you have this kind of planning context. That's the reason we do it.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Page.

I've had a request by a member to extend this one more time so we can finish the second round. Just for the information of members, in the second round there will be another Liberal spot, another Conservative spot, and then the NDP, for five minutes each. I've received this request from a member. I'm putting it to the committee, of course. As your chair, I do what the committee would like me to do. Obviously, it's further imposing on the witness. So I'm asking the committee and Mr. Page whether they would like to do that.

I don't know, Mr. Page, whether we're imposing on your time too much.

[Kevin Page]

We are here to serve.

[Ted Menzies, Conservative, Macleod, AB]

I guess the only concern is that some of us have House duties that we're already late for. We were planning on a one-hour session. So some of us have other commitments already scheduled. If it's the wish of the committee, fine.

[Mike Wallace, Conservative, Burlington, ON]

Can we not have them back another time?

[The Chair, Conservative, James Rajotte]

Go ahead, Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Point of order, Mr. Chair.

Earlier, you took it upon yourself to allow the government side and the official opposition side to ask more questions. We graciously accepted. You are well aware of the order of speakers. You have allowed three interventions on the Liberal side, and one single intervention for the NDP. I must take a stand against this. Your chairmanship over this committee is beginning on a very bad note because if you deny us the right to ask Mr. Page questions, I will be making a note of that. Earlier this week, we showed flexibility in adopting the rules of this committee. If this is how the government intends to play, and if it intends to use its additional time to attack Mr. Page's credibility, as Mr. Wallace did earlier, and if we are not allowed to ask additional questions, we take note of your highly partisan way of presiding over this committee, and will respond accordingly.

[The Chair, Conservative, James Rajotte]

I'll respond to that, Mr. Mulcair.

I appreciate your comment. I certainly didn't see Mr. Wallace's question as an attack. I certainly hope Mr. Page didn't see it as that either. I thought they were questions.

With respect to being the chair, obviously I'm always interested in more dialogue rather than less. I'm interested in more members having an opportunity to speak rather than fewer, and I follow the order as prescribed by this committee that was adopted by this committee at its first meeting. I follow the order of Liberal, Conservative, Liberal, Conservative, NDP. I would be happy to have more members speak, but if members want to go to the second part of the meeting, which is future business, then that is the will of the committee. I follow the will of the committee. If it is the will of the committee to continue this dialogue, and if Mr. Page is agreeable to that, I as a chair will allow a continuation of that.

You have a point of order, Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

What you have just stated is totally false. Earlier, you decided to allow two more questions. We did not give our consent, but clearly you sought Mr. Page's consent, and we assumed that you were going to follow the normal order, under which the NDP had the right to ask a question. You are depriving us of that right. This is your first time acting as chair of this committee, and we take note of this highly partisan way of acting and making decisions. In future, we are going to act accordingly. We showed flexibility when adopting the rules for this committee. Yet, your actions today betray our confidence, and in future we will act accordingly.

[The Chair, Conservative, James Rajotte]

I have Mr. McCallum on the point of order.

[John McCallum, Liberal, Markham—Unionville, ON]

It's not exactly the same subject, but I would have thought, since some people have other commitments at this time, that we could invite Mr. Page back. In particular, he alluded to this accountability framework, which I think is a key element in our monitoring, which we are going to be hearing witnesses on in coming days. So I would have thought that it might be a good idea to invite him back on that subject in the not too distant future.

[The Chair, Conservative, James Rajotte]

The committee is free to invite Mr. Page back at any time it wishes.

Mr. Pacetti, did you have a point?

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Yes. Having chaired the committee before and having been on this committee for a while, I think you did an excellent job, but I think there was a misunderstanding, in that my round and Mr. Kramp's round were perhaps the third round, and then the fourth round would have been an extra round. I think what we've done is we've probably made a mistake in making the third round too long and assuming that the NDP would come back on the third round. It's actually the fourth round. I think that's the mistake we made.

I think maybe we can clear that up, but I don't think we have to do that in front of Mr. Page.

[The Chair, Conservative, James Rajotte]

I'll just respond as the chair. I think I've earned a reputation as someone who is fair-minded. I encourage Mr. Mulcair to speak to Mr. Masse, to speak to Ms. Nash, to speak to the NDP whip, as to how I've chaired the industry committee in the past.

I would also say that my interest is in more dialogue rather than less, but I'll take Mr. Mulcair's point in the sense of if there's an hour allocated for a subject I will close it at that hour, exactly at 60 minutes, and allow no further questions, unless the entire committee agrees to extend it beyond that. So in future it will be 60 minutes sharp for questions.

I make every effort and I commit to every member of this committee to be fair to every member of this committee. But, again, I'm more interested in a substantive discussion and I'm more interested in more dialogue rather than less. And I'd be very happy, as the chair, to invite Mr. Page back if this committee so desires and to have a longer discussion if this committee so desires.

Mr. Page, I thank you very much for being here today. I thank you for you presentation, for your responses to our questions.

Members, we'll suspend for a couple of minutes and then we'll go to future business.

Thank you.

[The Chair, Conservative, James Rajotte]

I'll ask members to take their seats, please.

We'll now discuss future business. I'm informed by the clerk that the Governor of the Bank of Canada will be here on Tuesday morning at nine for an hour. I will cut him off at ten sharp. Obviously the committee needs to decide what it wishes to do, aside from that.

Does the committee wish to go in camera? No.

[Ted Menzies, Conservative, Macleod, AB]

It's just for clarification.

[The Chair, Conservative, James Rajotte]

We have before us three motions by Monsieur Laforest. Two of them are in order, but one of them has problems.

Does everyone have a copy of the motions by Monsieur Laforest?

Mr. Wallace.