Evidence of meeting #44 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was federal.
A recording is available from Parliament.
4:45 p.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Have you ever asked the provinces whether they were interested in providing information to you? They might do a better job of that than the federal government.
4:50 p.m.
Parliamentary Budget Officer, Library of Parliament
No, but as I was saying, we are performing calculations concerning the federal government. We published a study which we are going to release this year. For our team that is here today, it is difficult to do everything at once. Our purpose today is to improve the tools that allow us to assess risk and fiscal forecasts. Our next big project will be to examine fiscal viability. We are going to start tomorrow.
4:50 p.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
If I understand correctly, you have not yet asked the provinces whether they want to cooperate in the studies you are going to undertake.
4:50 p.m.
Parliamentary Budget Officer, Library of Parliament
We are examining the type of study we need to do for all of the provinces. The fiscal viability of the provinces does not really involve a lot of calculations. In my opinion, our project is very important.
Chris may have something to add. No? Fine.
4:50 p.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
As I mentioned earlier, I hope that your work is going to bring out the inequality of the federal government's treatment of some provinces. Is that an aspect that your report is going to be touching on?
4:50 p.m.
Parliamentary Budget Officer, Library of Parliament
Yes, but we are going to have to work with all of the experts and certainly with those from Quebec.
4:50 p.m.
Conservative
The Chair Conservative James Rajotte
Very well. Thank you.
Thank you, Mr. Carrier.
Mr. Wallace please, for five minutes.
November 3rd, 2010 / 4:50 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Thank you, Mr. Chairman.
I want to thank our guests for joining us this afternoon.
Mr. Page, Mr. Brison was shaking his head at everything you were saying, and I think one of the things you were saying is that we have to look at our fiscal outlook and, if we really want to get back to a balanced budget, look at cutting things. I'm looking forward to seeing what the Liberal Party brings forward in this budget process on what we're going to be cutting. I think he was, in cabinet, defending the Liberal spending scandal in the House, and I'm sure he understands the issue of cabinet confidence that you mentioned you're running into a bit of a problem with.
I have one question for you, and then I'm going to our economists who are here. I agree with you that we do have to be pretty tough going forward and we have to look at things. I'm assuming that the leadership from the budget office will be that if we're going to be making cuts to programs and so on, your office is going to be offering a reduction also, in this upcoming budget, that we can take advantage of.
4:50 p.m.
Parliamentary Budget Officer, Library of Parliament
Sir, I've spent a whole year fighting to get my budget back. It took me two years to get my HR plan approved.
4:50 p.m.
Parliamentary Budget Officer, Library of Parliament
If you're dissatisfied with the productivity of the PBO—
4:50 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
I'm not dissatisfied with anybody's productivity across the public service, but I think everyone has to pay a bit of the price and take on a bit of the burden. That's my only point.
4:50 p.m.
Parliamentary Budget Officer, Library of Parliament
Our budget is frozen at 2.8%.
4:50 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Yes, frozen, but that doesn't mean it can't go in the other direction.
That's not a threat; that's the reality.
I have two questions, and one is for my friends from the banks. You talked about household debt being a problem. My question is twofold: one, what can the federal government do to try to improve the household debt issue, from a policy perspective; and two, are the banks not responsible a bit for that? Most people, from a personal point of view, get their money from either the bank or a credit card, and I think you're involved in both. I'd be happy to have an answer on either.
Then for Mr. Poschmann, when we get a chance—hopefully we get a chance—on the personal tax rates that you talked about, is there a better way of changing that? Is it threshold changes or is it percentage changes? Or do you have an opinion?
Those are my questions.
4:50 p.m.
Conservative
4:50 p.m.
Deputy Chief Economist, TD Bank Financial Group
Yes, maybe I'll start.
We put out a report on household indebtedness a couple of weeks ago, and it was a fairly in-depth study. I've been shocked at the dearth of research in the area, so we undertook the study, and I think it's quite good, but perhaps I'm a bit biased.
There's a lot of focus on the debt-to-income ratio. I think whenever we look at an average statistic, we always have to ask ourselves if we are getting the full story. So the study does go into a fair amount of detail, looking at assets, debt to assets, debt to net worth, looking at a lot of the different things--debt serviceability. We look at some of the same things the Bank of Canada does.
The bottom line is that, in our view, we're not at crisis levels yet. I believe there are a lot of reasons to think that we're not in a U.S.-style predicament. We didn't get into the same risky lending during the run-up in the housing market. That said, no doubt a lot of Canadians have taken advantage of extremely low interest rates, and I don't think a lot of Canadians have factored in this notion that interest rates at some time will return to more normal levels.
So a lot of the report is more forward looking.
Under these interest rate assumptions, what kind of debt are we looking at? Frankly, I'm very concerned that mortgage rates are at historical lows and that in fact the borrowing could continue, even though we've--
4:55 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
Is there a policy that the federal government could do to start addressing that issue? The answer could be no, but I need the answer.
4:55 p.m.
Deputy Chief Economist, TD Bank Financial Group
Well, I had to provide a bit of context there.
4:55 p.m.
Conservative
4:55 p.m.
Deputy Chief Economist, TD Bank Financial Group
Okay. Anyway I was just getting to the punch line.
Right now, I think we have to be a bit careful implementing anything federally, partly because the housing market is slowing. If things do pick up, then things should be looked at. Obviously, looking at the mortgage rules is one thing--CMHC and the other mortgage insurers and the kind of mortgage rules. But I agree with you, the banks do have a responsibility. Generally, we need to dig deeper and understand the implications of these lines of credit. And I think there's an onus on the banks as well to look at whether it is a first-time buyer issue, that generally first-time buyers do use mortgage insurance, or is it tied to the lines of credit? From a bank perspective, I think there's an onus on us to dig deeper into the information and look and see.
4:55 p.m.
Conservative
The Chair Conservative James Rajotte
We're going to have to come back to the other questions in a subsequent round, unfortunately.
Mr. Pacetti, please, for five minutes.
4:55 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you, Mr. Chair. Thank you to the witnesses for coming.
Mr. Page, I have a quick question. I've been on this committee for the last six or seven years. I used to chair it. We used to have independent forecasters come forward, and we always had a problem in terms of getting estimates. If I can ask you a question in terms of simplifying it, or explaining your job exactly, what do you do that's different from the economic forecasters? Everybody seems to take the forecasting growth, they take a percentage of what we think that's going to be, they take a percentage of the government revenues, and we decide that government revenues are going to go up by that percentage, and that's it, the work is done, because we can't get any information on what's going to be spent. And even when we do have budgets, the budgets are not respected. But with the Liberal governments, at least, it wasn't respected and we actually underspent. With this government, they seem to be overspending, so we have the same type of problem going the opposite way.
My first question is, what is in your job, as the independent Parliamentary Budget Officer, that would be different from the economic forecasters to your right?
4:55 p.m.
Parliamentary Budget Officer, Library of Parliament
Thank you for the question.
Our job is actually quite different. Our job resembles much more what the Department of Finance does. In fact, most of our panel here have spent many years at the Department of Finance.
What we do--and what we have been doing over the past couple of years--is start with the average private sector forecast. We take the survey from the Department of Finance and then we translate that, using models, into a fiscal forecast. We break down the revenue by the major revenue components, and we do the same for spending.
4:55 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
So the revenues, pretty well, are similar. It doesn't matter who would calculate it, whether it be economic forecasters, Finance, or anybody. It's all proportional, depending on what your growth would be. Is that correct?
4:55 p.m.
Parliamentary Budget Officer, Library of Parliament
Well, it's important when you talk about the--