Thank you, Mr. Chair.
On behalf of the 3.2 million members of the Canadian Labour Congress, I want to thank you for affording us the opportunity to present our views on the Canadian and world economy, and the next federal budget.
Economists—including bank, OECD, International Monetary Fund and ILO economists—are increasingly gloomy about the economic prospects of all the advanced economies, including Canada.
The United States, Europe and Canada could slip into a technical recession soon, and even if this was avoided, we are almost certainly in for a long period of very sluggish growth and continued high unemployment. Why? We've talked about many reasons for the problems with the world economy. I am now going to quickly touch on five issues that are at the source of the problems we are now experiencing.
First, all the government investments have run out. During the recovery period of 2008-2009 after the great recession, these investments helped lessen the effects and restore the economy. Unfortunately, these public investments are running out or have already run out, which is Canada's situation. What we are seeing more and more is a shift by governments to austerity and spending cuts, instead of maintaining public investments to support the economy.
The second significant problem we are seeing at the international level is putting off fundamental reforms—often through the G8—that our financial system needs to rectify the situation and prevent the type of problems we encountered in 2008. Not having these reforms means that the large banks and hedge funds continue to speculate on the markets.
The third issue that is very important for us and that explains the current problem is the matter of very high household debt, particularly housing-related debt, mortgage debt. As we know, this resulted in a mortgage crisis in the United States, as it did in England and in other countries.
Today, increasingly, total household debt means that spending is weak and, as governments are turning to austerity policies, governments are also contributing less to economic growth.
The fourth problem that we are seeing is more fundamental and is one we don't often deal with: it's the issue of trade surpluses among countries. Some countries have very large trade surpluses—I'm thinking of China and Germany—and, because of their policies, prevent wage increases and importing, so that they should import more products and services from countries that have large trade deficits and high unemployment.
So we are seeing that many developing countries are continuing to grow, notably China, but that others, like the United States, Canada and part of Europe, are having difficulty with exports and with the recovery of their manufacturing sector.
The last main fundamental problem, one we do not discuss much, is one that existed prior to the crisis in 2008: constantly rising inequality, rising profits and soaring incomes for the very rich. Combined with stagnant wages for the working people, this creates a number of problems.
The main problem is that the growth before 2008 essentially came from the growth of household debt and speculative bubbles, as opposed to a preferred growth based on real investment in a balanced economy, an economy that creates jobs, an economy of sustainable development that creates real investments and that increases productivity, which is then linked to rising wages and so on.
There are five major issues that are more fundamental than simple short-term and long-term problems.
In Canada, it is very clear that the economic growth is slowing very quickly. This year, the first quarter was positive, but that was mainly linked to a build up of inventories. The second quarter was negative. The third quarter is also expected to be negative.
As for the total number of jobs in Canada, during this time we found ourselves in a situation where we've recovered to pre-recession levels. The unemployment rate remains high at 7.3%, compared to 6% before the recession. The number of unemployed workers is a quarter of a million higher than before the recession. At 14%, the youth unemployment rate is twice as high as that of workers aged 25 to 54. The real unemployment rate, which counts workers who have given up looking for jobs and involuntary part-time workers, is about 11%.
As for the labour market this summer, there was no job creation. What's more serious—and I am stressing this—real wages have begun to fall.
The Labour Force Survey for August showed that average hourly wages were up by 1.4% whereas inflation was 2.7% in July, 3% in June and 3.7% in May. So we can see that real wages have been dropping. We believe that, if real wages continue to fall, it will have negative effects on consumer spending in the short term. Consumer spending played an active role in maintaining our growth during the economic crisis. But given that real wages are falling, we are likely to see a fall in consumer spending and, as a result, a fall in the Canadian economy.
So what is the way out? We are faced with the following situation: for the Canadian economy to continue to grow, there are basically three options. We could increase our exports and reduce our imports; businesses could invest more; and we could invest more through public investment. Given that Canada is an exporting nation, we know that business investment is closely linked to exports. And since our clients are not necessarily buying our products, things are not looking good. So what is left? We have the last option, meaning public investment.
At the moment, the Government of Canada can borrow through 10-year bonds at a 2.5% rate of interest. It is a very low rate. Canada's debt is also low at 33%, which is half of the OECD average. We have the means to borrow in order to be able to focus on public investment. That is not expensive. Our recommendation is to continue with public investment in infrastructure. That includes bridges, trains, and so on, but also our social infrastructure with child care and care for the elderly.
Thank you.