Once again, thank you for inviting me to appear before this committee.
I have the pleasure of being last, so I'm not going to repeat a lot of what was said. I agree generally with the fact that the global economy has indeed slowed a lot. Economic growth is now much weaker both in the United States and in Europe, as well as globally, than we thought it would be only two or three months ago. We have to adapt to that.
A recession in 2012 is possible. It's not part of our forecast. We still think it can be avoided, but certainly one needs to realize that it is indeed a possibility. However, unlike 2008, which really did hit us hard and almost unexpectedly, this time around we can see it coming. The reason I think that a recession is not inevitable is that policy-makers in the United States and in Europe know very well what needs to be done to avoid such an outcome.
Now, democracy is messy, as you all know, and it's not always possible to do what needs to be done right away, but I wouldn't dismiss the capability of the European governance mechanisms to address the situation. It will take time. They will probably push it to the last possible second, but I think they will be able to avoid a major, messy default of Greece, for example. It is very serious and it is very risky, but I am not ready to assume that it is necessarily going to collapse.
Now for Canada. Of course, as was said before, this time around if there is a recession outside our borders, we are not going to escape it. That's obvious. I'll go even one step further. Last time around, in 2008-09, we did escape most of the impact of the recession for two basic reasons. One was monetary policy: interest rates came down very quickly. Secondly, fiscal plans were put in motion by the federal government and the provinces to address those issues.
This time around, we won't be able to do the same things. Interest rates are already at very low levels. I don't think they can go any lower. I don't think the Bank of Canada will cut the overnight rate; I don't think it will serve any purpose. Market rates are very low. Ten-year yields are actually now at 2% or thereabouts. This is very low, historically speaking, so we've done that.
As for consumers coming to the rescue as they did in 2008 and 2009 by massively borrowing, by getting mortgages and what not, again, given the high levels of household debt at this point, I think that's a place where we should not go. We should not try to push that elastic any more.
So that leaves us with exports and business investment. On private business investment, there are perhaps ways that governments can think of to stimulate and to favour private business investment. Public investment is also welcome at this point, and I think that we, as a government, should be prepared to perhaps accelerate some projects. However, I also wouldn't also put a great deal of emphasis on those projects.
Glen, you mentioned the Champlain Bridge. It's something that needs to be done, so if we decide to rebuild the bridge it's because we need to rebuild the bridge, not because we need to stimulate the economy. That's a big project. It's $1.5 billion or something like that, but it wouldn't do much for GDP growth in the first quarter of 2012. But it needs it to be done and interest rates are very low, so this would be a good time to do something like that.
Finally, when it comes to fiscal policy, when we think of the upcoming budget we need to be flexible, because we're not quite sure what's coming down the line. We need to be able to think in terms of rebuilding confidence, of stabilizing consumer confidence and improving business confidence. To me, those are the keys. Also, if we need to boost confidence, perhaps there are measures that can be done very quickly and can put money in people's pockets. Indeed, incomes are low and wages are weak, so we should think of measures like that.
Thank you.