Thank you very much, Mr. Chairman.
I basically have three points to make as opening remarks.
First of all, on the global context, we're in the midst of a crisis of confidence right now, which is really a function of an inadequate policy response to what's happening in Europe and arguably to the fiscal position and the recovery in the United States as well. I won't go into great depth on that, but I think it really points to the need to build confidence as a critical purpose of the committee meeting today and indeed of the whole design of Canadian economic policy going forward. This should be all about restoring the confidence of Canadians as consumers, as investors, as people who actually believe we have a strong economic future.
I could go into great depth on what the solution is in Europe, for example, but I won't do that. I did spend the first ten years of my career at the Department of Finance and another three and a half years at the IMF, so I've actually lived through this. I feel like I'm watching a bad movie the second time around, and it's very tragic, but there are solutions; it's not a hopeless circumstance. But it's also going to be very painful, in particular for taxpayers in a country such as Greece, which is nowhere near the bottom in terms of its adjustment. So confidence is the critical anchor.
Secondly, on our economic outlook, the Conference Board actually had one of the weakest forecasts in the pre-budget round of forecasts. We came up with a forecast in the first quarter of this year of growth of 2% this year and a little bit stronger in 2012. I know we're at the lower end of the range, and unfortunately we think the future is turning out that way. We revise our forecasts each quarter and have just finished the revisions for Q3 and are now forecasting growth in Canada this year of 2.1% and about 2.5% for next year. The trouble is that this forecast is not symmetrical, in that I don't think the array of risks around it are even: I think there's a lot more risk of things happening on the downside, of bad things happening, than having upside potential. That means you really have to build a note of caution into the fiscal forecasts going forward, because I think growth is really being hampered right now. Growth in our economy is below the normal track that we felt we were on nine months ago. Exports, for example, are probably about $30 billion to $40 billion below what they could be if our economy were performing at potential. And of course nominal growth is the key driver for government revenues. Therefore, we shouldn't be at all surprised if government revenues are a little bit below the path Mr. Flaherty set out in his budget, because of slower nominal income growth.
That brings me to the third and final point, which is on the design of fiscal policy right now. These are exceptional circumstances. Rebuilding confidence should be our anchor point. That's the key objective of the budget going forward. For me that means being prepared to make course corrections along the way, being very pragmatic, building prudence into the outlook, and not being wedded to one view, because the circumstances clearly have changed outside our borders and we have to find ways to adapt to that change. That doesn't necessarily mean more stimulus, because in fact we don't have enough data right now to really reach a conclusion on whether the economy has slowed down—nor does it mean stepping on the brake.
I think, for example, with slower nominal income growth, if we have to move the target of balancing the budget out by a year or two—a very common-sense adaptation—we should be prepared to make that adjustment. If the economy needs more stimulus at some point, we should be open-minded about that—but certainly that's not the Conference Board's view right now, that we have to add anything exceptional. So it's not just a matter of staying the course; it's being prepared to make common-sense course corrections along the way, depending upon the needs of the economy.
Mr. Chairman, I'll make two more points.
I had a commentary on tax expenditures that was run in about half the newspapers in the country about a month ago. As the federal government thinks about reviewing overall government spending, let's not forget the fact that tax expenditures represent about a $100 billion revenue sacrifice for the federal government. We have 190 separate exemptions now within our personal income tax system. So let's at least be open-minded about considering tax expenditures as part of any overall review of spending, because there could be interesting sources of revenue there that would preclude the need to have quite as much spending contraction on the spending side.
The other point I would make, and here I'll echo what other speakers have said, is that infrastructure is the best form of adding stimulus to our economy. We did a series of studies for various governments across the country during the recovery period, and if there were a desire to add a little bit more horsepower within the structure, even within the current level of spending, then shifting spending towards infrastructure spending would both provide stimulus to the economy and address a real need. Any of you who cross the Champlain Bridge in Montreal know exactly what I mean in terms of the crying need for investment infrastructure in this country.
I'll stop right there, Mr. Chairman.