Finance Committee on April 30th, 2013

[Mark Adler, Conservative, York Centre, ON]

Thank you, Mr. Chair.

I want to thank all of you, first of all, for being here.

We've received accolades as a country in terms of how we're held up as an economic model in terms of job creation, with the strongest record of the G-8. International organizations have heaped praise upon us and how well we're performing, relatively speaking, to other countries. Could you talk about the potential dangers that exist in terms of potential occurrences that could affect our economy coming from the outside?

[Sonia L'Heureux]

From my understanding, obviously what's happening in terms of our export market would be something to watch. What's happening in the U.S. is of interest to us, as well as the strength of the economy. The eurozone is also important.

I think I'll turn to my colleagues for more refined comments on the actual impact on our estimates when it comes to the outlook.

[Mostafa Askari]

Certainly the external environment is quite important for Canada. We export a lot of goods and services, so whatever is happening in the United States, in Europe, in the emerging markets, would be important for Canada. Everybody knows that there is a lot of uncertainty out there, especially in the U.S. and Europe. The fiscal situation in both areas is in very bad shape. There is also a lack of.... Especially in the U.S., the decision-making processes are really not working very well. There is a lot of uncertainty. If some of those problems and risks are realized over the next couple of years, it will obviously have a huge negative impact on the Canadian situation.

The way the projections are done right now is that the underlying assumption, really, is that over the next couple of years some of those issues will be resolved in the U.S. and Europe and they will go back to sort of more normal modes of operation. But if those things are not realized, obviously both will have a different scenario.

[Mark Adler, Conservative, York Centre, ON]

How many of the potential contingencies that you see outside our borders.... For example we don't know how long the sequester in the U.S. is going to go on for. You mentioned uncertainty in Europe. How much of these factors are built into your numbers? What's the methodology in terms of how you go about doing that?

[Chris Matier]

Again, in the case of the U.S., you mentioned the sequestering. Our current projection lines up pretty closely to the IMF's. According to the IMF's projection for the U.S., their assumption is that the sequester will take off about a half a percentage point of growth in 2013, so they will have that reflected. While we don't have our own estimates of these impacts, we can look to organizations such as the IMF for that.

[Mark Adler, Conservative, York Centre, ON]

Okay, so essentially, what you do is look for those—

[Chris Matier]

Yes, for the U.S. economy.

[Mark Adler, Conservative, York Centre, ON]

And for the European economy?

[Chris Matier]

Again, the approach that we take is very fine-tuned in the sense that we look at the main external factors, such as the U.S. economy, commodity prices, consumer confidence, as well as domestic factors. Per se we don't have an explicit forecast for the euro area. Again, we would look to the IMF to allow us to inform our judgment for certain variables such as commodity prices. If the IMF sees global weakness, we might want to adjust our outlook for commodity prices somewhat.

[Mark Adler, Conservative, York Centre, ON]

Domestically, what do you rely on for your information, and from whom?

[Chris Matier]

Domestically we're using the indicators for, let's say, Statistics Canada, to build up our near-term outlook for all of the sectors of the economy, for example, consumer spending, residential construction, and for business investment as well. We have a more detailed approach for Canada. Then any factors that we don't think will appear in our model we try to introduce, in the case of this fiscal consolidation. That's why we're using Finance Canada's multipliers to inform our judgment around that.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Adler.

Mr. Côté, your turn.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

I won't try desperately to get the answer I want to hear. Forgive me, but I couldn't help it.

Ms. L'Heureux, let's discuss the process for selecting the Parliamentary Budget Officer.

The NDP made proposals pertaining to the length and renewable nature of the PBO's term. We suggested that the term be lengthened to 7 years and that, 6 months before the end of the term, it be renewed or another Parliamentary Budget Officer appointed. We also laid out in our proposal all the considerations in the event of the incumbent's death or resignation.

Right now, you are doing the job on an interim basis. I would like you to do a comparison. Let's not kid ourselves. The process that led to your appointment was fairly confusing. I would like you to describe how that process differs from the one that led to your appointment as interim Parliamentary Librarian.

[Sonia L'Heureux]

I just want to make sure I fully understand what you are asking.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Yes.

[Sonia L'Heureux]

Are you looking for a comparison with the process set out in the legislation?

[Raymond Côté, NDP, Beauport—Limoilou, QC]

No, I want a comparison of the process that led to your becoming the Interim Parliamentary Budget Officer versus the process that led to your appointment as the Interim Parliamentary Librarian.

[Sonia L'Heureux]

So you want a comparison of the two processes.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Yes.

[Sonia L'Heureux]

In the Parliamentary Librarian case, it's an order. A competition was held, and candidates were interviewed. A recommendation was made, and the Prime Minister's order in council was introduced in the House. The House then adopted a motion that was submitted to the governor in council for approval. That is the process for the position of Parliamentary Librarian.

The process for the Parliamentary Budget Officer is different. Under that process, the Parliamentary Librarian must strike a committee to propose three candidates to the government leader in the House. He then submits those names to the governor in council. And it stops there because the House doesn't vote on it.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

To some degree, then, it's a faster process.

Do you think it would be beneficial to have the appointment process for the Interim Parliamentary Budget Officer clearly set out in the legislation? Would that have been useful?

[Sonia L'Heureux]

I'm not sure, because I wasn't involved in that appointment. I don't know which factors were considered during that process.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

At least you clarified the differences. Thank you kindly.

Now I would like to delve deeper into certain aspects of the economic and fiscal outlook, with the help of your experts. My question has to do with the regressive fiscal and tariff measures that were adopted.

Take the increase in the employment insurance premium rates set out in the legislation, for example. You cover that quite well in your report. There is also the elimination of Canada's general preferential tariff available to a certain number of countries on an array of 1,200 everyday consumer goods, and sometimes on more specific products such as diesel-electric locomotives. Then, there is the tax credit for labour-sponsored funds, affecting Quebec in particular.

Did your office examine those kinds of regressive economic measures? If not, would you have the ability to study the regressive dimension of those measures as it affects low-income families, such as those making $40,000 or less a year?

[Mostafa Askari]

We did not examine the measures through that lens. We focused on the impact of the economic and fiscal measures. But we can assess the various economic measures. We can assess the economic and fiscal impacts, but not so much the benefits to Canadians. That doesn't really fall within our mandate.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you.

But would you have the resources for that?

My apologies, Mr. Chair. I see that you're telling me my time is up. Sorry.