Evidence of meeting #118 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was measures.
A recording is available from Parliament.
11:10 a.m.
Conservative
11:15 a.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Thank you, Chair, and welcome to the witnesses.
In predicting a return to a balanced budget in 2015, even the PBO's projected budgetary balance, on average, is $2.5 billion higher per year, compared to what the government is projecting in its budget 2013. I understand your numbers are a little more rosy compared to what the government's numbers are, largely due to higher projected revenues.
Can you give us some detail on how you're projecting these higher revenues and where these projections are coming from?
11:15 a.m.
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
The revenues are determined by the level of GDP and the tax base, which is the broadest tax base.
Our nominal GDP that we are projecting over the five years is about $8 billion more than what the government is projecting in budget 2013. That difference in the GDP level explains about half of the extra revenues that we are projecting. The other half is explained by the assumptions that the government makes about the effective tax rate, and also about tax bases, personal taxes, corporate profits, and those things, which we don't have any access to, but we're assuming that amount is explained by those.
11:15 a.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Are you just using a different formula to get to the $8 billion higher number?
11:15 a.m.
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
No, we have a higher nominal GDP projection relative to the government. That's $8 billion, and that's—
11:15 a.m.
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
Why? Our projection is different because we have a different profile for GDP growth over the five-year period.
11:15 a.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
How does your profile differ from, let's say, the private sector's projections?
11:15 a.m.
Assistant Parliamentary Budget Officer, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
Do you want to answer this one?
11:15 a.m.
Chris Matier Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
Sure.
In terms of the average real GDP growth over the five years, it's the same as the private sector. It's just the profile.... The difference on nominal GDP, then, would stem from differences in projections of GDP inflation. I would suspect that our GDP inflation is higher, probably due to a higher outlook for commodity prices, let's say, than what would be consistent with the private sector forecasters.
11:15 a.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
When you look at the forecast of the U.S. economy at the end, you're forecasting higher growth in the U.S., or a stronger recovery in 2014. What do you account that to? Where are you getting your numbers to say, in your profile, that you see the economy in the U.S. being stronger than what the government is projecting?
11:15 a.m.
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
Our U.S. forecast is largely based off of private sector organizations in the U.S. We would follow some of the leading macroeconomic forecasters there, as well as the IMF. I think it would line up closer to those forecasters, as opposed to the Canadian private sector forecasters.
11:15 a.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
So, for budgetary consequences when you're looking at.... Again, it's forecasts. We are all pulling a number out of the air, and we're doing the best we can to make that number as accurate as possible to a different profile.
But if you're making decisions, would you not view it prudent to take the most cautious forecast over the most optimistic forecast?
11:15 a.m.
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
Our approach to doing the projection is to present what we consider to be a balanced approach, so that there's an equal likelihood that the projection could come in worse or better. Typically most forecasters, when they construct their forecasts, are trying to come up with, let's say, the most likely, and what will happen is they will provide their projection, but then they will say that the balance of risks is to the downside or to the upside. So I think for most fiscal planning, and I know that for the Office for Budget Responsibility in the U.K. and others, the tendency in preparing economic assumptions is to use a balanced approach.
11:15 a.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
In your scenario, then, would the balance of risk be to the upside or downside from where you forecasted?
11:15 a.m.
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
No, ours would be a balanced projection, so we would judge it to be approximately equal of being higher or lower. Again, this is largely subjective.
11:15 a.m.
Senior Director, Economic and Fiscal Analysis and Forecasting, Office of the Parliamentary Budget Officer, Library of Parliament
Yes.
11:15 a.m.
Conservative
April 30th, 2013 / 11:15 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you, Mr. Chair.
Welcome. First, we know that Kevin Page's term ended on March 25. When can we expect the appointment of a permanent PBO?
11:15 a.m.
Interim Parliamentary Budget Officer, Library of Parliament
In terms of the process that we're running to find a new PBO, I haven't finished looking at the candidates, all the people who came forward. There are some very high calibre candidates and we're still assessing them. Once I've made my recommendations of potential candidates as required by legislation, then it becomes an order in council and the Governor in Council has.... The answer to your question is I don't control that timing.
11:20 a.m.
Liberal
11:20 a.m.
Interim Parliamentary Budget Officer, Library of Parliament
I think in terms of the skills we're looking for, obviously we're looking for somebody who understands economic matters, the financial management of the Government of Canada. Because of the mandate, reviewing estimates and providing advice on the health of the economy, we're looking for somebody who understands that.
11:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
The principal requirement repeated by the Treasury Board president in the House is that the person be non-partisan. Have you seen any indication that the previous holder of the office was partisan?
