Thank you, Chair. I'll attempt to be brief.
The 2012 budget is being developed against the backdrop of a very tentative and uncertain recovery globally and here in Canada. In our view, there's a real danger of rising unemployment. The International Monetary Fund has just forecast an increase in the Canadian unemployment rate from 7.1% last month to an average of 7.7% in 2012.
One neglected sign of the softening of the job market in Canada is the disturbing and rather under-noticed fact that real hourly wages are now falling. For the last three months, average hourly wages have been increasing by only 1.4% over the previous year. That's well below an inflation rate of 3%.
The high dollar and the slowing Canadian economy have now given us the highest current account deficit of any of the advanced economies. That current account deficit as a country is now significantly greater than that of the U.S., because of the slow growth of exports caused by the high Canadian dollar. We also see weak rates of business investment outside the mining and oil and gas sectors.
Low interest rates have certainly given a boost to the Canadian economy over the last little while—supporting the housing sector and consumer spending. The household debt is now a record 150% of disposable income. House prices in relation to incomes are as high in Canada as they were before the collapse of the housing bubble in the United States. In our view, it's totally unsustainable for our economy to continue to grow by means of households going deeper and deeper into debt.
So what is going to sustain growth and investment in our economy? Public investment funded by the stimulus program, which, it should be acknowledged, gave a great boost to recovery in Canada, has now virtually come to an end. We're now seeing a turn to spending cuts by both federal and provincial governments. Based on IMF numbers, cuts to spending by federal and provincial governments in Canada will cut our growth rate by about 1% in the year ahead. So public investment has gone from being a source of growth to a drag on growth.
Against that backdrop, the priority of the 2012 budget must be to create jobs and to maintain the recovery, not to engage in counterproductive spending cuts. We call for the federal government to launch a partnership with the provinces and cities in a major multi-year public investment program that would create jobs now and promote our environmental goals. We believe this would also stimulate private sector investment and private sector productivity if we choose the right kinds of public investment projects. Such a program would include increased support for basic municipal infrastructure, mass transit and passenger rail, affordable housing, and energy conservation and renewable energy projects.
One opportunity we have now results from the fact that Government of Canada borrowing costs are incredibly low, 2.4% for 10-year bonds. That's a really historic opportunity to finance major public investment projects that make a lot of sense, owing to their decent rates of return. Many major public investment projects more than pay for themselves over time. Economic growth fueled by increased productivity in the private sector boosts future government revenues. In our view, investment in public transit is a key example. The Toronto Board of Trade argues, correctly, that major investments in mass transit will substantially reduce business costs.
In our view, some of the initial costs of such a program could be raised by raising the federal corporate tax rate from the planned 15% in 2012, which is well below the tax rate in the U.S. It would be our assertion that the cuts in corporate tax rates to date have not generated the expected increase in business investment. To the contrary, over the past decade the growth in after-tax corporate cashflow has far exceeded the growth in private investment—to the point that corporations in Canada are now sitting on $475 billion of uninvested cash reserves. We think the recent example of the discussion on the scientific research and development tax credit suggests that targeted tax measures would be much more effective in boosting private investment. Our point would be to raise corporate tax rates and to direct those proceeds into more effective ways of supporting private and public investment.
To conclude, Canada has a very low rate of public debt. Our interest rates are low, and there are major public investment opportunities ahead of us.
I'll shut up now.