Finance Committee on Oct. 29th, 2013

[Mostafa Askari]

We can take a look at it and provide a timeline to the committee as to when that can be done.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I appreciate that very much.

The IMF also continues to predict that Canada will be the strongest among the G-7 in the upcoming years and that our growth will continue to be strong. Do you also see, based upon what goes into the Monetary Policy Report of July 2013, that food price inflation has been largely driven by global movements in commodity prices? That of course threatens our core inflation. Do you see that also continuing to threaten the Canadian economy? I understand that this report on page 27 suggests that food prices have been the largest drag on core inflation in 2013. Do you see that continuing?

[Mostafa Askari]

As I understand, and I think the governor just mentioned in his testimony, there doesn't seem to be any threat of inflation in Canada right now given the conditions that we are in because we still have significant excess supply in the economy. The rate of inflation right now, including core inflation, is well below the target level, so there do not seem to be any general inflation pressures in the Canadian economy. In certain areas such as food or other areas there may be some pressures, but not overall inflation.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you very much. Those are all my questions.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Jean.

Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Chair.

Welcome to the committee.

My first question comes from your fiscal sustainability report last month that showed that the provinces and territories have a significant long-term fiscal gap, 1.9% of GDP, or around $36 billion in 2013. Much of the fiscal gap of the provinces is tied to demographics, the pressures of an aging population on health care, and other provincial programs.

Your report states that one of the main reasons for the federal fiscal surplus in the long term, which you estimate as being $24.8 billion in 2013, would be reforms to the Canada health transfer escalator. What would happen if the federal government reversed its recent changes to the Canada health transfer escalator and provided the provinces with greater financial support for health care? What would be the impact on the provincial situations?

[Jean-Denis Fréchette]

Just before I pass the floor to Mostafa, I think that we have been confronted with this debate before. Provinces will have to adjust to these kinds of situations. Health spending will increase in future years. Eventually they will have to deal with that. It's not only a matter of injecting money. It's also a matter of productivity, as you mentioned, but also finding new ways to confront the issues of the aging population. So that's number one, and there is some work to be done by provinces there.

[Mostafa Askari]

If we go back to the 6% escalator that was in effect—and is in effect still until 2017—if we go back to that for the future, the next 75 years, essentially that will wipe out the fiscal room that the federal government has. By the same amount it will reduce the fiscal gap that the provincial local governments have. The transfers don't affect the total. Transfers only affect how that gap is shared between the different levels of government.

[Scott Brison, Liberal, Kings—Hants, NS]

Some provinces have very different demographic trends than others. The maritime provinces, like Nova Scotia, were teetering on a declining population and we have a significantly aging population. Should we be looking at transfers based not only on per capita numbers, but taking into account demographic realities? Is that something that you've considered in terms of your analysis?

[Mostafa Askari]

How those transfers should be allocated between provinces is really a policy question. Certainly, a different formula would have different impacts on the provinces, but this is not something that we actually provide any comment on in terms of a policy issue.

[Scott Brison, Liberal, Kings—Hants, NS]

Last month you told the media that you want to have a new round of discussions or consultations between your office and MPs regarding how your office operates. Can you give us an update as to the status of those discussions and some of the recommendations that have come out of them?

[Jean-Denis Fréchette]

I said many things in the past week.

It's true. It's the way that I was operating before when I was director general at the research branch of the library. It's always important. We have a parliamentary clientele. It's important to have input from that parliamentary clientele. It was five years ago since the last round of consultations. Certainly, I have already met some members of Parliament.

With these three committees that are mentioned in the legislation, I see the chairs and vice-chairs not so much as an advisory group, because I cannot say that in terms of new legislation. But certainly, they will be people I will consult on a regular basis, maybe twice a year. I will do that round of consultation with them and other members of Parliament, simply to have a feeling about what they need and how we can provide the best tools for them in terms of the legislation. I will continue that kind of process.

[The Chair, Conservative, James Rajotte]

Okay.

Very, very briefly, Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

Under the Parliament of Canada Act, your office is entitled to free and timely access to any financial or economic data in possession of the department that are required for the performance of your mandate. Are you prepared to go to court to defend your right to free and timely access of financial and economic data, if that were required?

[The Chair, Conservative, James Rajotte]

A brief response, please.

[Jean-Denis Fréchette]

The court is a viable, open door. It's there.

I looked at Justice Harrington's opinion and he proposed some parliamentary remedies. I'm following these parliamentary remedies for now because I want to be really sure that if I go back to court eventually I want to be sure the judge will say that the PBO followed whatever the opinion was. I'm already following this. I already complained to the parliamentary librarian and we escalated that to the speakers. We've briefed the speakers. They are aware and very supportive of the impasse right now.

[The Chair, Conservative, James Rajotte]

Thank you.

I remind colleagues to allow enough time within their time for witnesses to answer as well. We're trying to get as many colleagues in as possible.

I'll go to Mr. Keddy now, please.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

Welcome, witnesses.

I'd like to extend congratulations as well to Monsieur Fréchette and the rest of your team. Welcome to the committee, and, Mr. Fréchette, thank you for your service to the Parliament of Canada before this appointment.

A number of points have been raised. I just have to question one of the points Madam Nash raised. She mentioned—and maybe we could get some real numbers here—67,000 fewer jobs. I'm trying to understand where that came from, when we know that the jobs that were lost during the economic downturn of 2008–2009 especially have been replaced. I'm questioning where that came from.

Taken along the lines of Mr. Jean's comments about commodity prices and lack of pipeline capacity, in your comments you looked at the improving fundamentals in the U.S. They're still modest, but they are improving. We heard just a few moments ago that their entire debt ceiling has dropped by two-thirds. Now they still have one third of enormous debt which affects our ability to trade with them. But if you take that back again to pipeline capacity and commodity prices, and if we actually had that extra $18 billion a day, that would adjust every measurement we look at in our economy. I guess I'm just asking if you would agree or disagree with that, and how we as a nation can move forward on that type of infrastructure.

[Jean-Denis Fréchette]

Your first question was about the jobs. In our model, the net result of the constraints and the expenses that were there for the expansion was that number, but it's true that in total jobs were created. The figures are as of September 2013. Net there were over 600,000 more new jobs than there were at the pre-recession peak of October 2008, for example. But it's like a car in which you have to brake and accelerate at the same time. If you take the two impacts eventually at the end you're not as fast as the car with only the accelerator. So that's the net result in terms of jobs.

Regarding the pipeline, I'll ask Mostafa to answer the question.

[Mostafa Askari]

Just to clarify on the job issue, I think what the number means is that over the projection period we are expecting about 600,000 new jobs created from 2013 to 2018. What that 67,000 means is that instead of 600,000, it would have been 667,000 had they not made those changes in the government spending.

On the pipeline, as I mentioned earlier to Mr. Jean, we certainly can say that the change in the discount between Brent, WTI, and the Alberta price would provide a positive impact on the economy, but we don't have any kind of quantified impact results on that. I am not able to tell you at this point how much that would change our projection.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

I appreciate that. In all seriousness, that was a bit of an unfair question to you.

Obviously it's no secret that one of our government's top priorities has been looking at a balanced budget as well as attempting to balance that budget. When you look at the economic and fiscal outlook update, it would appear that we're on track to do that. Some of that commodity price may determine whether that will be sooner or later.

Could you elaborate on how you evaluated your information and how important it is that Canada return to a surplus position and how the government's operating budget freeze plays into that scenario of returning to balance?

[The Chair, Conservative, James Rajotte]

Could we get as brief a response as possible? We may have to return to this in a later round as well.

[Mostafa Askari]

Certainly, the freeze had some impact. A freeze reduces spending, and reduced spending will improve budget balance. That's a fact. Whether a balanced budget by itself is absolutely necessary or not, and whether you're going to be above the balance or below by a small amount, from my perspective as an economist, it really doesn't have much of an impact on the economy. But that said, that's a policy matter.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Caron, s'il vous plaît.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

Welcome, Mr. Fréchette. You will see that things will be really interesting and that our meetings are not as bad as dentist appointments.

My questions will be about an element of the latest update pertaining to employment insurance. Slide 13 shows a chart that compares the number of regular employment insurance beneficiaries to unemployed persons. That is on page 7. This chart shows a fairly significant drop in the proportion of unemployed persons until July 2013. Could you comment on the causes behind that drop and tell us why you expect the proportion of beneficiaries to increase by 2019?