Thank you, Mr. Chairman.
Good morning to members of the committee. It's not the first time we've been here, and I hope it won't be the last. In view of the time constraint, I'm going to make three comments to start.
First of all, on our growth outlook for 2014, the Conference Board is one of the forecasters of record, I would argue, in the country. Right now our forecast is for growth to pick up a bit in 2014, to 2.4% in real terms. The key element is what's happening on the inflation front. Steve Poloz's last commentary about the Bank of Canada moving to a more balanced position on interest rates was interesting and probably is a leading indicator that inflation will not rebound, as we were forecasting earlier this year, to 2%. Now, that matters because what governments tax is the nominal economy.
Real growth is good, but you have to add the real growth forecast together with inflation. If we add them together, we end up with a nominal growth of around 2.25% to 2.50% next year, and I think there's more downside risk than upside. Normally low inflation sounds good, unless you're a government that's trying to generate revenues. The combination of recovering growth and inflation being fairly weak suggests that nominal growth will probably be below 4.4% next year. We do a revision of our forecast every quarter, and we'll have the numbers some time before the budget process starts up. By the end of the year or early into 2014, we'll have a revised number on the growth.
The other point I wanted to make, though—point number two—is that we do a long-term forecast for Canada as well. We'll do a short-term outlook for over the next 18 months to five years, but we're one of the few organizations to do a long-term forecast. Our view of the next 20 years going forward is that we're now entering a period of much slower growth potential for Canada, at around 2% after 2015. We're still not fully back to potential, to a kind of long-term growth path for our economy, because of the depth of the financial crisis recession. We're getting close to it, but after 2015, our view is that Canada can only grow on a sustained basis at 2% without feeding inflation.
That's a very different world from the world we've lived through in the last 25 years, where growth of 3% to 3.5% in real terms was the norm. That means that governments are going to have to learn how to live with slower growth on a going forward basis. That's why you see provincial governments, for example, all working hard to get back to balanced budgets right now. They know there's going to be pressure. The challenge of generating enough revenue to pay for health care and education going forward is going to be more acute.
As you think about the kind of advice you're going to give as a committee to the government, you have to look over the hill and think about what growth is going to look like after 2015. A world of 2% growth is very different from what we've lived through in the past, and that means that if you want to transfer more money to provinces, for example, you have to live within the growth constraint. If you want to put more funding into infrastructure, again, you have to live with a world of slower economic growth.
The theme we were given as witnesses was to talk about economic growth. We could go on at great length, but for my last point I'm going to put three markers down.
I think there are three things that governments and budgets going forward must address, almost as a chronic condition. One is investing in human capital. The reason growth is slowing is because of slower labour force growth and aging populations. We won't have as many workers entering the workforce, and that means we'll have to find a way to constantly upskill the workforce we have. The investment in human capital will be a critical piece of our growth strategy.
The second thing is investment in infrastructure. In the last budget, the government committed to increasing its investments in infrastructure. We think that's a good start, but probably not adequate for the long term. We haven't seen updated numbers from people at the Federation of Canadian Municipalities for a while, but they used to talk about an infrastructure deficit of about $125 billion for the country. Governments at all three levels are addressing that now. We have a long way to go. Look at the state of our transportation infrastructure at the border and elsewhere. It's a huge challenge.
With one minute left, the last point I'd make is on tax reform. We're creating a new centre at the Conference Board to use our research to try to identify areas where tax reform could contribute to economic growth. I know this committee has talked about that in the past. I think the time has come to have a serious national conversation about revamping our tax system to try to boost the growth potential of our economy.
Chairman, I'm going to stop there, but I'm quite happy to take questions.