Greater labour supply is a result.
Evidence of meeting #72 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was dollar.
A video is available from Parliament.
Evidence of meeting #72 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was dollar.
A video is available from Parliament.
9:15 a.m.
Conservative
9:15 a.m.
President and Chief Executive Officer, Canadian Manufacturers and Exporters
Yes.
9:15 a.m.
Conservative
Andrew Saxton Conservative North Vancouver, BC
Isn't that interesting. Thank you.
Finally, Mr. Nantais, how has government support for the automotive sector helped CVMA members?
9:15 a.m.
President, Canadian Vehicle Manufacturers' Association
It has helped tremendously not just CVMA members but all vehicle manufacturers who actually produce here. We have, as I mentioned, supports in the form of the automotive investment fund. We have a very significant effort on the issue of standards harmonization on a North American basis. We have other measures in terms of SR and ED tax credits, and yes, we can make some changes to those. These are all things that have been very helpful and will continue to contribute to new future investment considerations. The question is, though, we need to benchmark and we need to be competitive with these other jurisdictions that are upping their game. That will be the challenge as we go forward. There are many policies in place right now that are very helpful not just to the auto industry, mind you, but in manufacturing generally, including accelerated capital cost.
9:15 a.m.
Conservative
9:15 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you to each of you for joining us today.
Mr. Mendes, do you agree with private sector economist Doug Porter and others that oil prices have taken a precipitous drop, but for the mid-term there's a stabilization, and we're in a slow growth environment with lower commodity prices for at least the mid-term?
9:15 a.m.
Deputy Chief, Canadian Economic Analysis, Bank of Canada
As I mentioned, we don't actually produce a forecast of oil prices. We make an assumption that they stay near their recent levels. We do of course analyze the risks around that assumption. There are both upside and downside risks to the $60 assumption we made for Brent oil prices. On the upside, if you think about the cost of producing oil, a substantial proportion of world oil production today is too costly to be profitable at a $60 price. You can imagine that supply over time would disappear. That could put further upward pressure on prices.
On the downside, there could be further innovations in technology or cost-cutting measures that could put further downward pressure on prices. Overall, we see the risks to that $60 assumption that we made is tilted to the upside over the medium term.
9:15 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
You're able to make your forecasts and projections despite the volatility, or you're able to build in those assumptions and potential outcomes into your forecasts.
9:15 a.m.
Deputy Chief, Canadian Economic Analysis, Bank of Canada
As I said, we make an assumption. There's a lot of uncertainty around that, of course.
9:15 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Sure.
The Bank of Canada has said that the fall in oil prices is unambiguously negative for growth in Canada. Is it fair to say that it's overall positive for growth in the U.S.?
9:20 a.m.
Deputy Chief, Canadian Economic Analysis, Bank of Canada
Yes. Our assessment is that the decline in oil prices from the middle of last year would raise U.S. GDP by the end of 2016 by about one percentage point.
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
It's negative for Canadian growth but overall positive for U.S. growth. Would that put pressure on the federal government to potentially raise our rates in the U.S?
9:20 a.m.
Deputy Chief, Canadian Economic Analysis, Bank of Canada
I can't comment on federal policy. The positive for U.S. growth, though, is a positive for Canada.
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
What would be the implications of higher rates in the U.S. on the Canadian economy?
9:20 a.m.
Deputy Chief, Canadian Economic Analysis, Bank of Canada
We've said that when higher rates do come about in the U.S., they're likely to be associated with a stronger U.S. economy. It's the stronger U.S. economy that would really be—
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Would it increase pressure on the Bank of Canada to follow through with potentially higher rates if the U.S. were to do that, or would that differ?
9:20 a.m.
Deputy Chief, Canadian Economic Analysis, Bank of Canada
Not necessarily. The bank targets inflation in Canada. The decisions regarding monetary policy in Canada would be based on the outlook for inflation.
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Could changes in the U.S. economy in terms of growth affect inflation and relieve pressures in Canada as well?
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you.
Mr. Walker, the impact of falling oil prices on, you were saying, the Canadian auto dealers.... You're saying that cheaper gas is going to have an impact. Are people driving bigger cars or potentially buying bigger cars? We've heard this. Is it affecting people's purchase decisions in terms of the kinds of vehicles they're buying?
9:20 a.m.
Vice-President, Public Affairs, Canadian Automobile Association
Mark could probably speak to this more than I could.
What we see is the same thing that some others have alluded to. These are more long-term kinds of changes. People buy a car once every three or four years. They won't change their behaviour in the short term as quickly unless of course they have a lease and then they might want to switch over. The data will be too fresh to make any comment on that.
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
But it's having an impact on people's confidence in terms of consumer acquisitions and purchases. That's what you're implying.
9:20 a.m.
Vice-President, Public Affairs, Canadian Automobile Association
It may be in some parts of the country where they see the macroeconomic forces being more significant and more long term, as in Alberta. I'm not sure that's true anywhere else.
9:20 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Mr. Mendes, what do you see as the impact of softer oil prices on the Canadian employment market? Is it a softening of the employment market in Canada?
9:20 a.m.
Deputy Chief, Canadian Economic Analysis, Bank of Canada
As I said, we forecast that in the absence of any monetary policy response and any other shocks, the decline would have lowered output and economic activity in Canada.
