Finance Committee on March 26th, 2018

[Pierre Poilievre, Conservative, Carleton, ON]

I gather that this Saturday we will reach a real milestone. Bill Morneau will become the trillion-dollar man, as Canada will reach a trillion dollars in borrowing at the end of this week.

Now, the government has talked a lot about its new debt promise, distinct from the old one. The old one was that they would balance the budget by 2019 and that the deficit would never exceed $10 billion. The new one is just that the debt-to-GDP ratio at a federal level will decline.

I want to ask you whether that measurement is really complete if we're trying to determine what level of debt the Canadian economy can withstand. The federal government is one level of government. We have provincial governments, which have additional debt, and then municipalities, which in some cases do issue their own debentures that have to be paid by payers of property tax.

On top of that, we have corporate debt and personal debt. These other levels of debt are important because the same taxpayers who will be expected to shoulder the higher servicing costs that you anticipate in the federal budget framework are carrying their own personal debt. The $2-trillion economy we have is not just supporting the $651-billion federal debt. It's also supporting the provincial debt and the household debt.

Gluskin Sheff's chief economist, Dr. Rosenberg, did a calculation a month ago now showing that the combined Canadian debt—personal, corporate, and government—as a share of GDP is higher than debt levels in 15 or 20 other countries, including Greece, Italy, and Spain.

Do you not believe that the government should look at the overall debt burden of the Canadian population when determining how much the federal government can afford to borrow?

[The Chair, Liberal, Wayne Easter]

Mr. Leswick, would you like to take that on? I know that you can't get into the political decisions that are made, but go with it where you might.

[Nicholas Leswick]

If I could just acknowledge the question, to be very brief, indeed, we would have to consider the entire debt load that the national economy is supporting from a corporate, household, and total government basis.

Again, when you talk about interest rate sensitivity, it's what is the ability of a household to withstand interest rate increases against their household debt payments, which are predominantly, as the minister suggested, two-thirds of the mortgage payments, likewise the balance sheets of provincial, territorial, and local governments. Then again, as we talk increasingly in a higher yield environment, what is the ability of the corporate sector to incentivize its own investment in the face of higher corporate spreads and higher yields?

[Pierre Poilievre, Conservative, Carleton, ON]

If you think of the Canadian economy as being a workhorse, and then the debt loads being in the wagon behind that workhorse, it's one thing to say, “Well, the federal government's debt load, we can put that in the wagon and the horse can pull the wagon.” But that does not remember the fact that the horse also has to pull provincial debt, municipal debt, corporate debt, and then the massive personal debt. Those are all in that wagon as well, so when we consider increasing the weight of the federal debt in that wagon, ought we not to look at the other weight that the Canadian economy is pulling?

[Nicholas Leswick]

Absolutely, to completely acknowledge the point that's being made. Again, it's about the distribution of debts too. We want to maintain a growth track so that we don't unduly pull back on growth by suffocating the corporate, government, or household sectors from acquiring credit, making purchases, or investing in new homes or machinery and equipment, so it's a little bit about the distribution of that debt across the various sectors that you talk about as well.

[Pierre Poilievre, Conservative, Carleton, ON]

Does Finance Canada have an economy-wide measurement of debt that includes personal, corporate, and government debt?

[Nicholas Leswick]

Yes, sir. We absolutely do.

I do not have the metrics at my fingertips, but of course, working with partners across government, we have a keen eye on—

[Pierre Poilievre, Conservative, Carleton, ON]

Could you provide that to the committee?

[Nicholas Leswick]

Absolutely.

[Pierre Poilievre, Conservative, Carleton, ON]

Excellent. Thank you.

[The Chair, Liberal, Wayne Easter]

You can provide that to the committee.

We're out of time, and I don't really want to get into this discussion, but if you have no investment, your economy's going nowhere. You can't be all of one and none of the other.

I've been in business, and if you don't make investments.... Yes, you'll have debt, but you have to make investments to get growth, too, right?

Mr. Sorbara.

We will have time for one more if there's anyone else.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Welcome, everyone.

I have a quick question. On the term “market debt”, does that include the debt of the CMHC and of related entities, like the CMB and NHA programs?

[Nicolas Moreau]

Yes, when we talk about the market debt, the $1 trillion, we include the NHA MBS.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Just for my colleagues across on the other side.... The debt that's for CMHC literally is.... We're talking about millions of Canadians sitting at home tonight who purchased a home, who had less than a 20% down payment on their home, and who were required to buy the insurance on their home. That $400-plus billion of market debt that's out there is basically Canadians' homes.

Is that correct?

[Nicolas Moreau]

Yes. That debt is backed against....

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Which is backed against the security of their homes.

[Nicolas Moreau]

It's backed against mortgages, yes, exactly. There are assets behind that.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

So, for people sitting at home tonight—while they pontificate about this number over there—literally half of that number is the assets, the greatest single asset that every single Canadian family has: their house.

Is that correct, sir?

[Nicolas Moreau]

It's true; it's backed against assets.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Yes, it's totally true, Pierre.

CMHC was created in the 1940s to allow Canadians...to encourage home ownership. Market debt includes CMHC debt.

Is that correct, sir?

[Nicolas Moreau]

That is correct.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

Would you like to continue, Pierre?

[Pierre Poilievre, Conservative, Carleton, ON]

Sure, thank you.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

No, no, you can stop now. It's not your time.

[The Chair, Liberal, Wayne Easter]

You'll have time for another question after.