Thank you very much, Mr. Chair. Welcome to all members of the committee. I've been here many times. For some of you it's the first time, so I hope we get a chance to know each other a bit better.
I'm part of the circle of economists who give advice to Minister Morneau directly. In fact, we were meeting with the minister in Toronto on Friday, so I thought one of the things I could usefully put on the table this morning are my comments from Friday. I have four points to make.
First of all, on the economic outlook, I think the consensus is that our economy is growing. I think the best word for the growth is probably “feeble“. We think Alberta will be in a recession again this year. Growth is going to be very weak in both Saskatchewan and Newfoundland, but in other parts of the economy, growth will probably be robust. We think B.C. can grow around 3% and central Canada around 2.25% to 2.5%, but overall our forecast is for national growth of 1.7%.
The purpose of this first budget should be to give the economy a gentle nudge without necessarily building up a large stock of debt down the road. That's my second point. I do think it's important for a new government to establish fiscal anchors and to give the public a sense of what your strategy is going forward. I would put a lot of weight on the debt-to-GDP ratio falling over the next four years to ensure that we have the capacity to add more significant fiscal stimulus if we fall back into the kind of recession we saw in 2008-2009. Don't take just a one-year view; take a whole-term view about the debt load the federal government can afford to carry going forward, knowing that the more interest payments you make, the less you have available for other purposes.
I advised Minister Morneau to be prudent in this budget. That's my third point. You can be prudent by using a fairly modest growth forecast. The federal government forecast nominal income growth—not the real growth of the economy, but real growth plus inflation. I think there's a widespread agreement amongst economists that nominal income growth is going to be fairly weak, and I would aim toward the lower end of the band to ensure that you have upside potential. Another way to add prudence to your budget is by increasing the reserves built into the budget and have a sense that you can hit your fiscal targets and even have a bit more room to spare. Prudence is either a matter of using modest growth assumptions or building reserves into the budget, but I do think prudence is called for.
For the fourth point I'm going to pick up on some of the comments of my colleagues here.
The real purpose of the budget should be to start setting out a plan for stronger growth in Canada. We're now in a period of aging demographics, when economic growth of even 2% is going to be hard to reach, and we should be examining all possible options to try to add greater growth to our economy going forward. I mean things like making the right investments in infrastructure, which includes not spending on things that just give payback today but on things that are going to give the economy a long-term payback going out 20 to 25 years.
I also mean things like rethinking the tax system. Finn, I liked your comments a great deal. I've been writing about that for a decade or so. It's time to rethink the tax system to deal with the massive tax expenditures that leak out about $100 billion a year in federal revenue. We don't know what the interaction is amongst all the expenditures as well. That might be a challenge for this committee. You could show leadership by taking on the task of rethinking the tax system. You're going to be here for at least four years. What a great opportunity to add to the vitality of the Canadian economy.
Mr. Chair, I'll close by saying I've never tweeted from a committee before, but I had a chance to take a photo and tweet, so the committee is now being shared with my followers across the country, which is kind of a fun thing to do.