Finance Committee on April 30th, 2019

[Carolyn A. Wilkins]

I apologize. I don't have all of those details. I'd hate to give you what I have in my head and have it not be entirely correct. I would prefer to send you all of the information we have on our purchase policies, which may in fact be on our website, although I'm not entirely sure if that amount of detail—

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I've checked.

[Carolyn A. Wilkins]

Okay, if it's not there, we have them. I'm perfectly fine sharing them as soon as I can send them to you.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Could you share them through the clerk of the committee?

[Carolyn A. Wilkins]

Sure.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

When do you think we could have these?

[Carolyn A. Wilkins]

I don't see why we wouldn't be able to have something by the end of the day or the end of the day tomorrow.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

This will be in writing, through the clerk.

[Carolyn A. Wilkins]

Yes.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Great. Thank you.

[The Chair, Liberal, Wayne Easter]

You still have a minute.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Those were the main questions I was going to ask you. Will you also be able to share some of that internal analysis you did ahead of time on why this would be the best course of action?

[Carolyn A. Wilkins]

Absolutely. I think what I'd need to do is just check to see what kind of third party information might be there that we would have to extract—if any. I just have to ask the staff to look at that.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Okay.

[The Chair, Liberal, Wayne Easter]

Thank you.

We look forward to receiving that information.

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

Thank you for being here with us once again today.

My first question is on a topic I raise with you regularly when you come before us, and that is household debt.

I wonder if you could provide us with a status report on household debt in Canada. The situation does not seem to be improving. Some studies show that there can be good debt. A mortgage, obviously, is a good debt. However, a recent study by the MNP firm has shown that 50% of Canadians are $200 away from insolvency, that is to say a few dollars away from bankruptcy at the end of every month.

I wondered if those numbers are of concern to you, with respect to the Canadian economy. What are your thoughts?

[Carolyn A. Wilkins]

The household debt level of Canadians represents a high level of risk to Canada's financial system. We have been saying so for a long time. We noted that for a year now, the ratio of debt to disposable income has stabilized. That is good news. We also note that the quality of mortgage loans has improved, and that is very good.

You have to be careful when it comes to surveys of the population. Some people certainly do find that their finances are tight, even very tight. When we do our analysis, we look at the economy and the population as a whole. We know that 30% of Canadians have no debt. As for those who do, they have seen the cost of servicing their debt increase. The ratio is higher than before, but it seems manageable, on average.

Among the factors we can study are whether or not people are behind on payments, and the rate of personal bankruptcies. In Canada that has not increased, or worsened. The levels are not very high at all. However, some data show that it is more difficult in Alberta and Saskatchewan. That is totally understandable, given the adjustments people in those regions have had to make.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

When you must decide whether to increase the overnight rate, you take into consideration the effect that may have on people who are a few dollars away from bankruptcy.

[Carolyn A. Wilkins]

Of course. I think we spoke about this the last time we were here. We know that our overnight rate increases have a greater effect than before because people have more debt.

At the same time, as you mentioned last week I believe, mortgage rates increased, and then decreased again. Mortgage rates went down by 60 basis points since the beginning of the year.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

What effect would a change in interest rates have on the federal debt and the cost of servicing the debt? Every year we pay between $20 billion and $30 billion to service the debt; those are approximate figures since I don't have the exact figures before me. Do you evaluate the effect of the overnight rate on the federal debt and the annual deficit?

[Stephen S. Poloz]

That is part of our net analysis of the effects of interest rates on the economy. People who have bonds receive interest. The yield curve is very flat and has not changed for a long time. For the moment, there is no very big change, but I expect that some risk may change the yield curve one day or another. This will probably increase longer term rates as compared to short-term rates.

Overall conditions lead us to think that the yield curve will remain somewhat flat for a long time. It is possible that interest payments may increase because of other reasons, but for the time being, that is not what we forecast. We see a slight increase.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

I have another question about some figures that surprised me. I don't know if you can answer me.

In the Department of Finance financial review, it says that there will be a $3.1-billion surplus during the first 11 months of 2018-19, and the deficit for the same year is expected to be $15 billion.

Can you explain those figures, which are at the very least surprising? Indeed, it is surprising that in a single month, the budget balance changed and went from a $3.1-billion surplus to a $15-billion deficit.

[Stephen S. Poloz]

That does not really fall under our purview. I did read something in the papers concerning the current budget and the moment when certain things are added.

According to our analysis, revenues are higher than anticipated. This is another indication of the economy's solidity, and that of the labour market. The way in which income is generated is another index that the economy is stronger than what newspapers lead people to believe, as they paint a somewhat darker picture. There are a lot of differences amongst such data, those on production and those on demand, at this time. Those data have to be reconciled.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

It's true that the yields are—

[The Chair, Liberal, Wayne Easter]

We're going to have to leave it there. We're a little over time.

Mr. Fergus.