Evidence of meeting #47 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was innovation.
President, Canadian Vehicle Manufacturers' Association
From a sales perspective the picture is a little different from a production standpoint. I'm not sure whether you mean sales or production.
President, Canadian Vehicle Manufacturers' Association
For sales, we've come off 2008 and 2009, which is probably one of the darkest periods ever in the history of the automobile industry. That was one of the all-time lows; the market dropped off precipitously, literally overnight. Since then, year over year we've experienced continued growth, to the point that the last two years have been record years.
But we are cyclical. Some of the pent-up demand that was definitely there in 2008 and 2009 and in the years thereafter, because it was so large, has been satisfied to some degree. I think the industry is preparing for a softening of the market as we go forward. Some of that is part of the normal cycle, but it is softening.
I think we're still going to be fairly strong, certainly coming out of this year, although it may not be as good as last year, but I think various forecasters are all looking for a softening of the market as we go forward.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
How important is it to the industry—your first recommendation—to move the AIF to a grant, a non-repayable structure? Would you comment on that, please?
President, Canadian Vehicle Manufacturers' Association
We see this as being absolutely critical. Right now, if you apply and you're successful, the money you get is taxed in the first year you get it. In other words, you don't receive the full benefit of that incentive, and that in fact is the issue here. Other jurisdictions that put together packages to get the auto industry into their economy are essentially putting everything into the tool kit, everything from non-taxable payable loans or grants through to tax-free holidays, to free land—a combination of all those things.
I don't think we can compete directly with some of those packages, but we can certainly close the gap, and that's one way to do it.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
I think with our skilled labour force and opportunities on that front we should have no problem.
President, Canadian Vehicle Manufacturers' Association
I will say this. When you talk about what people say is incentives, one of the largest suppliers has done some analytical work on this point. When we talk about incentives, people are somewhat auto-fatigued, but it's an investment. It has a return on investment. The government gets back its revenues in three years. No other sector has an ROI like that. They more than double it in eight years, in terms of tax revenues.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
I want to follow up and ask some others some questions, and so I'm keeping track of time.
Scott, I'll go over to you and the GTAA. The story is such a compelling one: the second largest employment area in Canada, if I'm not mistaken; growth of 2.5 million to 3 million passengers every year. Pearson Airport this year is on track to pay $150 million in ground lease payments, which is given back to the federal government, to my understanding.
CATSA, in my humble view, needs to be better funded. The CATSA plus system.... I would say, having travelled in Europe this summer and seen some of the technologies in place there and the little monitors that tell you you're going to go through the Rome airport in less than seven or eight minutes, that these are things we need to strive for.
The 95% in 10 minutes I don't think is just a goal. It's something that needs to be measured, and there needs to be a time frame. But I really want you to emphasize how important it is that we're able to move goods, services, and people through that airport as quickly as possible.
Vice President, Customer and Terminal Services, Greater Toronto Airports Authority
First of all, thank you for your support. At the risk of pandering, I agree wholeheartedly with your summary.
We have an opportunity, we think, in a relatively small country of 36 million to 37 million people, where we have the second-largest international airport in North America. We have an opportunity to compete with the world's best. If we do it the smart way—and Canadians are pretty smart and pretty nimble—we can catch JFK in New York in five or six years.
Just imagine the revenue, the well-paid jobs, and the opportunities that would create, not only for the Toronto and southern Ontario region. Imagine what that can mean for our carriers across the country. In the next three or four years, 100 million incremental passengers will be travelling from China. They're going to decide whether to come into Canada and connect through Canada to points all across the world, or to go through JFK, Miami, and other U.S. airports. That decision will be based on flow and connectivity, on how quickly can they get through.
We have to decide if we're prepared to compete on that level. I think we will. We can beat them at their own game. We've demonstrated that over the last five or six years. The relationships with the agencies, the airport operator, and government have never been better, so let's seize upon that and make it work for us.
Liberal
Liberal
The Chair Liberal Wayne Easter
Speaking of flow, we need to flow to this side.
Take one more minute, Francesco.
October 21st, 2016 / 2:10 p.m.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Thank you, Chair.
Mr. Watt, I'll make it quick. I'm looking at StatsCan's web page. We focus on this measure of debt to disposable income—169%—with household sector debt to GDP over 100% for the first time, but we don't look at net worth, percentage of disposal income, and financial assets, all those measures on the other side of the balance sheet.
A number of your colleagues came to Ottawa and gave each of our caucuses a brief, and some have disagreed with looking at this one ratio. As a fellow economist, who's right, who's wrong, or are we all right and all wrong?
Chief Economist, HSBC Bank Canada
It depends on what you're looking at.
I look at the debt situation from this perspective. We run a large current account deficit. What we do is that we have to provide funds, and we borrow funds within the economy, so it's not the asset side; it's the funds themselves and the investment flows.
Households don't really save. Corporations are no longer saving because the corporate profit backdrop is back. Governments are not saving because we're running deficits. We're borrowing a lot of money from international investors. When I think about the household debt situation, I'm saying, who is going to be providing those funds?
When I say the household sector is vulnerable, what I'm saying is that the household sector should now step up and start providing those funds. It still has the asset base in the backdrop, but it's the flow of funds on a quarterly basis, who provides them, and who borrows them. We now need to get another domestic source, and I think that has to be the households.
Liberal
The Chair Liberal Wayne Easter
Thanks to both of you.
We have a number of people at the back of the room waiting for the open-mike section. We will start that probably five minutes late, at 2:35.
Mr. Albas.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Thank you, Mr. Chair.
I appreciate all the presentations today.
Due to time restrictions, I won't be able to ask a question of everyone who deserves one, but first I have a quick comment for you, Mr. Johnson. I too believe, like Mr. MacKinnon.... We're almost pen pals. It's very one-sided. I get more letters from you than I give back to you, but I do recognize your suggestion about the inequity between an IPO where an entrepreneur donates to charity, versus a private equity sale.
The challenge I have, though, is that obviously an IPO involves an efficient market. There are many buyers and many sellers, and they more accurately prescribe what the market is willing to bear for that stock. A private equity sale is much more inefficient, and everyone thinks they're getting a better deal. Perhaps when you're talking to Mr. Sorbara, we could talk about that further. To me it's an intriguing one, but that's not going to be the hard part.
I would like, though, to focus more on the economy side, so I'm going to start with Mr. Speer and Mr. Watt.
We've heard from the Chambre de commerce du Montréal métropolitain that this next budget will be a credibility budget for the government and that they have to show a credible return to balance to do so. First, I would ask the two of you, would you agree with those sentiments? Second, what is a reasonable time frame in which to establish credibility? We've seen many provincial finance ministers having to break their word and actually push it back because of deteriorating conditions.
Mr. Speer, maybe you could go first.
Munk Senior Fellow, Macdonald-Laurier Institute
Thank you.
I think that's right.
Mr. Morneau's mandate letter talked about a fiscal anchor, and of course we now have a fiscal position that lacks the fiscal anchor.
I think a preoccupation on timelines is probably unnecessary, but a clear path forward, I think, is required. That's why there's a tendency to see balanced budget legislation as a straitjacket, and it need not be. In fact, it ought to be seen as a useful guide, as a help. Countries such as Australia have used explicit fiscal rules to help signal to the market, to government departments, and to stakeholders the government's fiscal trajectory. I think it would be of use not just to the government but to this committee for this budget to set out a clear path to close the gap between revenues and outlays.
Chief Economist, HSBC Bank Canada
I agree that we need to have some clarity. The time frame that has been put out I think does make sense. I don't necessarily know if they will be successful in achieving it, but at the same time, as a firm, we have been out there saying that, given the slow growth backdrop, countries that have the room to provide stimulus should.
I think that if we're going to bring in a long-term commitment to when we will return to balance, it should be within the context that we are going to do what's necessary to get the Canadian economy off the mat and provide our commitment. We've started that. I think we should be prepared to provide more.
But it's more than just, say, the federal government and the fiscal program it brings in; it's also what sectors it is going to crowd and how it's going to do it. I think it's more credible if you bring out a program that can credibly crowd in other sectors of the economy, and right now I think it's business investment by drawing in foreign direct investment, because we're not going to be able to provide it domestically with the challenges of the non-financial sector.
As I say, we can't necessarily overlook.... By remaining focused—I'm saying credible for a long-term fiscal commitment—we can't overlook the need to provide stimulus in the short term as the Canadian economy goes through some I think pretty challenging adjustments.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
On the need for spending in areas such as infrastructure, David Dodge, the former governor of the Bank of Canada, has said that there should be an articulation of or a differentiation between what is productive infrastructure and what is not. I feel that sometimes we call everything infrastructure. There are things that over the long term will make us more efficient, and there are things that will open new markets. In terms of those kinds of productive things that make us wealthier over the long haul and allow new opportunities, is that where the focus should be? Or should it be on quality of life, on infrastructure and recreational infrastructure that is more common and that people see in their municipalities more often?
Chief Economist, HSBC Bank Canada
At this point in time, I think that rather than doing the division you have, we have to think about replacement of infrastructure versus trade enhancement infrastructure. I think we need to get Canada a better place to take advantage of export opportunities, so certainly a focus on transportation infrastructure should be a key point of the infrastructure side as well.
Munk Senior Fellow, Macdonald-Laurier Institute
I would agree with what my colleague says, but I'd also say that about a third of new incremental spending set out in last year's budget was dedicated to infrastructure—however one defines it—and that means the other two-thirds were non-infrastructure related. I don't think there is anyone who would argue that deficits for the sake of deficits are a stimulus. I think your implicit point that we need to think about the composition of stimulus, if that's indeed where we're going, needs to be a major part of the discussion.
Where I think I would respectfully disagree with my colleague is that I really do think we need to have a debate—and this committee is the right place to have it—about when and why as a country we'll run deficits as a purposeful policy. Under what circumstances should we be returning to balance? Under what circumstances are short-term deficits justified? I think that debate has largely been supplanted by this debate on what we should be spending on, instead of why or when.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
I have just a quick comment, Mr. Chair.
I want to thank Mr. Rodgers for his presentation today. I know that Habitat for Humanity for Central Okanagan has done some of the most entrepreneurial work in forming a ReStore operation that funds and partners. As partners, they come to the table with money and ask government to work with them on what their priorities are. They've already chosen the people and the places, and they just need the help.
I really appreciated your presentation today.
Liberal
Raj Grewal Liberal Brampton East, ON
Thank you, Mr. Chair.
Thank you to the witnesses for coming today. All the presentations were very insightful. My apologies, I won't be able to ask all of you questions because the chair keeps a very tight leash.
My first question is for Scott.
Pearson is something that we can all be proud of in Canada, across the board. Since I've been travelling over the last year in my current role, it has been a phenomenal experience every time. I read an article this morning in the Toronto Star. You guys actually re-tweeted or used the Prime Minister's principal secretary's tweet on Thanksgiving, which said that half of the lines in security were closed. He hashtagged “fail”, and then you guys responded to him saying, “Maybe you should give us some more money”. I thought that was pretty clever.
It said $60 million would get us in line with international standards. Is that the number we are working with?