Evidence of meeting #83 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was outlook.
A recording is available from Parliament.
4:30 p.m.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
What was that attributable to and do you see that having any kind of impact on us?
4:30 p.m.
Economic Advisor, Analyst, Office of the Parliamentary Budget Officer, Library of Parliament
Certainly it was lower than many expectations, including our forecast. The primary driver of that was a big pullback in consumer spending, which had been quite strong up until then. I think it's too early to call it a turning point. One thing I was reading today is that there seems to be a big discrepancy between the surveys of consumer confidence and where consumer spending is expected to be and where it actually comes out. One thing to note about the U.S. GDP, especially in the first quarters, is that there have been some big revisions, notably in those first quarters. And this is something their statistics office has flagged, so I think we'll probably want to wait and see for a couple of months as the revisions come in.
4:30 p.m.
Economic Advisor, Analyst, Office of the Parliamentary Budget Officer, Library of Parliament
But continued consumer spending growth at that level—it was close to flat—would be problematic for sure.
4:30 p.m.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
Because if I heard you correctly earlier, strong consumer spending is largely attributable to our economic growth projections. Is that right?
4:30 p.m.
Economic Advisor, Analyst, Office of the Parliamentary Budget Officer, Library of Parliament
Yes.
4:30 p.m.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
So, if we run into the same bump the U.S. has run into, all of this could be out the window.
4:30 p.m.
Economic Advisor, Analyst, Office of the Parliamentary Budget Officer, Library of Parliament
Yes. I think consumer spending is roughly 60% of the economy, so a sustained pullback would be....
4:30 p.m.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
I wanted to get clarification on a number that was mentioned by Mr. Fréchette. I believe you mentioned an increase in growth of $10 billion. Is that correct?
4:30 p.m.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
Yes, I think so. In nominal GDP?
Just for my purpose, how does growth of $10 billion...? To me it seems like we're going into debt by $20 billion or $30 billion to grow by $10 billion. That doesn't sound like a very good business decision to me. Can you clarify that?
4:30 p.m.
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
I think the $10 billion was the increase in the level of nominal GDP relative to the projection we had in the fall. That was just comparing—
4:35 p.m.
Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament
—our current projection with the projection at that time. It wasn't just the growth. The GDP will continue to grow over the five years.
4:35 p.m.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
Okay.
I have one final question, and it relates to infrastructure. I continue to have trouble identifying infrastructure projects in my part of the country. You mentioned in your opening remarks that about half of last year's allocation is going to make it out the door within the budget year.
Secondly, I believe you said you were confident that the majority of the two-year allocation would make it out the door. What gives you the confidence?
4:35 p.m.
Parliamentary Budget Officer, Library of Parliament
The confidence, I'll—
4:35 p.m.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
First of all, explain, if you could, what you found as to why it wasn't out the door more quickly, and then answer the question.
4:35 p.m.
Parliamentary Budget Officer, Library of Parliament
Thank you.
In the first year of the infrastructure program, only half found its way in terms of spending. There were multiple reasons for that. One was the problem of allocating the money to the provinces and negotiating all of the.... That was one of the situations, and now the money seems to be flowing more rapidly.
Some of the money will flow next year, and next year, in 2017-18, or the upcoming year, 90% of the $10 billion will be spent as a result of these accelerated negotiations or agreements between the federal government and the provinces.
It's not only a matter of the agreements. The agreements were signed, but allocating the money within provinces was a problem. There was also a seasonal factor. As you know, some parts of the country do not have a lot of infrastructure work during the winter, for example.
So that was the reason.
We have indicators of that because we monitor for the Senate's national finance committee the expenditures of all the infrastructure programs, and we report on it, which is what I alluded to earlier. We will appear before it again on Wednesday. We appear every three to four months before that committee and monitor the money that is flowing, according to the numbers that we have from Infrastructure Canada and other departments.
Do you want to add something, Jason?
4:35 p.m.
Liberal
The Chair Liberal Wayne Easter
Mr. Shaw, do you want to respond? We're over time but that's okay. We'll go down this path.
4:35 p.m.
Director, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
I'll just add very quickly that some of the best data we have access to comes from provincial budgets. That provides the best go-forward look regarding how much infrastructure spending will actually occur, because, of course, the federal government is transferring the money to provincial governments, and then in turn, down to municipalities, with respect to the spending.
We perform detailed tracking of all the provincial budgets. It's a painstaking and occasionally thankless task. But for 2016-17, comparing what provincial governments indicated prior to the federal budget 2016 and the new infrastructure announcement and where they actually ended up, we can see that there's no net increase in spending for the current year overall, but in 2017-18 there's actually a fairly substantial increase.
4:35 p.m.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
Okay, but are provincial budgets based...? Have they received the money, or are they preparing their budgets and just anticipating that they're going to receive the money?
4:35 p.m.
Director, Economic and Fiscal Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
That's a great question. It's in anticipation. That's why the provincial data is so critical, because it's actually their planned spending...the people on the ground across the country who are responsible for delivering these projects.
One of the key weaknesses in the federal data, of course, is that it's backwards-looking. It very much reports on the cash flows, and as has been pointed out to this committee and others in the past, those cash flows can occur, of course, after the projects have been undertaken, whereas with the provincial budgets, there is very good clarity regarding when the people who are actually delivering those projects think the activity will occur.
4:35 p.m.
Parliamentary Budget Officer, Library of Parliament
As with some municipalities, as well.
4:35 p.m.
Liberal
The Chair Liberal Wayne Easter
Did you want in, Mr. Shaw?
Okay.
Just for some clarity then, are you making a presentation to the Senate finance committee or banking committee on Wednesday?
4:40 p.m.
Parliamentary Budget Officer, Library of Parliament
National finance.