Finance Committee on Feb. 23rd, 2016

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I'm asking if it's possible for you to make them formally available to the committee.

[Nicholas Leswick]

If possible, I can get back to the committee on that.

[The Chair, Liberal, Wayne Easter]

We will turn to Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair, and thank you to all of you for coming out today.

There has been a lot of talk about commodity prices and the impact they are having not just on world markets but on the Canadian economy in particular. What would the implications be on Canada's economic growth if we do not have a sustained increase in commodity prices in the future?

[Nicholas Leswick]

Let me talk about the channels of impact in terms of how low commodity prices would ultimately factor into lower economic growth in Canada.

Lower commodity prices would ultimately translate into lower nominal income for the economy, so lower profits for corporations and lower wages for Canadian workers. A second effect would be lower investment in commodity assets, so lower investments in the oil sands, lower investments in LNG facilities. But overall, it's ultimately a reduction in our terms of trade as well. The price we get for imports would be lower in relative terms vis-à-vis where commodity prices started versus where they would be in a shock minus control scenario.

Ultimately, it's lower income for the Canadian economy.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you.

There's all this talk about did we have a surplus, did we have a deficit last year. In your opinion, would it be prudent to look at it as an entire 12-month scenario and not as a month-by-month scenario?

[Nicholas Leswick]

Thank you for the question.

We published our fiscal projections in yesterday's backgrounder as spoken to by the Minister of Finance in which we projected a deficit in the order of magnitude of $2.3 billion for 2015-16.

[Raj Grewal, Liberal, Brampton East, ON]

To what extent can the federal government minimize the impacts of other economies having a negative downturn? What comes to mind is China. What policy measures can we take to ensure our economy is somewhat sustained?

At the end of the day, we all realize that all the world economies are quite integrated, and that benefits us as well, but in your opinion, is there anything from a policy perspective that should be taken by the federal government with other economies to help minimize downside risk?

[Nicholas Leswick]

With respect to that, it's a very difficult question. Canada has a small, open economy. We're a country of some 35 million to 36 million people. We depend on external markets to sell our goods and services, and as you just touched on, our valued commodities. In terms of protecting against global economic volatility, as you mentioned, we enjoy the upsides, and we are certainly affected by the downsides as well, so anything we can protect....

We have stabilizers like the employment insurance system, automatic stabilizers, which kick into effect and protect us against some of those cyclical factors. Supporting domestic consumption and investment while still attracting foreign direct investment means the right kind of policy approach, but certainly we wouldn't want to close ourselves to the ups and downs of the global economy.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you. Excellent.

In terms of the foreign exchange rate and Canada's dollar versus the U.S. greenback, in your opinion, what number should it be? As the dollar fluctuates, there are advantages and disadvantages on importing and exporting. At what level...or is there even a number that suggests that this is the ideal exchange rate for the Canadian economy to grow?

[Nicholas Leswick]

I always use a very simple answer, and it's one I always have to stick to. We don't comment on the underlying value of the Canadian dollar. It's solely determined by market forces.

Stronger or weaker—this is almost getting at my answer to you in the last question—the Canadian dollar presents both upsides and downsides to the Canadian economy. As we're seeing, a weaker Canadian dollar is incentivizing our manufacturing sector to make investments, to enhance its capacity, so that it is more competitive and able to avail upon foreign markets to sell Canadian goods and services.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Mr. Liepert.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I've heard from several of my colleagues on the government side that we don't have a spending problem, that we have a revenue problem. It was the Conservative government that cut the GST from 7% to 5%. If the Minister of Finance decided on March 22 that he was going to not fulfill the election promises and hold spending to the current level, and if you took out the $6-billion contingency fund, it is possible, is it not, that the government could, by putting the GST back to 7% and overturning another Conservative initiative, which has become quite commonplace, actually have a balanced budget? Is that correct?

[Nicholas Leswick]

I mean, the raw math of the matter is interesting. I have to say that it's difficult, if you're saying at this current point in time, to anticipate certain cyclical factors in terms of where the economy is going, or what is truly our underlying structural surplus or deficit.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

But if I'm correct, one point on the GST is about $6 billion. Is that not correct?

[Nicholas Leswick]

If it's a rough—

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Give or take; give or take.

If you take out the cushion, that reduces it to $12 billion. My math: six times two is 12.

[Nicholas Leswick]

I'm certainly not going to argue with the former minister of finance for Alberta about his mathematics.

[Voices]

Oh, oh!

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

We will watch and see whether they turn back some additional Conservative initiatives over the past few years.

In your estimation, is that 7.6% less personal income tax—to be collected in 2016-17, I guess—largely because of the downturn in Alberta?

[Nicholas Leswick]

I think it would be difficult to say that it's merely as a result of the downturn in Alberta, but certainly the lower income in the Canadian economy is being driven by lower commodity prices.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

In what other areas would people be paying less? In your assessment of the economy, in what other areas would personal income tax be down other than the oil and gas sector? When I say Alberta, I'm sorry; I should include Saskatchewan—let's say the energy sector.

[Nicholas Leswick]

Okay. I think that maybe reframes the question.

I think there's Atlantic Canada certainly, with their offshore activity and their winding down of some of their big mega commodity projects as well; Saskatchewan; and B.C., quite surprisingly. We've done some research on the size of the itinerant workforce in Alberta. Where we generally think the large proportion comes from Atlantic Canada, we see neighbouring provinces, obviously Saskatchewan and British Columbia, that will suffer loss of employment due to deterioration in—

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

But it is largely due to the downturn—