Finance Committee on April 13th, 2021

[Dr. Trevin Stratton]

Absolutely. I would agree with those remarks about the potential economic benefit of removing interprovincial trade barriers. There are many people who have said this.

The International Monetary Fund has also looked at this and estimated that it can add about 4% of real GDP per capita to Canada's economy. It's going to be incredibly important for when we have difficult fiscal situations going forward. These kinds of policies, focusing on reducing regulatory burdens and interprovincial trade barriers, are low-cost or no-cost ways to get to economic recovery.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

We'll turn then to Mr. Ste-Marie, followed by Mr. Johns.

Gabriel.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Good evening, everyone.

I want to thank the witnesses for their presentations.

My first question is for Mr. Stratton or Ms. Drigola.

I agree that it's important to maintain measures such as the Canada emergency wage subsidy and the Canada emergency rent subsidy for the duration of the pandemic to help people through the crisis. My question is about after the pandemic.

In the fall 2020 economic statement, Ms. Freeland announced a $70 billion to $100 billion post-pandemic stimulus package. This echoes the Biden administration's $1.9 trillion package in the United States. However, there's some debate in this country about the package. Some economists say that it's a good idea and others say that it isn't necessary.

What are your thoughts on this? What's your organization's position on this stimulus package?

[Dr. Trevin Stratton]

Absolutely. It's important to keep in mind that not all types of spending are stimulus. I don't know of any economist who is saying turn off the spending taps. There are obviously a lot of Canadians and businesses out there still needing support. However, support programs aren't meant to be stimulus. Stimulus spending is when governments step in to spur demand when it's absent in the market. They're stimulating demand.

When we look at some of the data that came out this week from the Bank of Canada about the business outlook survey and the consumer confidence survey, we know that there is pent-up demand in the economy. Businesses are planning on investments in anticipation of this being released, and consumers are planning on spending more after vaccinations are widespread, even if their income expectations remain the same. There's quite a bit of savings in bank accounts right now that might be released.

While we need support programs, we do not necessarily need stimulus for the sake of jump-starting demand. It's ready to be released. It's not fiscal policy that will release it, but rather health policy. Nothing will have a greater impact on our economic growth than getting the pandemic under control. That's why our position is that any government spending should focus on those longer-term competitiveness issues when it comes to the regulatory burden between productivity, removing interprovincial trade barriers, and infrastructure spending to a certain extent—not for shovel-ready stimulus but for improving our long-term competitiveness.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

If I understand your point of view correctly, you're basically in favour of the support program during the pandemic because we need to recover as quickly as possible, as you said in your presentation. However, you aren't necessarily in favour of a stimulus program to boost the economy after the pandemic, and certainly not to boost demand.

Some may say that this program could boost supply, that it could help businesses get equipped to shift towards the green economy, or that it could support growth sectors.

Do you have the same opinion in terms of supporting or boosting global supply?

[Dr. Trevin Stratton]

Global demand is also projected to rise in the second half of this year. Economic growth projections have been revised upwards for the second half of this year as well. In Canada, we see demand being projected to increase later on as well, for similar reasons.

Leaving stimulus aside for a second, what's very important to me and what I'm concerned about is what's called economic scarring. There are compounded affects on business investment and labour market scarring in terms of lifetime income and things along these lines. These are longer-term impacts that we'll see well after we have the health aspects of the pandemic in the rear-view mirror. Focusing on that is going to be very important in shifting from rebound to recovery.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

Mr. Chair, do I have time for one more question?

[The Chair, Liberal, Wayne Easter]

Please be very quick.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

I'll stop here then. I'll come back to this.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Gabriel.

We have Mr. Johns, followed by Mr. Fast.

Gord, you have five minutes.

[Gord Johns, NDP, Courtenay—Alberni, BC]

I'll start with the Chamber of Commerce. As a former executive director of the Chamber of Commerce, I first want to thank all of you for the work you're doing and for the hard work you've done throughout the pandemic. We have six chambers in my riding. They've been instrumental in supporting their membership and our local economy.

Ms. Drigola, I'm going to direct my attention to you, since you're representing the small business side of things.

The recent CEBA loan has obviously been life-saving for many small businesses. We've seen the government expand it to $60,000. With the third wave now happening and many businesses under more shutdowns, we're putting forward a pitch to the government to expand that by another $20,000, another $10,000 forgivable portion and extending the repayment timeline to 2025.

Do you think that extension would make a difference right now for small business owners?

[Alla Drigola]

You bring up an excellent point about the timeline. A year ago, 2022 seemed like plenty of time to repay loans, but here we are a year later in the third wave. Small businesses are pretty maxed out in terms of debt capacity. Extending that repayment timeline is something that would be a good use of government time to revisit, particularly for small businesses.

That being said, I think extending the loan is also something they could do. That's also an example of where it's time to start tailoring those supports to the businesses in the sectors that really need it, versus a broad blanket open to everyone, including those who may not necessarily need access to that additional loan. It should be more targeted towards those hardest-hit sectors.

[Gord Johns, NDP, Courtenay—Alberni, BC]

I really appreciate that, especially as someone who comes from an area that's dominated heavily by tourism. You can imagine how that sector has been impacted.

Ms. Wilson, you just talked about child care. The number one priority, pre-pandemic, of the Comox Valley Chamber of Commerce in my riding was affordable and accessible universal child care. We look at Quebec, where 70,000 individuals went back to work. Like you said, all genders benefited from that program, but it was predominately women who benefited from their child care program. Their GDP, as you know, grew 2%. It's been instrumental for their economy.

Right now, we've seen women disproportionately impacted by the COVID crisis. Can you speak about how critical this is to the economic piece and to helping bring people back to work, especially women?

[Nancy Wilson]

There's no doubt that child care is essential. It's long overdue that Canada implement a national child care program that is publicly funded and takes the model we see in Quebec, which has excellent, robust data showing that it works, that there's a good return on investment there, and that labour force participation increased in Quebec. The data is there. It's there in other countries. It makes sense. It should be, quite honestly, a no-brainer.

My short answer is, let's do it already.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Yes.

[Nancy Wilson]

Let's face it. Even if we had a national child care program across Canada, those child care facilities would have been closed during social distancing. We still have to look at systemic inequalities that exist within the economic system. If we're looking at tourism, women entrepreneurs are highly represented in tourism and accommodation in that sector. There are other issues to be solved in addition to the child care issue in order to really get that sector back on track.

[Gord Johns, NDP, Courtenay—Alberni, BC]

I have only a few seconds.

Obviously, we're seeing the housing crisis that's going on right now and the impact it's having on not just employees of business owners, but actually business owners themselves. In the 1970s and 1980s, 10% of our housing market was non-market housing; now we're at less than 4%.

Can you speak about how critical it is for the federal government to invest in non-market housing and partner with all levels of government and start building housing?

[Nancy Wilson]

It's critical when we look at economic housing issues to make sure not only that a gender-based analysis is implemented, but also that we're looking at intersectional issues. When you pair economic inequalities with racial inequalities and gender inequalities, you see that these issues can't be addressed adequately in a vacuum or by solving them in just one area. We really have to look at how everything is interconnected and how we can address things at the systemic level.

[The Chair, Liberal, Wayne Easter]

We'll have to move on to Mr. Fast, followed by Mr. Fraser.

You have five minutes, Ed.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you.

My questions will be for Mr. Stratton, because it's seldom that we have an economist at the table. Thanks for coming, both of you, from the Canadian Chamber.

Mr. Ste-Marie has already taken us down that path, but there are a few different pieces I want you to help me put together. Like so many other central banks around the world, the Bank of Canada pursued a policy of aggressive quantitative easing, especially early on in the pandemic, and it still hasn't tapered off its purchases of government bonds. You layer on top of that the massive stimulus that's happening in the United States and the infrastructure spending they're hoping to get passed down there. Add to that pretty strong GDP growth, and then on the sidelines you have corporate and household savings at record levels.

When you put all of that together, do we still need a $100-billion stimulus program in Canada? What could be the impact of all of these influences on our economy?

[Dr. Trevin Stratton]

Certainly central banks in Canada and all over the world have pursued quantitative easing, and we saw how this tool can be used successfully to address economic downturns during the 2008 crisis. That being said, a lot of central bankers themselves would agree that there are limits to how much government debt central banks can buy.

There are risks of inflation. Our economic growth projections have started to tilt toward upside risks, that the growth will actually be higher than was initially projected. I like the way it was framed in terms of putting the pieces together, because I really think we need to think about it holistically and systemically and macroprudentially. It's thinking about the combination of monetary policy, fiscal policy and potentially pent-up demand at the same time.

Certainly there are risks for inflation if the desired amount of easing required is overestimated and too much money is created by the purchase of liquid assets.

That being said, the bank has said that it will stop quantitative easing efforts once the economy has recovered, so it will be very important for it to keep an eye on that. The bank has said that if there is more inflationary pressure, then we can expect it to adjust policy accordingly.

[Ed Fast, Conservative, Abbotsford, BC]

Could you expand a little on productivity-enhancing infrastructure investments? If you're looking at productivity driving infrastructure, what would that be?

[Dr. Trevin Stratton]

That's a great question. I think this is an issue that actually existed in Canada pre-pandemic as well. We have historically had lower productivity levels than the United States, for instance. Our productivity levels have actually been diverging from those in the United States since around 2011, because of some of the competitive policies that have been put in place down south to encourage investment in both technologies and skills.

We haven't seen the same level of investment or the same types of competitive policies put in place here to encourage that, so it will be very important to try to do that going forward. As many people talked about during the pandemic, there might be an acceleration of digitalization, of course ensuring that many Canadians are involved in re-skilling and upskilling so they also don't fall behind.

In terms of productivity, economists like me talk about just outputs in terms of units of input. Being able to invest and create that investment environment for technologies and skills is what will help enhance that for us. That includes infrastructure—not only traditional infrastructure but also broadband infrastructure, which will have a huge impact on that going forward, specifically for rural and remote communities, which should not necessarily have a divergence from urban communities when it comes to the economic opportunities available.

[Ed Fast, Conservative, Abbotsford, BC]

Can you comment at all on how we repatriate the foreign direct investment we've lost over, say, the last decade? There is no doubt that we're paying a steep price for not having had a competitive environment that attracts foreign investment. Do you have any ideas on how we get that back in Canada?