Finance Committee on Sept. 25th, 2023

[Tanya Woods]

Thank you, MP Hallan.

I'll start, and then I'm going to share this one with my colleague Romit.

Housing affordability is a top issue and, as an industry representative today, we want to make sure that we're very clear. There are a number of cross-purpose policy and implementation challenges we've experienced that look like they will drive costs up for the end consumer.

Financing housing is the essential part of turning the idea of home ownership into there being a home to own. We're very hopeful that, in fact, the government will form the round table to make sure that it can keep pace with the changes that are being made and implemented right now relating to mortgages and other housing policy measures, and to ensure that they understand the marketplace.

I'll invite Romit to add a couple of additional comments.

Thank you.

[Romit Malhotra]

Thank you, Tanya.

Thank you for the question.

All I would add is that there have been several proposed recent changes to policy or regulation, and while they may be well-meaning individually, we've found that at times they're often in conflict with each other or could be disproportionately unfavourable to small and mid-sized financial institutions, which has the effect of limiting choice for Canadians and/or increasing costs.

I'll make it tangible quickly by way of citing one example. CMHC's “Advice No. 18” targeted issuers of mortgage-backed securities in single-family housing, but if it goes as proposed—

[Jasraj Singh Hallan, Conservative, Calgary Forest Lawn, AB]

I'm sorry to cut you off, but I have very limited time.

I want to shift to Mr. Dodge. Thank you for being here.

We're seeing commentary from economists at several financial institutions talking about a recession or a downturn that is now all but avoidable. A strategist with Desjardins told the CBC, “The path forward looks bleak”.

Oxford Economics is reporting that the recession of the Canadian economy has arrived. Household debt remains high. Bankruptcies and solvencies are up. We now see banks increasingly preparing for loan defaults. Even BMO has shut down its auto loan unit out of concern for loan defaults.

I just want to get your thoughts on what this is signalling to you.

[David Dodge]

I think we've always understood that we would need a period of essentially zero growth in order to rebalance demand and supply. We thought that a year ago. What happened in the intervening period is that we actually had stronger demand than we had anticipated, so that period of zero growth basically got pushed back. It's now what we expect to see over the next 12 months or so.

That's not the end of the world, I have to say. To be able to disinflate from the levels that we were at and get back to close to 2% sometime at the end of 2025 without a major rise in unemployment and a major disruption was really quite a trick.

Yes, in the next 12 months, we would not expect demand to be strong. In fact, we need it to not be strong in order to break the expectation that inflation is going to stay high.

[The Chair, Liberal, Peter Fonseca]

Thank you very much.

Thank you, MP Hallan.

Now we're going to our final questioner.

It will be MP Weiler, please, for five minutes.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Chair.

I'd like to ask my first question of Mr. Dodge.

In your opening, you mentioned four key areas where the government should focus investments. One that we haven't spoken too much about is the last one, which is AI and digitization. I was speaking with a management consultant a couple of months ago. He was talking about how much further ahead a lot of businesses in Europe were in utilizing AI. I was just reading a report recently that said only 4% of Canadian businesses are using AI.

I was hoping you might be able to expand a little bit on that fourth pillar that you talked about. How might the government be able to look at that as an area for improving our productivity?

[David Dodge]

What do we try to do? We try to do it, essentially, through an R and D tax credit, which is at least the appropriate instrument. Whether it's precisely well articulated has always been a question. I am on the board of a small firm. It certainly is critical to us in terms of making our investments in new technology. I think it is important, but there has to be a will on the part of private industry to go ahead and do it. There has to be an attitude that the only way we can move forward is in fact to be innovative, to do new things and to invent our own IP, which we can then sell to the world rather than importing IP from the rest of the world and paying for it.

This is one where government can set a framework, but it is really up to business to pick it up. I won't say it's the rare business, but it's a small fraction of businesses and always has been. It is true in other countries as well that a small fraction of businesses pick it up. This is going to be a collective effort of the business community. The target that Anne was talking about is really important. Until we see that start to move, it's not clear what government can do, other than talk about it and provide that tax incentive or tax refund for the small guys. You need it as a refundable credit in order to be useful.

All I can say is that, in my own experience, for the small struggling company that produces IP, it is a very important incentive. We certainly use it and would do less well if it were not available.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you.

With my remaining time, I'd like to ask the Coalition for a Better Future a question.

The scorecard is very useful in really showing the scale of the challenge that we have in Canada, but I was hoping you could provide some ideas not just on the “what” but on the “how”.

Both Ms. Raitt and Ms. McLellan, could you identify one area that you would suggest we focus on in the next budget to increase our productivity?

[Anne McLellan]

Unfortunately, my colleague, Lisa, had to leave to do a CBC interview.

First of all, let me say that, while it's not specific, we hear this over and over again: “Why can't we collaborate in this country to achieve the inclusive, sustainable economic growth we all want?” Canadians talk to us about the fact that they are so dispirited by the fact that different parties and levels of government seem unable to talk in a respectful way with each other to come up with the solutions that Canadians know and feel will meet these big challenges. It's collaboration among all three levels of government, but then also collaboration with the private sector, levels of government and civil society. Yes, that's a general motherhood thing, but Canadians palpably feel that we are lacking collaboration to deal with these big problems. They want to see it. That is one message I would leave you with.

Otherwise, it's important.... Here, I suppose I speak directly about the Government of Canada. I think the Government of Canada has to show leadership in terms of providing both that spirit of collaboration and some of that certainty that the private sector needs to be confident in terms of its investment going forward. Actually, what will ultimately drive the transition to a green economy—governments have to be there, absolutely, especially at the beginning—is private sector investment.

We need to ensure that governments—probably at least federal and provincial governments collaborating and working together—provide the framework in which we have the certainty to make the investments. We really do need to do a better job of providing that framework—calling it a plan may be too specific—in which people can organize their businesses and, quite honestly, their communities.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Weiler. What a great note to finish on.

MP Lawrence, I'm going to give you a few seconds. I think you wanted to say something.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I need three seconds.

Have we confirmed the Minister of Finance's appearance?

[The Chair, Liberal, Peter Fonseca]

Okay. We'll get to....

What I'd like to say right now is that the Honourable Anne McLellan was a great note to end on.

The members know this full well, but I'll tell all the witnesses: We have many challenges, but the biggest challenge on this committee is time. We have distinguished, diverse witnesses with us. We wish we could listen to all of you and hear from you a lot more. We want to thank you for your testimony for our pre-budget consultation. It means a lot to have you all here with us. Thank you very much.

That concludes our meeting. We are adjourned.