Finance Committee on Oct. 26th, 2023

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

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

We'll now go over to MP Blaikie.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

On the same topic, do you think that Ms. Freeland's decision regarding the acquisition of HSBC by Royal Bank of Canada, or RBC, has any implications, whether symbolic or strategic, for the future of Canada's financial sector and its ability to invest in a greener economy?

[Léa Pelletier-Marcotte]

Thank you for the question.

I can't give you a specific answer. I'm neither an economist nor a specialist in either competition or the banking sector. However, I do think we should be concerned about the reduction of competition in all areas, including the banking sector.

Our report doesn't target any particular banking institutions more than others, but it's no secret that RBC's investment portfolio is quite problematic.

As for the HSBC acquisition, we'll have to see what's driving it.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

In terms of competition in the financial industry and this problem that you've highlighted of an oligopoly that tends not to have a sufficient amount of competition, are you concerned that approval of the RBC-HSBC merger will tend to perpetuate the current less-competitive culture in Canada's financial sector? Do you think that this could have negative consequences for Canadian consumers of financial products?

[Alex Vronces]

Though the association is not close enough to the particulars of the deal to have an informed opinion about whether the acquisition should be approved or disapproved, we don't think the decision should be taken lightly.

The five big banks in this country control 90% of the banking assets. They also control a lot of financial infrastructure. They gatekeep in that financial infrastructure. Any decision that does significantly lessen rivalry between our banks will just put upward pressure on banking fees, customer service, cost of capital and all the things we need to grow the economy.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

We go now to MP Hallan for five minutes.

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

Thank you, Chair.

Thank you to the witnesses for being here.

Mr. Asselin, my questions will be for you. Thanks for being here.

In a recent letter to Chrystia Freeland, Goldy Hyder said that he wanted her to avoid spending in the fall economic update and to “set a clear fiscal anchor focused on managing the growing cost of servicing debt.”

Numerous people, whether it's the former governor of the Bank of Canada, David Dodge, the current Governor of the Bank of Canada, Tiff Macklem, or even the Minister of Finance, Chrystia Freeland, have all said that deficits fuel inflation. Because of that, in the last 19 months, there have been 10 interest rate hikes, putting Canada most at risk in the G7 for a mortgage default crisis now. All of that spending led to inflation and to these interest rate hikes, and now Canada is in a really risky position.

To quote Goldy in that letter, "With long-term interest rates at the highest they have been in years, it is irresponsible to suggest that economic growth will be higher than interest rates for years to come,” and as you said, “Governments can no longer run permanent large deficits without fear. The era of low interest is no longer with us, and that is a reality the government must address.”

Can you reiterate whether one of those fears is this mortgage default crisis? What other fears are you talking about when you say “fear”?

[Robert Asselin]

Thank you for the question, Mr. Chair.

To me, the faster we go back to price stability, which is 2%, the better it will be for the economy, for Canadians and for the government to get back into a position—to your point—where we can reinvest and grow the economy, and where we're not worried about putting too much debt onto future generations.

The more time it takes to get back to 2%, the more painful the crisis of affordability will be. The higher the prices remain, the less good it is for all Canadians.

This is why fiscal policy right now needs to be very disciplined. We need to be very disciplined. This is not a political statement from me. It's just a policy stance.

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

Is it disciplined right now?

[Robert Asselin]

I think Governor Macklem was correct yesterday when he said that over 2% growth in spending for governments doesn't help him to bring inflation back to 2%. That's just a factual thing. I don't want to go into the politics of it. It's just math.

We need to go back to 2%. I think the governor is keen to go back to 2%. He understands the importance of it. We, as a country, have decided that 2% is important for inflation and for price stability, and the more time it takes, the more painful it will be for Canadians, unfortunately.

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

In that vein, as we were discussing in pre-budget consultations, I believe it's really important that we include the context of where Canada is in terms of the battle of fiscal and monetary policy and its effect on inflation. Yesterday, the Governor of the Bank of Canada, Tiff Macklem, at his monetary policy report press conference reiterated his concerns around government spending adding more to demand than what supply can keep up with. In other words, when you have too many dollars chasing too few goods, you get inflation.

The Liberals have had inflationary deficit after inflationary deficit, adding more to the national debt than every government before them combined. That flooded the economy with money, driving up demand, while historic low productivity meant supply could not keep up. As a result, we have 40-year highs of inflation, followed by the fastest interest rates hikes in Canadian history; and now mortgages, household debt and even government debt are all more expensive. As we discuss with Canadians what Canadians need to see in the next budget, I think it's important that we include the context given yesterday by Governor Macklem.

That is why I wish to move the following motion:

That the committee concur in and report to the House of Commons the comments made by the Governor of the Bank of Canada on October 25, 2023, when he said quote, “We expect government spending to grow at 2.5 per cent. What that means is, if all those spending plans are realized, government spending will be adding to demand more then to supply is growing and in an environment where we are trying to moderate spending and get inflation down, that’s not helpful.”

I'd like to move that motion and continue on.

[The Chair, Liberal, Peter Fonseca]

The motion has been moved by MP Hallan.

MP Blaikie.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

I presume notice had already been given of that motion, or is he giving notice today and then moving it on another day?

[The Chair, Liberal, Peter Fonseca]

He is giving notice right now, at this moment.

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

On a point of order, I believe that this is permitted because we are on the same topic of the day, so notice is not required.

[The Chair, Liberal, Peter Fonseca]

It does pertain to the PBC.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

I'm sorry. It's not obvious to me that a motion to agree with a statement that was made outside the context of this room is germane to a pre-budget consultation. If it was a motion that had something to do with how we were going to conduct ourselves in a pre-budget consultation, that would be one thing. If it was something arising out of testimony, it would be another thing.

This is completely another thing. It's fair game for Mr. Hallan to give notice of a motion like that today, but I don't see that it's relevant to our pre-budget consultation study except in so far as Conservative members have talked about what the Governor of the Bank of Canada has said, but I think that's pretty slim grounds procedurally to be able to move a motion like this without notice.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

We're going to suspend, and I'll confer with the clerk.

After conferring with the clerk and the analysts, in my opinion, it does not pertain to the PBC.

We will continue with our meeting.

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

Mr. Chair, I have a point of order. This has happened a couple of times, and that's why I raise this.

We've had discussions and debates with respect to the administration of this committee. Conservatives have raised an issue. We've heard the other side, but we don't often get a chance at a rebuttal, which I don't think.... I think it actually violates the principles of natural justice.

[The Chair, Liberal, Peter Fonseca]

That's not a point of order. I've made my decision. You can challenge my decision, MP Lawrence, but I've made my decision.

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

Mr. Chair, that was a point of order. It was pertaining to the future operation, which is what a point of order is. It's about the rules of the committee, and I was making a valid point of order with respect to the operation, so it was a valid point of order.

I just put it in your ear for going forward. It was meant to be instructive going forward, not with respect to this decision, and I am aware that I can challenge your decision, as I have done before.

[The Chair, Liberal, Peter Fonseca]

MP Baker.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I'd like to raise a point of order on that very topic of how we work going forward.

I think it's important that we respect the witnesses who are before us and are here to present. Many of them have travelled here to speak about pre-budget consultations, so I would suggest, as we move forward as a committee, that we refrain from political grandstanding and debates before the witnesses, and that we set aside time for that if that's where the committee wants to spend its time.