Finance Committee on Jan. 17th, 2022

[Sophie Chatel, Liberal, Pontiac, QC]

I would like to talk about the pressure caused by supply and demand.

In your opinion, do the statistics show that the cost of housing decreases when there is a greater supply of housing on the market?

[Anil Arora]

It depends on the location. Is it a rural or urban area? What is the current situation? What is the demographic population component?

Of course we can provide assistance when it comes to components in order to find a solution that fits local demand.

This is not a Canada-wide situation. It affects some suburbs in a more local way.

We could provide assistance in terms of demographic data, among other things, to figure out the ideal proportion of supply and demand. As I said, we are well positioned to provide assistance but not to answer that question in particular.

[Sophie Chatel, Liberal, Pontiac, QC]

Do you have any statistics regarding the number of housing units available per 1,000 inhabitants by municipality?

[Anil Arora]

Yes, of course. We have data from the census and other sources. We can send it to you or you can find it on our website. We have a centre for housing statistics that could be useful to you. Also, if you have a specific community in mind, we can help you find that kind of information.

[Sophie Chatel, Liberal, Pontiac, QC]

All of the OECD countries are experiencing the same thing as we are, namely, an increase in the cost of rent since the end of 2014.

Is there a reason why all countries are experiencing the same crisis?

[Anil Arora]

I, personally, am not actually involved in these studies, but we can do some research with our OECD colleagues if that subject is of interest to you. It could answer your question.

Once again, the statistical agencies are not really interested in policies per se. However, they are obviously interested in their components.

[Sophie Chatel, Liberal, Pontiac, QC]

I would like to ask one last question.

Did you notice—

[The Chair, Liberal, Peter Fonseca]

Thank you, Madame Chatel.

[Sophie Chatel, Liberal, Pontiac, QC]

I will ask it next time.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Yes, that's the time. I know it goes quickly.

We are moving into our fifth round here, members. We have the Conservatives up for five minutes. I believe it's Mr. Stewart.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you, Mr. Chair.

Rural Canadians don't have an option to take public transportation to work or to the grocery store. We depend on owning our own transportation. Most of the people I know buy a used vehicle. I'm bringing this up because the cost of a used car has gone up significantly in the last year, or last year and a half potentially. I think a lot of people were refraining from buying new vehicles because the cost of a used car was more affordable.

In my constituency of Miramichi—Grand Lake, the median household income is a little over $34,000. Buying a used car was a method that many constituents, and I, over the years were using to keep costs down. At this point in time, the cost of a used car has gone through the roof.

Obviously there was some discussion earlier about the fact that we don't include this within our CPI, but the United States does include it in theirs. I think it's a little unfair for elected officials to continue.... Some are telling Canadians that we're doing better than the United States when it comes to inflation, but we aren't actually playing by the same rules. In particular, the case of the used car is one of the most significant examples of that.

When will the used car market be better reflected in the CPI to get a true, all-encompassing inflation rate?

[Anil Arora]

First, just let me make it as clear as clear can be. The purchase of used cars is included in the CPI. Not everybody buys a used car, of course. I've bought used cars. Not everybody buys a used car every month, or for that matter, every year. When you look at that basket overall, the weight of purchasing a used car is about 1.43% in the CPI. Used cars, along with new cars, are included in the CPI in Canada. I just want to make that very clear.

What we are differing on in the case of that change.... Once you adjust for quality—does it have airbags, does it have the rear-view camera and so on—once you adjust for that, then for each year you have to look at the price change as it gets older. What factor do you use to do that comparison, from one year to the other, for a used car?

In Canada, of course if we had a ready-made data source that would tell us that, where everybody would report what they paid, what the features were, the year and so on, then we'd have a perfect way to account for that change in time. In the absence of that, we use what we do have, which is the change for that controlled quality—the new car—and we use that as a change.

Like I said, we don't just dismiss it. We are, in fact, doing some work with registrations and other private sector providers of that data to see how we can get at a good number. Just keep in mind it would still only be cars that are sold at dealerships. It does not include what you might put up on—I don't want to promote any one platform—whatever one may use to sell their car.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Okay. Thank you for that answer.

I think what I'm trying to say here is that, you know, 99% of Canadians are not buying brand new vehicles. Can we expect the weight to be greater in future CPI? Will you make the weight greater in future CPI analysis, knowing that new cars are now harder to get? With these chips that aren't coming in from the Asian markets, a lot of new cars can't be manufactured. People are waiting months and months and months to buy a new car, and the cost of a used car is going through the roof.

Why is it costing so much, and when will it be included in the CPI analysis?

[Anil Arora]

The answer is an absolute yes. As I mentioned earlier, every single year we take stock of what Canadians spend on what as a percentage of their overall picture of expenditures, and the weight is dependent upon what those data tell us. At the moment, that number is 1.43%. If in fact more people are buying more used cars, you're going to see a relative higher proportion. The data will tell us what that weight should be. We don't arbitrarily put that number together.

As I said, it's that basket and its relative weight compared with other expenditures. If we see that proportion go up, the weight of the basket will reflect it. We will show that change. As I said, as we get more and more sources of data, we'll start to refine even the measure by which we show that used-car price change over time.

[The Chair, Liberal, Peter Fonseca]

Thank you. That's time.

Mr. MacDonald, you're up for the Liberals for five minutes.

[Heath MacDonald, Liberal, Malpeque, PE]

Thanks, Chair.

In the middle of the pandemic, the first three quarters of 2021, residential construction accounted for a larger share of the GDP than did business investment. Supposedly this never happened before. It's usually twice as large as the residential. How does that contribute to CPI?

[Anil Arora]

You're absolutely right that the residential investment in real estate as a proportion of the overall [Technical difficulty—Editor] quite a bit. Unfortunately, the other factor that you talked about, the business investment, in general overall has gone down. So you see one going up and the other coming down.

The net worth of Canadians, as those real estate assets have gone up, has also gone up. I think we showed that it went up by about $2.3 trillion as well. Those are all stats we put out that talk about the change and so on. They talk about that asset and how it's in proportion to the overall economy going up or down over time. That's assets. CPI is consumption. [Technical difficulty—Editor] an average household in a particular area would now incur to maintain that asset, if you like.

That's what the CPI does. It takes a basket and it shows you, okay, when you purchase that home, and you pay the real estate fees and the costs, that's included. It includes all those elements that are the one-time costs, but then it says, quickly, what are the costs to maintain that particular dwelling?

The CPI is a consumption-based measure and the other is an asset-based measure. They both exist. We track them both.

[Heath MacDonald, Liberal, Malpeque, PE]

Okay.

The discussion that we've had here today has been very interesting, obviously. We're under the understanding that years prior to COVID-19, we had a stable CPI. All of a sudden, COVID hit and CPI increased. We know it's because of global supply chains. We know it's because of environmental challenges and climate change. We know it's because of demographics, the aging in place that we talked about earlier. We know there's turmoil in the labour markets worldwide because of the pandemic. Our supply chains are affected by that, and interprovincial migration.

Would you consider the past two years the perfect storm for the CPI difficulties that we're dealing with today?

[Anil Arora]

[Technical difficulty—Editor] on it, as we see. I think that even in my own lifetime we have seen higher CPI costs. The numbers we show are benchmarked to the same kind of number back in 2003, so it's not unprecedented. In fact, in some of our past, we've seen inflation rates much higher than what we see here today. [Technical difficulty—Editor] one could get into the analysis of, but what we do see in these last two years is a series of factors, as you've articulated them, and that has been the context around many of our releases, which point to why we are seeing what we're seeing, not only at the macro level. We can actually break it down by different components.

[Technical difficulty—Editor] better, as mentioned earlier, because we're updating that basket every year. We're getting better because we now have real-time data, as I mentioned, with the scanners and so on. We're getting better at understanding not just what's happening at the macro level, but what's happening in different provinces and what the different components are of CPI as they relate to the consumption pattern of a fixed basket over time.

I hope that helps.

[The Chair, Liberal, Peter Fonseca]

Thank you.

You have 15 seconds, Mr. MacDonald.

[Heath MacDonald, Liberal, Malpeque, PE]

That's fine, Chair. Thank you. I'll cede my time.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Now we're moving to the Bloc and Monsieur Ste-Marie for two and a half minutes, please.

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

Thank you, Mr. Chair.

With regard to household spending on housing, were you able to establish what category of household was experiencing the biggest price hikes in this sector? Was it households that own a house and pay a mortgage or households that rent? Were you able to measure what category of household is being hardest hit by the inflation we are experiencing right now?

[Anil Arora]

To my knowledge, we did not do it, but I will ask Ms. Ertl to clarify the relationship between the increase in consumer goods and the increase in household spending.

[Heidi Ertl]

Thank you very much.

The CPI measures the increase in spending by home owners and renters. I can confirm that the spending of home owners increased by 5.3%.

For rented accommodation, it's an increase of 1.8%, so we have certainly seen that owned accommodation, owned housing, has increased at a faster pace, but there are certain dynamics at the regional and local levels that can go beyond those headline numbers.