Finance Committee on Jan. 17th, 2022

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

[The Chair, Liberal, Peter Fonseca]

We're moving on to the Liberals and Ms. Dzerowicz for five minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I just want to clarify one thing because I think it's important. Sometimes there are interjections and people who might be listening from home might not get some context. I know that Mr. McLean had mentioned something about a tax on principal residences being recommended, and I just want to be clear that there's no such recommendation by our government.

To provide testimony to the standing committee on May 4, 2021, the CMHC and Generation Squeeze came before the committee. Canada Mortgage and Housing Corporation, as represented by Mr. Michel Tremblay, a senior vice-president, indicated that CMHC is funding 47 solution labs whose purpose is to find housing solutions focused on vulnerable groups who often fall through the cracks of the Canadian housing system. If you go through the testimony, both Mr. Tremblay and Mr. Kershaw, who heads up Generation Squeeze, indicated very clearly that they do not provide tax policy advice to the government and have not been asked by any cabinet minister to provide that information or tax policy recommendations to the federal government. I further want to indicate that what happens to the reports is that they're actually posted, according to Mr. Tremblay, and they are for anybody to use, for public consumption.

I want to make sure that, in addition to the fact that numerous ministers lately have come out very clearly to indicate that there is no proposed tax on principal residences, people will know that it's also covered very clearly in the May 4, 2020, Standing Committee on Finance meeting, and if people want to read that in depth I encourage them to do so.

Mr. Arora, we've asked you a number of questions about so many different things. You've done such a wonderful job that I just want to say thanks to you and your team for your patience and excellent responses.

Housing is treated differently in various countries. How do you or the team at Stats Canada assure yourselves that the way you're measuring housing costs is actually the right one for Canada? You know that in Canada we have a higher than average number of people who own houses. Therefore, how do you assure yourselves every single year that, yes, this is the right measurement for us to continue to use?

[Anil Arora]

There are different measures. I think we align very nicely with international standards and, where needed, we customize for our particular situation. I think most countries look at housing as an asset and then in inflation look at it as a consumption over time. You have to start to look at things like the valuation of the asset, the opportunity cost of what you would do. Not everybody has a full mortgage or the same size of mortgage. It isn't that you couldn't apply other measures to come at some of the questions that have been asked. It's just not the way that we, I would say, generally look at an asset that has a shelf life and that then has to be depreciated, and you have to look at what the opportunity cost is that one may forgo. We're pretty confident that we remain among the avant-garde in how we keep these concepts pure and make sure that these things are working.

The second reason we feel confident in the numbers is that we confront these data sources with others. When you break down that somebody is looking at an average cost price and we look at an index of certain things, it gives you a good sense that, yes, the measure that we have withstands that kind of scrutiny. Then we look at the comparability of the macro level or the aggregate component, as well as the different subcomponents over time.

All three of those areas give us the confidence that we're able to provide policy-makers with the information they need to have a good debate and to make sure that they're making decisions based on good quality data.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

I know Ms. Ertl would like to add here, if she could, please.

[Heidi Ertl]

Very quickly, I would only add that there are several different methods to approaching housing measurement in CPIs, and there is no consensus on that. It's the one area that is quite complex. The U.K. and the U.S. both use what's called the “rental equivalence” method; hence, they are not also including housing prices directly in their CPI measure. They view it as if the homeowner were renting the property. We are taking the approach where all of the costs of living and use of the home are included in addition to housing prices in some of the components. There's also an acquisition approach, which I believe is the one you're referring to, where you would actually include the house price. To my knowledge that approach is only used by one other country.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Dzerowicz.

Members and witnesses, we are moving into our sixth round. I am cognizant of the time. We're looking at about 15 minutes. I understand that in the past when it has come to a final round and time didn't allow for a full round, we've had the Liberals and Conservatives for five minutes and the Bloc and NDP for two and a half minutes each. We'll continue in that vein.

We'll have the Conservatives up now.

Mr. McLean, you have five minutes.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Chair. I appreciate the opportunity of one last time, and I appreciate Ms. Dzerowicz's comments as well in defending why a commissioned study has been brought forward by CMHC, which is not attached to a cabinet minister. Nevertheless, if the Liberals weren't thinking about taxing home ownership, they'd stop commissioning studies on how to tax home ownership, so please stop the studies. Stop putting trial balloons out there.

Our job is to defend Canadians when they tell us that they don't want to have a tax on their principal residence. That has been the actual Canadian norm for a long time. We don't need to dive deeper into taxing Canadians in order to pay bills that have gone through the roof under this government's mandate.

I'll go back to the questions that we're asking of our witnesses here today.

Mr. Arora, thank you for all you've given us today. I hope you recognize that our intent here is to make sure that we're looking forward and avoiding what we've seen from other government agencies when they say, “Well, inflation is just transitory and we don't have to worry about it.” We do have to worry about it. The things that we have to look forward on for housing include the fact that, as we've pointed out, the cost of the mortgage interest payment has gone down, but the cost of the actual principal on the house has gone up significantly, including in your data.

When interest rates go up, those mortgage rates are going to go up, and the other part of that pendulum is not going to come down. That will lead to mayhem in the housing markets in Canada. We're trying to make sure that we're ahead of that and make sure that we're spelling out what the actual inflation is in housing here in Canada.

Can you comment on that, please? What's going to happen to the housing market when interest rates normalize in Canada?

[Anil Arora]

Obviously, we will continue to measure both the weight of that consumption...the mortgage payment as it goes up, with the interest, let's say. It will form a certain percentage of that basket, and we will continue to measure it over time. That's our role. It's to make sure that you know, both in relative terms of that basket and then in terms of the price change over time that's going to have. If interest rates go up, people are going to pay higher mortgage interest payments, and that will have a corresponding effect on the inflation rate.

[Greg McLean, Conservative, Calgary Centre, AB]

I appreciated your earlier comments that some of these costs are landing on new homeowners and not on regular homeowners. The issue is that the new homeowners and those who now can't afford new homes because of the rocketing prices for housing in Canada are going to be hugely affected by any change in interest rates going forward. A correction is going to be on the horizon.

By measuring inflation and actually putting a proper inflation number on the table, a more indicative inflation number, much like they do in the United States.... In the United States, housing prices have not gone up nearly much as Canada's housing prices, yet their actual inflation rate, their CPI rate, is at 7%. Somehow the way we're measuring in Canada has us at 4.7%, significantly lower than in the U.S., yet it is not indicative of what our shelter costs are in Canada. We're still trying to come to grips with that. I haven't heard yet how you are reconciling that. Can you provide more illumination?

[Anil Arora]

Ms. Ertl mentioned earlier that the U.S., in a sense, takes the equivalent of a rental cost for a particular dwelling and substitutes that. Yes, that potentially has some benefits, but it also equally has some things to take into account, because depending upon how much mortgage is left, that may not essentially be an exact or a good enough proxy for some households as it would be for others. All of these methodologies come with a price.

The second thing is the availability of that kind of data. We have to be conscious that you have to have good quality data to be able to put those—

[Greg McLean, Conservative, Calgary Centre, AB]

Okay. Let me ask one last question,

The issue with inflation is that measuring it properly leads to making sure that wages are reflective of what people are paying in the economy. If what we're trying to do is tamp down the expectation of inflation, we're not passing on what Canadians are experiencing in the market and, therefore, what their representation of wages versus expenses should be in the economy.

Is there any indication of that?

[Anil Arora]

We rely on real experts. We have an advisory committee. We rely on international experts, and all the information that comes back says that we have a measure that is second to none.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Arora.

Now we're moving to the Liberals and Mr. Baker for five minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks, Mr. Chair.

Mr. Arora, something you said earlier sums up a lesson that is important to be heeded. It was when you were responding to one of the members. To one of his questions, you said, “We deal in facts”. I think we should focus on that as we wrap up. Some of the questions I'm hearing you answer over and over again from some of the committee members on the Conservative side reflect the fact that they're refusing to operate or deal in facts.

For example, they're refusing to accept the fact that the cost of housing is properly accounted for in the consumer price index. You've explained why that is, because you've explained the consumer price index is a measure of how the cost of living, including housing, affects Canadians.

They refuse to accept the fact that the government has said countless times—whether it's in committee forums like this, in question period or in the media—that it is not considering a tax on public residence. They refuse to face that fact.

They refuse to accept the fact—we just heard it from one of the members—that the government is not commissioning studies like they've alleged. I want to refer to that quote from an article where Paul Kershaw, the University of British Columbia professor who led the research that Mr. McLean was referring to, said he wanted to be clear that “This was not a government-commissioned report”, as the Conservatives are spinning it.

All this is to say that if we go back and focus.... It's very important that we remember that we really do, as you have advised us, Mr. Arora, deal in the facts. That's what Statistics Canada and you present to us to the best of your abilities, and you do it in an excellent, credible and objective way. I want to thank you and your team for being here today and for doing that every single day.

I probably have three minutes left, so I want to ask you a few more questions with the remaining time, Mr. Arora.

One of them is how we're currently recovering from a very difficult economic time as a result of the pandemic. I have another few questions, so if you can be brief I'd be grateful. How does the current recovery, in your view and based on the data you've collected and assessed, compare to past recessions?

[Anil Arora]

First of all, we've served for 100 years, and I look forward to serving as an agency for the next hundred.

I would say with this recovery, when we look at it in comparison, say, to the 2008-09 recovery, there are some fundamental differences between the situation back in 2008-09 compared to what we're going through now. Obviously, this one is a public health crisis to which policy responses have had a fairly significant impact on what we're seeing. We don't see the kind of housing crisis that we saw back then, where we saw the exact opposite trends of what we're seeing now.

However, there are some parallels as well, in terms of supply chains and the impact of a particular issue in one country having an impact on another because of the integrated nature of our economies and our societies these days. Those are some of the areas where we can start to look at comparing and contrasting the uniqueness of this particular situation as opposed to in the past.

From a data perspective, our aim is always how we can provide more timely data, more granular data and more integrated data, so that we can better understand what's going on and you as decision-makers can make the right difficult choices so that we're all working together.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I appreciate that.

Mr. Arora, my last question to you is about when we think about the government response to the pandemic that you just spoke to. Canadians would think of the CERB, the wage subsidy or some of those other programs. There are a number of them, for example, the programs supporting businesses.

Can you speak to how those initiatives have impacted the things that you measure? I'm thinking of wages, unemployment and other data and the economic indicators you measure.

[Anil Arora]

We put out literally a hundred small analytic papers over the course of the last year and a half that go into all those different nooks and crannies and aspects. I would encourage you to look at the social, housing, economic and even some of the environmental aspects of this very unique—in our lifetime, anyway—experience. I think what we're seeing is the integrated nature of where the problem is and the response. We have tried to show, in our data, all of those aspects.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Arora.

We'll now move to the Bloc.

Monsieur Ste-Marie, you have two and a half minutes.

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

Thank you, Mr. Chair.

First, I would like to thank you, Mr. Arora, Ms. Ertl and Mr. Peterson, for being with us this afternoon. You answered our questions non-stop. It has been a busy afternoon for you, and we sincerely thank you.

My next question has to do with the statistics that you have on business and personal bankruptcy.

Have you calculated the number of bankruptcies since the beginning of the pandemic?

If so, could you tell us what they are? What have the trends been in that regard since the beginning of the pandemic?

[Anil Arora]

Yes, we calculated the number of businesses that went bankrupt. However, I am not sure if we can provide you with any statistics on personal bankruptcy.

Mr. Peterson, do you have anything to say about business openings and closures or bankruptcy?

[Greg Peterson]

I don't have those data available at my fingertips, but we do have a number of reports on business openings and closings. We can make that available to the clerk.

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

Okay. That would be great.

If you have any statistics on personal bankruptcy, we would really appreciate it if you could send them to the committee at the same time.

I will stop my questions here and leave the remaining time for Mr. Blaikie.