Evidence of meeting #141 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was inflation.
A recording is available from Parliament.
Liberal
The Chair Liberal Peter Fonseca
Thank you.
Thank you, MP Thompson and MP Dzerowicz.
Members, after looking at the time, I'll say that we're going to divide what time we have left equally. We're going to go with four minutes for each of the parties.
We're starting with MP Lawrence for the first four minutes.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Thank you very much.
Thank you, Governor Macklem, for being here and for your availability.
Who sets the interest rates for Canada?
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Right. Are you supposed to do that independently?
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
At the end of question period yesterday, Prime Minister Trudeau said, “and interest rates will be coming down, I am sure, in the coming months.” Have you communicated to the government that you will be reducing interest rates?
Governor, Bank of Canada
I have regular conversations with the Minister of Finance, but no, I don't.... We take our decisions when we take our decisions, and I communicate those decisions to the Minister of Finance after we've taken them.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
There's no way that the Prime Minister could know that interest rates are coming down.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
There's no way he would know that interest rates are coming down.
Why would he say that?
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
I think we will. I think that's exactly what I'm going to ask.
Don't you think it's an irresponsible comment for him to make?
Governor, Bank of Canada
I think you should take this up with the Prime Minister. I'll leave it at that.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Okay.
I'm going to switch gears and talk briefly with Ms. Rogers, if that's okay, about productivity.
I agree with what you said in your speech on March 26, when you said this is a break-the-glass moment. I want to talk about one particular factor. I know there are many. You talked about it a bit in Canada and you talked a bit about it in your speech.
You talked about capital investment and the lack of it. Canada is, of course, predicted to be dead last in the OECD. We need capital to maintain, increase and improve our productivity, to grow our economy and to fight inflation.
Is now the time to increase taxes on capital?
Senior Deputy Governor, Bank of Canada
As MP Davies pointed out, we have seen declining capital investment over a long period of time and over multiple different tax regimes. We're not tax experts, so we're not going to evaluate any one particular measure.
What I would say is that there are really three things that go into productivity. There's labour and there's capital intensity, and then there's a multiplier in terms of how effectively we use those other two things. Our productivity problem spans across those things. Capital intensity, capital investment is one of those things, but we have room to improve in all three areas.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Yes. It makes sense, though, that presumably some of the issue, I think, is competition. Otherwise, why is that investment not being used by businesses? I think Mr. Davies makes that point well.
However, if in fact we reduce the amount of pie and we take more money from the private sector and give it to the public sector, and if Canadian businesses then have less investment and less capital, we're going to be less productive. That's just basic economics.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Yes, or it can be a statement. You could disagree or agree.
I'm sorry. Go ahead.
Senior Deputy Governor, Bank of Canada
At a basic economic level, that's true.
As I said, there are three things that go into productivity, and we have room to improve on all three. I talked about all three of them in the speech. Investment is one area.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Another issue that you talked about in your excellent speech, Ms. Rogers, is the difference in cultural or societal entrepreneurial spirit. Experts have commented that Americans seem to have more of that than Canadians.
One of the things I'm very challenged by with this NDP-Liberal government is their demonization of entrepreneurs and of success and of business owners. If in fact you hear things like “business owners are cheats” and you hear more and more of this class warfare, eat-the-rich type of commentary from the NDP-Liberal government....
I'm not worried so much about those who are already prosperous, but what I am worried about is those who desire to be wealthy, and I don't think being wealthy is a bad thing. In fact, I think it's a great thing.
If in fact we undermine young Canadians' dreams to become wealthy and to become successful, do you not believe that it has the effect of undermining our productivity?
Senior Deputy Governor, Bank of Canada
I think Canada has a lot of entrepreneurial spirit. We have a strong education system. We have a lot of the factors that should set us up well to improve our productivity. I'll leave it at that.
Liberal
Ryan Turnbull Liberal Whitby, ON
Thanks to the governor and the deputy governor for being here today. It's good to see both of you.
I want to pick up where my colleagues left off and ask about climate change and the impacts on our economic growth. Do we have any idea, at this point, of the impact that climate change is having on Canada's economic growth?
I would note that the Canadian Climate Institute did a really good report called “Damage Control” that modelled this, and the numbers were pretty scary, to be honest, but I want to ask you, Ms. Rogers.
Senior Deputy Governor, Bank of Canada
As I said earlier, one of the difficult things about climate change is that we don't have a long period of history from which to forecast events and the impact on the economy from events. It's really what we think of as shocks, and they can have an effect on growth.
If you looked at GDP in British Columbia, you saw the effects of the forest fires last summer very directly. In order to really think about the effects on the economy, you have to sort of forecast what we anticipate some of those shocks to be, how much more frequent they'll be, what the scale will be and those kinds of things.
Liberal
Ryan Turnbull Liberal Whitby, ON
Is the challenge not really having climate science integrated enough in your macroeconomic models?