Finance Committee on May 7th, 2024

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I think that I have spoken to some relevant measures of economic growth and talked about how we're seeing growth doing really well, particularly considering the widespread predictions about how Canada was going to suffer a recession, including from your side of the House.

I think a measure that is worth pointing to is median income, and I would point all members of this committee to some commentary recently written by Tyler Cowen, a U.S. economist, on Bloomberg, about how median income is a very important measure. That captures the life of the middle class. In median income, Canada has had steady growth over the past decade, and it looks really good compared to comparable economies.

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

Thank you, Minister.

Could you please just answer this question? If you don't know, just say you don't know. That's fine.

What country had the worst per-person income drop in the G7 in the last five years?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I think I've spoken to where I see the important measures of growth, productivity and median income.

One of the valuable things about looking at the median income measure is that, as everyone is aware, because of some of the COVID dynamics, Canada had a real surge in the number of non-permanent residents in this country, such as international students. Obviously an international student won't have the income of someone who has been working here for many years, and that fact does have an impact on the numbers.

The budget included a section devoted to talking about these economic impacts. I would point people to median income as a really good measure that speaks to people's lives.

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

I do appreciate that, and I would love to get to some of what underlies that, but first we need to sort of put where the baseline is.

To answer that question, Canada has had the worst income drop in the G7 over the last five years. The U.S. is at an 8% increase. Italy is at about 7%. Japan is a little shy of 4%. Then we have France and the U.K. Germany is slightly negative, and Canada is an outlier at negative 2%.

GDP per capita has a real impact on people. In fact, that's how most economists measure economic well-being. We've also had seven quarters now in which Canada's GDP per capita has been shrinking. If in fact we measured GDP on a per capita basis, we would be in one of our longest recessions. Since the Liberals formed government, our GDP per capita, our economic growth, has not grown a bit, not in the last 10 years. We are in a serious economic crisis, and it's troubling to me, Minister, that you won't answer basic questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

Thank you, Minister

I know the minister has a hard stop at one o'clock, and to get through everybody, we have to get to MP Dzerowicz. Maybe you could follow up when the Conservatives have the floor again.

MP Dzerowicz, go ahead for five minutes, please.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

Minister and Mr. Jovanovic, thank you for being here today.

My first question to you, Minister, is on the capital gains inclusion rate.

Since you introduced federal budget 2024, we've heard a lot of different commentary on the government's plans to increase the capital gains inclusion rate. Can you speak to us and shed light on why these changes will support investments in growth and productivity and how these changes will play a role in creating fairness for all Canadians of every generation?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I'll start where you concluded, which is to say this really is a budget for fairness for every generation. We recognize that means we have to make investments in Canada, for Canadians, and especially for millennials and Gen Z, and that means massive investments in housing. This budget has the most ambitious federal housing plan in Canadian history, with nearly four million new homes to be built by 2031. It means investments in affordability and in the social safety net. We've been discussing some of those, and they are really important for all Canadians, especially young Canadians.

Crucially, it means investments in economic growth. The budget includes a $5-billion investment for students, for post-docs, for our universities and for research. That investment in our fundamental intellectual capacity is an investment in young people. It's an investment in the future.

The budget includes an investment of more than $2 billion in AI to be sure Canada maintains its strong position in this essential frontier of the global economy. The budget includes really important investments in productivity overall, like the expansion of the accelerated CCA, the accelerated capital cost allowance. When you talk to businesses, they say that is a measure that drives investment. Of course, with this measure, plus Bill C-59, we will have four of our investment tax credits in the clean economy passed into law. That program is essential to ensure that Canada can remain an industrial and manufacturing economy in the 21st century.

We're making really big investments in Canada's economic capacity, and those investments cost money.

Now, some people would simply choose not to make any investments and follow a path of austerity. I think that would be a terrible mistake. Other people might choose to make the investments, but not do it in a fiscally responsible way. We saw that with a far-right budget, which didn't last very long, that was put forward in the U.K. I think that would be a mistake here also. Our government, which recognizes we need to make investments and we have to do it in a fiscally responsible way, is making our tax system more fair and using that fair approach to fund the investments that Canadians need.

I think the elephant in the room—in this committee, in the House of Commons, in Canada—is the Conservatives' really refusing to be clear on their view of tax fairness for every generation. I think that we're actually going to end up disagreeing: The Conservatives are going to prefer not to invest in Canadians because I think they find it too challenging to ask those who are doing the best to contribute a little more. I think that's a clear line of difference, and that would be a real mistake for Canada and Canadians.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

I have one quick final question. I know you talked about how a strong economy is very important for us. You talked about investment tax credits. We introduced them in Bill C-59 and now in this budget. Can you talk to us, Minister, about how you see investment tax credits helping Canadian businesses remain competitive in the global market while also pushing Canada towards a more sustainable economy?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Our chair says I can't, but I'll just say they're important.

[The Chair, Liberal, Peter Fonseca]

You have 15 seconds. Yes, they're very important. That's great. Okay. Maybe in another question you'll be able to follow up on that.

We go to MP Ste-Marie.

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

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

Thank you, Mr. Chair.

Minister, I'm going to ask you a question on another topic. Depending on how much time is left, you can answer my question and then come back to the issue of open banking.

I'm very pleased to see that part 2 of Bill C-69 includes the implementation of the OECD's pillar two, a framework for a global minimum tax. I commend all the work you are doing to combat the use of tax havens. I think this is really major, and I commend your courage.

However, in the 300 pages that are difficult to understand, there seems to be nothing about the distribution among the provinces of this tax that would be collected. In particular, what is the plan for provinces such as Quebec and Alberta, which collect corporate taxes?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Thank you for the question.

First, I want to quickly wrap up our conversation on open banking. It's really optional and we don't want to impose anything. However, I want to assure you that, for us, it is important to work with the provinces and territories and with caisses populaires. We are also prepared to work with you and to exchange ideas. You have raised an important concern, which we have discussed at length.

On the implementation of pillar two of the global tax agreement, I thank you for your understanding. I spoke a bit with Mr. Davies about the importance of having a multilateral regime, but it's really a complex regime. For all the processes related to the OECD and also for pillar one, it may be a good idea for us to continue the conversation among our teams to explain what we are going to do. We are currently doing work as part of pillar one, and it is not just up to us.

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

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie. We're right on time.

We'll now go to MP Davies for two and a half minutes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Minister, just before I leave the topic of the Canada disability benefit, last June this is what Minister Qualtrough, who is responsible for disability inclusion, said:

No person with a disability in this country should live in poverty. Yesterday, the Canada Disability Benefit Act became law, creating the framework for a new federal benefit which will lift working-age persons with disabilities out of poverty. ...I look forward to working with the community this summer as we begin the regulatory process to make the Canada Disability Benefit a reality.

Minister, the reaction from the disability community in Canada is overwhelming. That $200 a month is not going to lift anybody out of poverty, really—any person living with a disability.

Would you agree with me that maybe as positive a start as this is, this disability benefit does not meet the promise of this government to establish a benefit that will lift people living with disabilities out of poverty?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Let me say I think we have the same values and the same aspirations, probably in general and certainly with regard to this benefit.

From my perspective, if we want to build robust and enduring programs for Canada and Canadians, we have to act step by step and ensure that we are building them with a foundation that is going to work.

I would say we have to recognize two more things. One is that Canada is very broad and diverse. As Mr. Ste-Marie was pointing out, it applies to everything. In thinking about open banking, I think we all share the same vision, but we know we have to take into account what is happening already in different provinces.

As you know very well, Mr. Davies, that is true also when it comes to treatment of people living with a disability across the country. I really believe—

[Don Davies, NDP, Vancouver Kingsway, BC]

I only have 10 seconds.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I'll stop there.

[Don Davies, NDP, Vancouver Kingsway, BC]

Is that okay?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Sure.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

I'd like to move to the school nutrition program. Your budget says it will help 400,000 people. In my calculations, there are 2.2 million kids in Canada in grades 1 to 6. We all know that this program needs to be universal. I want to single out Ryan Turnbull, who has helped on this program.

How is this amount of money going to be allocated? What conditions may be attached to this money to make sure that all children in Canada get universal access to this program? Clearly, if it's for 400,000 kids, it won't even come close to being a school nutrition program for 2.2 million kids a year.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Again, we have been clear with the national school food program that this is.... We currently have a patchwork, and some kids are getting support. That's great. Some of that support comes through programs supported by the federal government.

This measure is a big deal. It's saying we need to build a national school food program, but we need to be practical and build it based on what we have today in Canada and not kind of try to tear it up, but we have a patchwork. Our approach is going to be to build on that patchwork with willing partners, and that's why we're saying—

I'm sorry—

[The Chair, Liberal, Peter Fonseca]

Yes, we're going to have to get in there, because now we're over the time, and I don't want to take up time from the final two members.

I have MP Chambers for five minutes, please.

[Adam Chambers, Conservative, Simcoe North, ON]

Thanks very much, Mr. Chair.

Minister, it's always a pleasure to have you here at committee. I'm sure you're always very busy, but it's nice of you to make the time to see us.

I want to take you on a vacation. Let's go to Mexico for a second. The Government of Mexico's average yield to maturity of their debt is around 18 years, and 59% of Mexico's debt is in 10-year bonds or longer.

In Canada, our average number of years to maturity is 6.9, and the number of 10-year bonds we issue as a percentage of our total debt is 33%. During COVID, 60% of the debt we issued was for three years or under. That's all renewed now at 4% or 5% interest rates instead of being locked in at, say, 1% for 10 years. In rough numbers, that's about $10 billion a year in extra interest payments.

Do you think the government made a mistake during COVID by issuing short-term debt instead of long-term debt?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

First of all, I think the people who are taking a break from their regular activities at this committee, which they're very busy with, are the people who have been filibustering the work of this committee. I'm very grateful—I sincerely am—that people took a break from that important work that the people of Canada appreciate on filibustering to have this conversation.

I would also say that it's an interesting choice to contrast Canada's fiscal position—our credit rating and our debt management—with that of Mexico. I can assure you that there is.... Well, I haven't talked to every single person in Mexico, but I talk to their government a lot. They would cheerfully trade their position for ours, given our AAA credit rating, which was reaffirmed last week by Moody's.

I'm glad that you're focusing on Canada's debt and our debt issuance, because it gives me an opportunity to highlight an important fact, which is that we issued a five-year global U.S. dollar bond. That's important, because the Bank of Canada likes to maintain some U.S. dollar debt—