Finance Committee on Jan. 31st, 2022

[The Chair, Liberal, Peter Fonseca]

I'm just looking at members. I am seeing everybody in agreement. Is that correct?

It looks like everybody is in agreement, Mr. Blaikie.

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

Thank you.

Mr. Giroux, for whatever time I have remaining, please continue.

[Yves Giroux]

I don't envy you, as parliamentarians, having to approve spending when we have main estimates tabled before the budget, and then the budget comes after the mains. It is very difficult for you, as parliamentarians and decision-makers, to figure out where the budgetary appropriations are and why is it that the mains don't include items that the government will be introducing a couple of weeks later. These are often found in supplementary estimates (A), (B), or sometimes (C). It's very complex to figure out where the government is seeking funding for budgetary items.

It's very complex, and it's due in part because of the fact that [Technical difficulty—Editor] Before the mains, there is not enough time for officials to include budgetary spending in the mains, so it's very complex to follow the money as you are asked to approve it. There is room for significant improvement.

[The Chair, Liberal, Peter Fonseca]

My thanks to Mr. Giroux and Mr. Blaikie.

We are moving to the Conservatives.

Mr. Poilievre, you have the floor, for five minutes.

[Pierre Poilievre, Conservative, Carleton, ON]

Mr. Giroux, thank you for coming.

You've recently published a report in which you chronicled $542 billion in government spending measures, almost a third of which is not part of the COVID-19 response plan.

How much in new or additional measures has the government enacted in the last two years, or since the COVID crisis began, that is unrelated to COVID-19?

[Yves Giroux]

My estimate is that about $176 billion, give or take a billion or two, is not directly related to COVID-19.

[Pierre Poilievre, Conservative, Carleton, ON]

Since which start date?

[Yves Giroux]

That is since the start of the pandemic.

[Pierre Poilievre, Conservative, Carleton, ON]

Since the start of the pandemic, the government has enacted $176 billion in new spending measures that have nothing to do with COVID.

You have said that the government's own guardrails, which it has set in place, have now been reached and that there is no longer justification for a new $100 billion of additional spending. The chief economist for Scotiabank came to our committee last week and said that all things being equal, additional deficit spending would contribute to inflation.

Do you agree with him on that?

[Yves Giroux]

I agree with him that if the additional spending is not to increase the productive capacity of the Canadian economy, but purely to stimulate demand, it would indeed create inflationary pressures.

[Pierre Poilievre, Conservative, Carleton, ON]

So deficits can contribute to inflation.

[Yves Giroux]

Yes, they can.

[Pierre Poilievre, Conservative, Carleton, ON]

Could $100 billion in additional deficit spending measures potentially contribute to inflation?

[Yves Giroux]

Again, if they're not destined to increase the productive capacity of the economy, they can create inflationary pressures.

[Pierre Poilievre, Conservative, Carleton, ON]

That's because they create, in that case, more demand without meeting it with new supply.

[Yves Giroux]

Exactly. They create more demand in an economy that is already running close to or at full capacity.

[Pierre Poilievre, Conservative, Carleton, ON]

Right. Obviously that capacity is quite weak, but the fact that we have such a weak economy and we're considering it to be at full capacity is really quite a depressing story. More dollars chasing fewer goods always leads to higher prices. Some are even calling that “Justinflation”. I won't ask you to comment on that, because I know that's not necessarily in your report.

However, do you believe we can continue to go on adding new debt at this rate, or do you think it is advisable for us to get on a prudent path to reducing the debt-to-GDP ratio?

[Yves Giroux]

I've said a couple of times that we could afford a deficit that was as high as the one in the last fiscal year, but we cannot afford that many years in a row. As deficits decline, that suggests that the fiscal situation will return to more sustainable levels of deficit, but it's clear that we cannot afford the same level of deficit that we saw in 2020-21 for many years in a row.

[Pierre Poilievre, Conservative, Carleton, ON]

Mr. Chairman, how much time do I have left?

[The Chair, Liberal, Peter Fonseca]

You have 45 seconds.

[Pierre Poilievre, Conservative, Carleton, ON]

All right.

Mr. Parliamentary Budget Officer, we have had 85% housing inflation since the Prime Minister took office. When he came into office, the typical house went for $436,000. That typical price has risen to $811,000. Last year, we had all-time record housing inflation of 26%.

Do you believe the negative real interest rates on variable rate mortgages might be contributing to the demand that is ballooning these house prices?

[The Chair, Liberal, Peter Fonseca]

Make it just a brief answer.

[Yves Giroux]

It is very clear that very low interest rates are fuelling demand, because most people don't buy a house paying in cash. They look at the monthly payment and they decide, based on that, what type of house they can afford. Lower interest rates, other things being equal, mean lower monthly payments, and lower rates mean that people can afford to spend more on a house. Therefore, yes, it is creating upward pressures on prices for housing.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Poilievre.

We are moving now to the Liberals and Ms. Dzerowicz for five minutes.