Evidence of meeting #161 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was rate.
A video is available from Parliament.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Thank you.
Thank you, Governor, for clarifying for everyone that if the carbon tax is removed from things like fuel, the price of these items will in fact go down. That was, I think, helpful to have on the record.
Would that go for all other products that are tied to this? If a truck that transports food no longer has the tax applied to it, then we are easing the input cost on food, for example.
Governor, Bank of Canada
I don't have an estimate of the secondary effects, but the direct effects on overall inflation are relatively modest.
The secondary effects are going to be even more modest. I'm not saying there aren't some products where that could be important, but what we're looking at is CPI inflation, everything in the basket. When you look at it that way, the secondary effects are going to be de minimis.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Going back to the very end of your response to Mr. Morantz's last question, you were beginning to talk about timelines for project approvals and the impact, the drag, that has on productivity. I'd like you to maybe complete your answer, if you'd like to, and talk about how regulatory timelines create delay, which creates a drag on productivity, which is where we get this declining per capita GDP that we have in Canada.
Governor, Bank of Canada
We have well-intentioned regulations at different levels in this country—federal, provincial, municipal. They want to make sure that these investments are in the best interests. The difficulty is that, at times, we have overlapping, sometimes even conflicting regulatory approval processes. They're tough for investors—people who want to build—to navigate. There can be considerable uncertainty in how long it's going to take. What that does is it scares off investors.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Indeed. Delays on the capital will go somewhere else—for example, the United States.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
The gap in investment, the investment deficit with the United States, the difference between American investment in Canada and Canadian investment in the United States is now.... Do you have a statistic on that?
Governor, Bank of Canada
I don't have the number in front of me, but there's no question that too many companies.... Foreign capital, even some Canadian capital, is going to the United States, because they can get faster regulatory approvals.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
We've heard at this committee that the difference is almost half a trillion dollars. Does that sound about right and roughly correct?
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Okay. Would you care to name some of the specific regulatory obstacles to investment?
Governor, Bank of Canada
No. I'm not going to get into specific line-by-line issues. I think that the message is that we need to look at this from a whole-of-country point of view. These are well intentioned, but I think where we can streamline the process and provide more certainty, that's going to encourage investment.
The productivity problem is long-standing. Along with getting rid of interprovincial trade barriers, these are some things where we know there's a problem and what it is. It's going to take some concerted effort to cut through it. However, it's something we could do that, if we could do it, could have a pretty good return in the short run.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Is it wise, then, to increase capital gains taxes when you are in an acknowledged productivity and investment crisis, where investment is going to other peer countries and not to Canada? Is that a wise time to raise a tax on investment?
Governor, Bank of Canada
I think I've said everything I'm going to say on that question.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Okay, I'll take that as a no, that it is not a good time to raise a tax.
I don't know if I have any time left for another question.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Is Bill C-69 a good one as far as barriers to investment, then?
Liberal
October 29th, 2024 / 4:50 p.m.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Thank you, Chair.
Welcome, Governor and Deputy Governor.
Right now, we have inflation in the Canadian economy that has fallen and is down. Interest rates have fallen. The Bank of Canada, under your leadership, reduced it by 125 basis points; the last cut was 50 basis points. We have an economy that is growing moderately. However, it's growing. In fact, we enter the new year in a few weeks. The International Monetary Fund forecasts that, in 2025, we'll have the fastest growth rate among all of the advanced economies in the G7.
Governor, have we achieved the soft landing that we and many economists spoke about after coming out of COVID, a war in Ukraine and supply-chain bottlenecks?
Governor, Bank of Canada
I'm going to turn it over. We'll let her take all the credit here.
Senior Deputy Governor, Bank of Canada
That's not a term we use a lot—“soft landing”. The way the governor described it at the beginning is that we know getting inflation back on target and getting interest rates down—and down further, if the economy continues to evolve the way we expect it to—is a big relief for Canadians. We are very glad to deliver that relief to Canadians.
However, I'll go back to the question we had earlier: Do we feel our work is all done? No. It's been a long fight to get us back here. The economy still doesn't feel quite back to normal for most of us, so there is still work to do to stay here and stick the landing.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Absolutely.
From your press conference opening last week, the two sentences that have stuck with me have to do with your suggesting that “we are back to low inflation” and that “This is good news for Canadians.”
If you had a probability interval, would you say this is accurate 95 times out of 100, or 99 times out of 100?
Senior Deputy Governor, Bank of Canada
The one thing he has told me, ever since I took this job, is that monetary policy works. It was a tough slog. I don't think we ever put odds on the end result. I think we were confident. We just needed to stick it out.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Of course.
In relation to the monetary policy transmission mechanism—which I remember from about 30 years ago—what would you say we learned when inflation went from below 2% to above 8%, not due to traditional sources like hyperinflation but to supply bottlenecks and a war in Ukraine? For example, prices went from $2,000 or $3,000 to over $15,000 to ship a container from, say, Europe to Halifax.
Looking ex post, what would you say we have learned on both the monetary policy side and the fiscal policy side to get inflation back down?
