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.
NDP
Don Davies NDP Vancouver Kingsway, BC
My research says that Statistics Canada estimates it at 0.6% or about 37.5% of the total. Does that ring a bell—about a third?
Governor, Bank of Canada
The numbers I have in front of me are more with regard to total shelter, which also includes rent and home insurance.
NDP
Don Davies NDP Vancouver Kingsway, BC
I'd like to move to unemployment. According to Statistics Canada, the youth unemployment rate was up 2.8 percentage points on a year-over-year basis in September. It's at 13.5%. This is more than double the overall unemployment rate, and it reflects increases among both young men and young women. It's up 3.7 percentage points to 15.3% with regard to unemployment among young men, and for young women, it is about 11.5%, so that's up by 1.8 percentage points.
Governor, what impact have the Bank of Canada's past interest rate increases had on driving this increase in youth unemployment across Canada? I'm wondering how that will factor into future policy decisions.
Governor, Bank of Canada
It does factor into policy decisions.
We raised rates very forcefully to get inflation down. It worked, but it wasn't painless. When inflation was 8%, we had a very overheated labour market. That was part of the inflation problem.
The good news is that much of the adjustment in the labour market came through vacancies as opposed to rising unemployment. Companies reduced their posted job vacancies; they didn't lay people off. We still see that layoffs are actually not particularly high—they're at fairly normal levels—but what has been weak is hiring. Population growth has been strong and hiring has been weak, so there have been more people entering the labour force than finding jobs.
Who are the people entering the labour force? They're mostly younger people looking for their first job, so yes, what you're seeing is that they have been particularly affected by the weak hiring. You're seeing that youth employment rates have gone up a lot. If you look at the unemployment rates of, say, 25- to 55-year-olds, they've actually moved much less.
What that's telling us is that those job vacancies have come down a lot. When you talk to businesses, they're not having trouble finding workers the way they were in the past. There are certainly pockets where they're having trouble, but overall, they're reporting that they can find the workers they need.
Yes, we need to see job growth pick up now. We have inflation back to 2%. We want to see hiring pick up so those young people aren't spending as long a time in unemployment and they are finding those jobs. Going forward, as interest rates pass through and as demand comes back, we expect job growth to pick up.
Liberal
The Chair Liberal Peter Fonseca
Thank you.
Thank you, MP Davies.
Members, we're moving into our second round. I have MP Hallan up first.
October 29th, 2024 / 4:15 p.m.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Thanks, Chair.
Governor and Senior Deputy Governor, thanks for being here.
Governor, the CMHC's September numbers show there's a downward trend in housing starts. In your January monetary policy report, you highlighted that, “Strong population growth is supporting inflation in rental prices”. Since January, have you seen this trend continue?
I'm asking about the drastic increase in the population growth that has continued to keep rent inflation high.
Senior Deputy Governor, Bank of Canada
I think there's more than one thing that's contributed to rent inflation. Certainly, there's been an imbalance between the demand and supply—those are the numbers that CMHC's talking about—and inflation. There's no single variable that has contributed to this.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Right, but in your report, it doesn't highlight anything else. It just says in here, “A larger increase in newcomers than in the past is adding pressure to the structural supply constraint in housing.” One would take it from your own report that this is the factor.
Is that correct?
Senior Deputy Governor, Bank of Canada
What our report says is that there's a structural imbalance between supply and demand. When you're adding more demand than you are supply, you're making that worse.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Given that, after that January report, did you see any changes, or is it the same reason that has kept rent inflation the way it is?
Senior Deputy Governor, Bank of Canada
I think there has been a big change since January.
Governor, Bank of Canada
What you can see is that rent inflation has ticked down a bit, but there's a big stock of rents. People renew their rents at different times, so it takes a while for new rents to feed into the average rent. What's in the CPI is the average rent increase.
We are starting to see some evidence—and I want to be clear that we don't have good data on this—that the new rents—
Governor, Bank of Canada
I'm getting to your question.
The new rents are coming down—
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Respectfully, rent inflation has not changed to below 8% for the whole year, which is an indication that nothing has really changed.
I take your monetary report as a warning in January, when you wrote what you wrote. At the same time, two years ago, the government's own department warned it was going to increase the population so drastically that there would be a housing crisis, and it would get even worse. That was the government's own department.
Given the numbers we have of rent inflation being over 8%, my question is this: If the government had heeded your warning and its own department's warning, would we not have seen rent inflation as drastic as it was over the past few years, but especially this year, since it stayed above 8% the whole year?
Governor, Bank of Canada
Look, I think it's fair to say that the imbalance between demand and supply was further exaggerated by the large population increase. That added a lot to demand and, yes, put upward pressure on rents.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
Of course.
Therefore, if they had heeded the warnings from the bank and their own department this year, do you think there would have been less pressure on rent inflation?
Governor, Bank of Canada
If there had been less population growth, there would have been less pressure on rent inflation.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
The reason I'm saying this is that there was a very damning report yesterday from Food Banks Canada. There are now more than two million Canadians going to a food bank in a single month. When we talk about doorsteps, we see and hear the pain among Canadians all over. Whereas 40% of someone's paycheque used to be for housing costs, it's now up to 60% and sometimes 80%. There's less money for Canadians. Now we're seeing more food bank usage. When you look at population growth and the rapid increase the government implied....
With food bank usage going up so much right now, what is your message to those people? It seems like my colleagues on the Liberal side painted such a rosy picture, but two million-plus Canadians are going to a food bank in a single month.
Governor, Bank of Canada
There's no question that, particularly for people at the lower end of income distribution, it's been a very tough couple of years. High inflation was particularly concentrated in food and rent. These are necessities. You can't cut back on necessities.
The best thing we can do is get inflation down, so they can have more confidence that their cost of living is not going to keep rising the way it was two years ago. We've done that. That's good news, and—
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
On that point, those people you're talking about who are lower-income, would you not agree that raising taxes on them only hurts them further, such as the carbon tax? Does government spending mean they're going to increase taxes on Canadians?
Governor, Bank of Canada
I don't want to get into commenting on specific tax measures. I think I've been pretty clear. I completely agree with you that lower-income people have been hit hardest by high inflation. That is one of the reasons why low inflation is such an important policy.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Hallan. That's your time.
Now, we're over to MP Baker.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Governor and Senior Deputy Governor, it's good to see you again. Thank you for being back here at committee.
Governor, when I'm out knocking on doors in my community of Etobicoke Centre, a lot of folks talk to me about the rising cost of living and the impact this has had on their quality of life. One issue I also hear about from a lot of folks is the question of when interest rates are going to come down. These are folks who have mortgages that may be variable rate, and those rates are fluctuating as the interest rate rises and comes down. There are also folks on fixed mortgage rates who are worried about renewing—that they'll be renewing at a much higher payment level, as a result of higher interest rates. This would cost them more, and they may not be able to sustain that. Every time you come here to committee, I ask you this: When are interest rates going to come down?
I ask this because it is one of the most common questions I get from my constituents. I think the question I want to ask you today is.... Well, let me first say that I've heard from a number of my constituents who have felt relief from the four consecutive interest rate cuts, especially the last one of 50 basis points. However, I still get questions from constituents who say, “Are interest rates going to come down further, and if so, when?”
What can I tell my constituents when they ask me that question?