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.
Governor, Bank of Canada
You're going to have to take your tax projections and fiscal projections up with the fiscal authorities, not the Bank of Canada.
Conservative
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Why would you answer a question about fiscal policy from a Liberal member—
Governor, Bank of Canada
The reason I objected is that I have answered many questions about the carbon tax from you and from your colleagues.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
Arguably, the capital gains tax is bigger than that. It's billions of dollars out of the economy.
Governor, Bank of Canada
Yes, but the carbon tax has a very direct effect on inflation. If you look at our forecast, when we publish our monetary policy report, we actually have a line that shows the impact of the carbon tax on inflation. It has a very direct effect on the thing that we are charged with controlling, so yes, I have a responsibility to respond because it directly affects our remit.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
We had Ian Lee here, who projected that the capital gains inclusion rate will increase the cost to Canada. It will cause a decline of 3% in the GDP. Do you agree with that assessment?
Governor, Bank of Canada
I'm glad you have experts coming in and giving you good advice on these issues. These are really important questions, and you should get the best advice from the best experts.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
At least in this context, you're not willing to promote the economic and financial welfare of Canada by answering a question from an elected official about a major tax. Is that correct?
Governor, Bank of Canada
I am directing questions on tax to the Government of Canada and the Department of Finance. That is their responsibility. Our responsibility is monetary policy.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
With the greatest respect, Governor, I would suggest that when you come to the finance committee and elected officials ask you reasonable questions, you answer them.
Thank you.
Liberal
Rachel Bendayan Liberal Outremont, QC
On a point of order, Mr. Chair, I would like some clarification.
Mr. Morantz said he withdrew his comments earlier. Does that mean they are struck from the record of this meeting?
Liberal
The Chair Liberal Peter Fonseca
What I will say, PS Bendayan, is that we expect respect and decorum towards the witnesses who come before our committee. I believe the governor and the senior deputy governor have made themselves more than available. They're here for two hours.
The governor has answered MP Morantz, and MP Morantz retracted what he had to say earlier.
Conservative
Marty Morantz Conservative Charleswood—St. James—Assiniboia—Headingley, MB
In fact, I will go further, Mr. Chair. I apologize for that—I really do—but I think my question is reasonable, and I think he should be answering it.
Liberal
Rachel Bendayan Liberal Outremont, QC
On a point of order, I believe Mr. Morantz's time is up. If the Conservatives would like to go back to their partisan attacks on the Governor of the Bank of Canada, they may do so outside of this forum.
Liberal
The Chair Liberal Peter Fonseca
PS Bendayan, we have 20 seconds, but I don't know if MP Morantz...? No. Okay.
We're going to our next questioner. We have MP Thompson next.
Liberal
Joanne Thompson Liberal St. John's East, NL
Thank you, and welcome back with such good news. I can tell you the constituents in my riding are very pleased with the interest rate drop. Knowing it's the fourth consecutive drop, it's very good news.
I want to go back and ask an additional question on the uncertainties. You referenced the uncertainties we face in forecasting. I'm not trying to do the full list, but obviously, there are global tensions and trade barriers.
I want to ask if climate weather events are also a part of that. I'm saying that in light of the record-breaking events of the past year. It's a dubious record to break. Significant weather events have a toll on many levels, obviously, but there's still a financial toll.
Does that reality become part of your forecasting on uncertainties?
October 29th, 2024 / 5:10 p.m.
Governor, Bank of Canada
What we've certainly been seeing in recent years is the number of severe weather events and forest fires.... It's not higher every year, but there has been a pretty clear trend. Obviously, these are, first and foremost, impacting people, but if you look at it from a financial point of view, what you can see is that the claims for P and C insurance keep going up. That's driving up the cost of insurance, so yes, it is having a financial impact.
Obviously, when you're doing a forecast, the one thing you can't predict is what the shocks are. We can't predict what the weather events are going to be, but yes, we know these weather events are impacting people. They are adding costs. We know the trend. We don't know the speed. We don't know what it's going to be from one year to the next.
Liberal
Joanne Thompson Liberal St. John's East, NL
No.
Is that uncertainty now part of the conversation, in terms of the unknown?
Governor, Bank of Canada
Yes. Going back to MP Baker's...we are in the process of trying to build some of this into our models. We are not there yet. It's a pretty new undertaking. We can see the costs when they happen. However, we don't have good models of them.
Senior Deputy Governor, Bank of Canada
It's a difficulty for central banks, regulators and everybody else. Think about the effect of climate risks, going forward. We always use historical data as a way to proxy the future. The thing about climate risk is that we don't have enough historical data to build models with enough certainty to look forward. That's the difficulty. You end up trying to model the future without that historical data.
Liberal
Joanne Thompson Liberal St. John's East, NL
I appreciate that. It is indeed challenging. It's our new reality, sadly.
I want to circle back to a very recent thread of conversation on innovation. Certainly, I'm always very proud to say that a tremendous amount of innovative work is happening in Newfoundland and Labrador, and it's driving the economy forward.
You referenced opportunity in a very general way. In your role, how do you see the opportunities for Canada, moving forward, not in terms of policy but rather in terms of the so many phenomenal innovators and the work happening in Canada, which is truly leading the way forward?
Governor, Bank of Canada
I can say a couple of things.
As the senior deputy highlighted, when it comes to scientific breakthroughs and true innovations, Canada is a leader in AI, quantum and health sciences. Where we've underperformed is in turning those innovations into commercially successful businesses. Too often, a Canadian invention gets turned into a successful business south of the border.
I think our innovation ecosystem has improved a lot in the last 15 years. Where we're still having a hard time, though, is in achieving scale. We've done a lot better on start-ups. Where we're falling behind is in achieving scaled-up, globally successful companies. We have some great examples, as I responded to Mr. Ste-Marie. However, we don't have as many as we'd like. I think we need to be focusing more on scale. How do you achieve scale? Particularly in a more networked world, returns on scale really matter.
The second thing I will say is that the U.S. is undergoing a big investment boom. There's a combination. First it was the IRA—the Inflation Reduction Act—and then the CHIPS Act. There was some infrastructure investment, and that certainly created investment. Now you're seeing the AI boom. Generative AI is very concentrated in the United States. There are huge investments in computing, and big investments in data centres. You have new investments in nuclear and electricity. We are sitting right next to the United States. I think there are opportunities for Canada to get into that supply chain.
Those are a couple of thoughts.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Thompson.
I'm looking at the time, everyone. We thank the governor and senior deputy governor for the two hours they've allocated to us here. Being mindful, we'll go about four-plus minutes per party, as we normally do when we don't have time for a full round.
We're starting with MP Hallan.