Finance Committee on March 21st, 2022

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Dzerowicz.

We're moving to the Bloc and MP Trudel for two and half minutes, please.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

Thank you, Mr. Chair.

My question is for Ms. Cyr. It is also to enlighten my colleague from the Liberal Party, who believes that the government's programs are currently hitting their targets.

As part of the National Housing Strategy, a committee was formed to assess whether the strategy's objectives are being met. The National Housing Council published a first mid-term report on this major ten-year housing strategy about a month ago.

According to the report, only half of the housing funded by the National Housing Co‑Investment Fund could get families and single people out of core housing need. It was not a housing lobby group that said this, it was the National Housing Council, the group formed as part of the National Housing Strategy.

It also says that about a third of the investment could help low-income households in core housing need. What is far worse is that almost none of the housing in the National Housing Strategy-funded projects gets single parent families, whose numbers are steadily increasing, out of core housing need. This is outrageous.

What do you think of this report, Ms. Cyr?

[Edith Cyr]

Through the National Housing Strategy, the Government of Canada has indeed invested money in housing, but the report allows us to see that some targets are not being met.

In my opinion, affordable housing is one of the important priorities of the government. Therefore, programs need to be evaluated and reoriented to properly meet the targets. Existing co‑investment programs need to be looked at more closely and changes made. Some initiatives are somewhat better at meeting their targets. What makes the targets reachable should be studied.

Personally, I think one of the ways to create affordable housing is to target community housing, social housing. The very mission of the organizations that are dedicated to this is to meet the needs of households through the production of affordable housing. We should team up with the organizations in this sector and direct the funds to better meet the needs.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

Thank you, Ms. Cyr.

[The Chair, Liberal, Peter Fonseca]

That is the time. It goes quickly.

We're going to move to the NDP and MP Garrison, for two and a half minutes.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

Thank you very much.

I'd like to start by thanking Ms. Farha for her work on emphasizing the right to housing. She gave the committee a couple of very specific things on reducing the demand side, which might help, by taxation of real estate trusts, and she raised the question of some things that CMHC could do. I wonder if she has other specific suggestions on that demand side for the committee.

[Leilani Farha]

Sure. There's a lot that could be done on the demand side. Some of my co-panellists have already articulated some of these things.

One thing that shocks me about Canada is that we don't have a sense of who is in need and where they are in need. I think there needs to be a national audit, city by city, region by region, place by place, that enumerates who is in need, what their income brackets are, and who is living in homelessness, etc. We do point-in-time counts across the country that are orchestrated nationally. We could do the same with a national audit. I wanted to say that.

Also, it strikes me that none of the programming to date, none of the policies, the national housing strategy and decisions taken by Finance—and those need to be better melded together, because they're operating in different fields at the moment—are taking a look at what your human rights obligations are and what is actually required of government. Once you do that, you end up in the place that Madame Cyr was talking about, targeted approaches.

In my opinion, any new unit that's built at this point has to go to those who are in need. It has to. This isn't just light stuff; this is a major crisis confronting this country: 235,000 people living in homelessness is an embarrassment in such a rich country. We have people living in parks. We have people who've never been homeless before who are falling into homelessness because they can't pay their rent.

I think every move that is made by Finance or by the national housing strategy folks needs to be targeted to those most in need.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Garrison. That's the time. We're moving to the Conservatives and MP Chambers for five minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

Thank you to our witnesses for coming today. Unfortunately, we have a limited amount of time, and we have some wonderful folks here.

I'm going to focus my questions on Mr. Robson to start with.

Mr. Robson, I commend you for a well-timed opinion piece in The Globe and Mail today. I'd like to spend a little bit of time talking about that. Perhaps before we get there, though, I will say that we've had a number of economists before this committee, including some chief economists of financial institutions such as the Bank of Canada, who have painted a picture of the economy that is very different from the one the Department of Finance is painting.

Growth is robust. The slack has been absorbed in the economy. Unemployment is below where it was prior to the pandemic. These are all good things, so why is it that we need to continue with significant amounts of deficit spending?

[William Robson]

Well, I personally would prefer to see the deficit disappear quite quickly. There was a reference earlier to what happened in 2008-09, and what I very much liked about what the federal government did after that episode was that it did, after having run a deficit much bigger than it wanted to, get the budget back to surplus; and that meant that a lot of the bills that would have otherwise been passed forward indefinitely were paid more by the people who benefited from some of the fiscal stimulus at the time.

I'm not seeing that same approach this time, and it does concern me—not just that some of the pandemic-related spending has gone on perhaps longer than it should have but also that we're seeing other types of spending as well. The federal government's own operating spending—the federal government employment is way up—and those things are going to be very hard to reign in when the time comes to get the budget back to balance.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much. So what I'm hearing is that the fiscal plan of this federal government is to spend at every single stage of the business cycle, which clearly is not a sustainable fiscal path. You, in your op-ed today, had a recommendation with regard to what you would like to see as a fiscal anchor. Would you like to comment on that, please?

[William Robson]

I think there is no substitute for having a target on the bottom line. I would like to see that be zero when it comes to the amount borrowed, and that means, practically speaking, having a small surplus. My two main reasons for that are, first, that the debt-to-GDP ratio has not proved to be a very serious constraint and, second, that when you have a particular target on the bottom line, such as zero, every dollar of spending needs to be justified in terms of the dollar that you don't spend somewhere else or the dollar of revenue that you will raise to pay for it. At the moment, we're operating in a bit of a spirit of money appearing to be free. Because of the conversation on housing, I'll just say I'd be wary of any program that relies on decades of big federal government subsidies, because I think the money is going to dry up at some point and that pinch is going to be less serious the sooner we get on with getting the budget back to balance and the debt under control.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay. Thank you. Let's talk about inflation for a minute. Your initial testimony indicated that many people don't like inflation, but in fact, there are some entities that are significantly benefiting from a windfall of revenues. Who might those be?

[William Robson]

What I didn't say in my testimony is that there is a protected class. MPs are actually part of it. You have indexed pensions. Federal employees have indexed pensions. Most people don't. So for people who don't have indexed pensions, a long period of high inflation is extraordinarily stressful and destructive. Debtors do benefit from surprise inflation. At the moment, one of the big questions—and it relates to the earlier question about transitoriness—is, if inflation continues, how much is it a surprise? At the moment, long-term interest rates are quite low, but they are rising. Something that concerns me about the current episode is that if inflation expectations start to rise and we start to see that feeding through into long-term interest rates, it will get harder for the Bank of Canada to bring inflation back down. If people are still expecting 2% over the long run, then it's not that jarring a change, but once people have started to build increases of 4%, 5%, 6% or more into their wage and pricing plans, getting inflation down gets a lot more painful.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay. Thank you. I have one final question, Mr. Robson. The federal government is actually seeing its revenues increase substantially in this time of inflation. In fact, there is some discussion about governments around the world preferring to let inflation run hot so that it helps them pay off their debts. The Bank of Canada quietly released a paper in early March in which it talked about the credibility of the central bank and not wanting to bend to fiscal policy. When the Bank of Canada was presented with a fiscal plan that doubled the size of the national debt, do you think that the bank really had much choice other than to purchase government bonds if it wanted to keep interest rates low?

[The Chair, Liberal, Peter Fonseca]

Give a short answer, please.

[William Robson]

The Bank of Canada needed to create liquidity in the short run because of the pandemic, but I have a lot of concern that they seem to be taking responsibility for long-term interest rates and not just the overnight rate they use for monetary policy. To that extent, I think they are getting into problematic territory. The credibility of the low inflation target would be much greater if the government's debt weren't seen as potentially unsustainable.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chambers.

We're now moving to the Liberals.

MP Baker, you have five minutes, please.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Chair.

Thank you to all our witnesses for being here today. I wish I could ask questions of all of you, but I won't have time.

I want to start by clarifying something with you, Mr. Robson. In your points about monetary policy, it sounded as though you said that you believe there's been too much government spending. In other words, the fiscal policy has been too expansionary.

I've been thinking in this discussion, and in prior meetings of this committee, about what the alternative would have been, during COVID, for example, if we'd not had that expansionary fiscal policy. For the folks watching at home, what we mean by expansionary fiscal policy is the government spending significant sums of money to support businesses, to support individuals who lost their jobs and to buy vaccines and that sort of thing. Most of that went into supports for businesses and individuals to prevent bankruptcies, insolvencies, homelessness and that sort of thing.

My question for you is this: Do you believe that the government should not have done those things? Is that what you're saying? Or are you saying something different? I don't want to put words in your mouth. I want to make sure I'm clear.

[William Robson]

No, I was very supportive of many of those initial steps. In fact, on the wage subsidy, I was on the record as having said that the early proposals weren't strong enough to create that continued labour market attachment.

I think many elements of that initial response to the pandemic were very well done. I would cut quite a bit of slack, given the speed at which they had to happen, for some of the problems in design that were inevitable with that kind of a fast rollout.

Having said all that, though, problems recur regularly, including fairly substantial crises. Russia's invasion of Ukraine reminds us of that. So I would like to see—I mentioned the 2008-09 parallel—a fiscal policy that gets the budget back towards surplus more quickly than is currently in prospect. As I mentioned already, a lot of the spending initiatives that we have seen have not been to do with the pandemic, including the expansion of the federal government's own operating costs. That has a long tail—for example, much higher pension costs going forward. The difficulty I have is that it doesn't appear that we're going to be robustly positioned for whatever comes next. Whether it's another pandemic, war, climate change, or other challenges that will be out there for future Canadians to deal with, they should have the fiscal capacity to deal with them.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

What I hear you saying, I think, and I don't mean to oversimplify, is that you're comfortable with the past decisions around COVID-related spending. It's more forward-looking where you would like to see more fiscal restraint. Is that a fair way to summarize it?

[William Robson]

Yes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Okay. Thanks for that.

I have two minutes left, if I'm not mistaken, Chair.

If I may, I'll direct my questions to you, Mr. Yan. I was very interested in some of the things you were saying about foreign capital in our housing market and foreign ownership of housing. Are you able to quantify for us in any way the impact of foreign capital on prices in our housing market?

I think you're muted, sir.

[Andy Yan]

Thank you.

I think it's something that any number of researchers have been attempting to look at and are beginning to quantify. I think fundamentally we see the beginnings of this data in the Canadian housing statistics program. We've discovered that in certain markets, with certain product types of housing, 20% of, say, condominiums in Richmond, British Columbia, are owned by people who don't live in the country.

I think it kind of begins with this type of initial research. This is still in its embryonic stage. I think we still need to fundamentally get on top of and follow the lead of any number of countries in dealing with foreign capital in our residential real estate markets.