Finance Committee on Dec. 9th, 2021

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

Is there a region, retroactively, that it would apply to?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

We will always be open to regions saying, “Hey, we qualify.”

[The Chair, Liberal, Peter Fonseca]

Thank you, Minister and Mr. Blaikie.

We will move to the Conservatives for five minutes.

Mr. McLean, you have the floor.

[Greg McLean, Conservative, Calgary Centre, AB]

Minister, welcome to the finance committee. I hope we have some good debates here over the next little while.

For my first question, I'll go back to housing. I'm going to quote you in this meeting, where you talk about the net worth of Canadians being “up 22%” since COVID. You realize that the price of housing is up 24% in the last year alone, so of course if 72% of Canadians own houses, it's only going to be indicative that their net worth is going up, in that case. As well, about one-third of Canadians have stock portfolios that have gone up by 62% in the last year.

Inasmuch as it looks like Canadians' net worth is going up, it is purely inflation that is driving that up, and it is asset inflation. People with assets pre-COVID are actually doing very well on a relative basis, but people without those assets, and there are a lot of Canadians without those assets, are not doing nearly as well. You're creating a huge divide between the haves and the have-nots in society. I don't know if you've thought about this in your approach of continuing to flush money into the system, but it is causing a problem.

I'll let you respond to that and what you're going to do to address that. I know the big easy issue, the easy button, is just to push some more money into different programs in society, but that will actually create more inflation throughout society. What do see the endgame being here?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

That is a good and thoughtful question. I actually do think a lot, as I'm sure you and I hope all members of this committee do, about the income distribution effects of various policies that we put in place. In my previous life, before I became a politician, income inequality was something that I wrote about a lot. It is a real challenge.

When it comes to where Canadian households are right now, it is worth pointing out what has been happening with savings. That is not purely about assets; it's about what people are saving. In Q3, the savings rate was 11%, as opposed to a 3.4% rate between 2010 and 2019.

Finally, I know, Mr. McLean, of your own financial background. I hope that you would not think that appreciation in the value of stocks is a sign of problems in the economy.

[Greg McLean, Conservative, Calgary Centre, AB]

I think an irrational increase in stocks is actually a bit of a bubble. If you call a bubble when stocks go up by 62% in one year, we call reversion to the mean, which means that, eventually, it will come back down.

Likewise with housing, if anybody in the history of Canada could have foreseen that their houses would increase in value by 24% in one year, we would be building houses at a far faster pace than we are or ever have. That is an aberration. House prices should go up 2% to 3% per year. We're 10 times that at this point in time, because we flushed over half a trillion dollars into the Canadian economy.

If you want to talk about the savings rate, perhaps you're misallocating some of the money that's gone into the system, so that people who have the ability to save are actually saving. People without that ability don't have the wherewithal to get by.

Those are interesting things, but I'm going to ask you one question here, because you did talk about the export surge to $56.1 billion—the highest ever—in the third quarter. What else was the highest ever in the third quarter, Minister? It was the export of natural resources from Canada. That's something that your government seems to continue to want to restrain. Some acknowledgement of the importance of this export industry to Canada would be very pertinent at this point in time at this committee.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

I'm happy to acknowledge that.

You know my own personal background. I have often reflected on the reality that I, personally, owe a lot to the strength of the energy sector in building the Canadian economy and in building so many public services in your province—and my native province—of Alberta.

I'll give you a specific example. You know the Alberta heritage savings trust fund as well as I do. Maybe everyone around this table will share in paying some respect to Peter Lougheed. I benefited a lot from Alberta heritage trust fund scholarships. That whole fund was created thanks to the energy sector in Alberta. I absolutely acknowledge the critical role it has played in building not just the Alberta economy but the Canadian economy, in making the lives of so many Canadians better, in creating really good-paying blue collar jobs—

[The Chair, Liberal, Peter Fonseca]

Thank you, Minister.

Now we're moving to Madame Chatel for five minutes.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

Madam Deputy Prime Minister, thank you for joining us today.

I would like to come back to Bill C‑2.

Madam Deputy Prime Minister, what are the consequences if we don't pass this bill by the holidays, if there's a delay, or if we never pass it? This has been one of my concerns since the beginning of the study.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Mrs. Chatel, I am very pleased to answer your question. In addition, I think that Mr. Leswick is happy to see a former colleague again. Finally, I thank you for your hard work in the Organisation for Economic Co‑operation and Development.

Bill C‑2 is very important for our government. I also think it's important for us all for three reasons.

First, there are sectors of the economy that still need help. Think of the tourism industry, hotel industry and cultural industry. I am extremely proud to see that Canada's economic recovery is robust. We have been able to fight back against the COVID‑19 and the recession that it caused. However, we must not forget that some sectors of the economy cannot fully reopen, as restrictions are still in place. This is the case at the border, for example. Our approach is to preserve Canada's economic capacity through subsidies. To be preserved, these sectors need a little more help.

Second, we offer subsidies to people who are ill and to those who have to stay at home to care for a loved one. These measures are very important, and they are more important than ever since the arrival of the Omicron variant. We need to encourage people to stay at home when they are ill.

Third, it is a measure to ensure that the government will be able to put tools in place very quickly, if lockdown measures are still needed to combat COVID‑19. I hope this won't be the case, of course. However, we must be prepared for any eventuality.

For all these reasons, I hope everyone will vote in favour of the bill.

[Sophie Chatel, Liberal, Pontiac, QC]

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

[The Chair, Liberal, Peter Fonseca]

You have about a minute and 20 seconds.

[Sophie Chatel, Liberal, Pontiac, QC]

Okay.

I would like to make a brief follow‑up, Madam Minister.

Earlier, you said that in some cases, certain sectors were at risk of bankruptcy. In addition, the Omicron variant could lead to another lockdown. As you mentioned earlier, some people who are sick could be forced to go to work if they don't have sick leave.

This week, we heard that if we don't pass the bill by the holidays, some of the most vulnerable people and businesses won't receive financial support in time, even if we pass the bill next year. Can you confirm this?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Yes, I agree with that Mrs. Chatel.

As Mr. Blaikie mentioned, there are vulnerable people and businesses that can't wait.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, Madame Chatel.

We're going to move now to the Conservatives. This is going to be our third round, members.

For five minutes, we have Mr. Poilievre.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

I'll go back to Ms. Bergen's point about the minister's mistake when she claimed that Canada's greater risk was deflation, rather than inflation. Six months earlier, Conservatives had begun warning about the inflation threat, yet she went out in October of 2020, when house prices were already rising.... They were up 12% in half a year, mortgage lending was ballooning and stock markets were rising. Since she made her prediction about deflation, there has not actually been a single month of deflation in Canada. In fact, now we have the highest inflation in two decades, and we have a housing price inflation of 20% since she took office, including a 20% increase in land prices, which of course are not linked in any way, shape or form to supply chains.

This mistake that she made, against our warnings, has great consequences. Food prices are going to go up a thousand dollars this year for single mothers who can't afford to pay their bills. Young people are living in their parents' basements because they can't afford homes—something the minister was celebrating a moment ago, when she thought all of this asset price inflation was a good thing. Today, her only defence is that it's great that the stock market is up.

Sure. For the plutocrats, that is great news. Their assets have been inflated by the minister's excessive spending and money creation, as have millionaire mansion owners in her social circles. However, for working-class folks who can't afford stocks, houses, bonds or the other things that she's inflating, all they have is a real—

[Julie Dzerowicz, Liberal, Davenport, ON]

I have a point of order, Mr. Chair.

Is there a question in there somewhere?

[Candice Bergen, Conservative, Portage—Lisgar, MB]

That's not a point of order.

[The Chair, Liberal, Peter Fonseca]

I will allow the member to continue.

[Pierre Poilievre, Conservative, Carleton, ON]

These sorts of mistakes have consequences.

I notice that the minister, to defend her faulty prediction of deflation, sais she was just relying on Larry Summers. Actually, Larry Summers made the same prediction I did, which was that deficit spending would lead to this inflation. I'll quote him. He said:

First, while there are enormous uncertainties, there is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation....

If she had even listened to a Liberal economist, who has been predicting that there would be inflation as a direct result of government spending and central bank money creation, then she would not have gotten us in the mess that she has created today.

Would she agree with Larry Summers—whom she just quoted—that, in fact, deficit spending is contributing to inflation here and in the United States, and in other places where governments have behaved similarly irresponsibly?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Mr. Chair, let me just start by saying that it's really important for Canadians not to be misled by a false narrative about where we are in the Canadian economy. That is important, because confidence, people's attitudes, have a very real impact when it comes to our future prosperity. Confidence, animal spirits and a certainty about where we are going in the future are a very real economic factor.

It's really incumbent on me to correct the entirely misleading impression that Canadians are being given here, which is that, somehow, our economic policies aren't working and that, somehow, our country is not doing what is in fact the case, namely that we are in the midst of a really strong recovery from a really dreadful external event. The external event was a global pandemic. Our government responded at scale and appropriately. The result is GDP growing robustly, jobs being all back, strong exports and household finances in good shape.

That is a good story, and that is what Canadians need to feel confident about.

[The Chair, Liberal, Peter Fonseca]

Thank you. That is your time, Mr. Poilievre.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

[The Chair, Liberal, Peter Fonseca]

We are moving now to the Liberals with Mr. MacDonald for five minutes.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you, Chair and Deputy Prime Minister.

It's great to be here. I'm new to this committee, but I'm finding it very interesting, obviously.

Escalating issues around the world are taking a toll on economies everywhere. I want to touch base with you in regard to how Canada continues on a positive trajectory. The numbers speak for themselves. We could argue all day that “this economist said this” and “that economist said that”, but it's proven in the labour force survey that just recently came out and so forth.

Can you expand on the particulars of why we're on this trajectory?