Thank you, Mr. Chair.
My name is Robert Asselin.
I'm the senior vice-president of policy at the Business Council of Canada. We represent the heads of 175 businesses, employing over two million Canadians.
I want to convey two simple messages to you today.
The first relates to fiscal policy in perilous times. We are in the midst of the riskiest economic policy landscape we’ve seen in decades. Inflation remains stubbornly high, and the risks of policy mistakes are increasing. This requires a change of direction on fiscal policy. As the recent events in the United Kingdom have shown us, misalignment between the Government of Canada and the central bank could cause unease in the bond market and raise the cost of borrowing inadvertently. Put simply, the more expansionary fiscal policy continues to be, the more difficult it will be for the central bank to do its job and bring inflation back to its mandated target range.
It is generally accepted that as long as economic growth outpaces interest rate increases, the burden of servicing debt will fall over time. In the current economic environment, we can no longer assume that this will be the case. When interest rates go up faster than growth, there is simply no easy way out. Debt financing becomes much more burdensome for taxpayers. Therefore, like former Bank of Canada governor David Dodge, we are of the view that the government should adopt a new fiscal anchor based on debt servicing costs. It should commit to ensuring that its debt service costs do not exceed 10% of annual government revenues going forward.
The second message I want to convey to you is on our economic competitiveness.
We must manage and look to the future without complacency. For too long, we have neglected our economic competitiveness. While the government has announced some measures in the last two budgets that will certainly help our economy, we're still a long way off. The federal government still lacks a coherent long-term growth plan and a modern industrial policy that will make Canada more competitive.
The world's largest economy—and Canada's largest trading partner—now has a clear and bold industrial strategy for the first time since the Cold War. Because of this, Canadian policy-makers need to acknowledge the real threat that the recent adoption of the Inflation Reduction Act, which is called the IRA, and the CHIPS and Science Act in the United States pose to our economic competitiveness. We are already hearing of projects moving to the U.S. to take advantage of the IRA.
To stay competitive, Canada needs an industrial strategy of its own with several key components. Although I don't have time to go through every component in this testimony, let me briefly emphasize three essential ones.
Number one is talent. In a recent survey of our members, 80% reported having difficulty finding the skilled workers they need to grow and compete globally. As a result of these shortages, 67% have cancelled or delayed major projects. Some 30% were forced to relocate work outside of Canada.
With an aging workforce and a declining labour participation rate, Canada's future prosperity depends on change to our immigration system to significantly increase the number of economic-class applicants who are granted permanent resident status.
The second is investments. Canada must demonstrate to the world that we can successfully complete major projects and build the infrastructure that is required to access global markets. For such projects to go ahead, however, investors need regulatory predictability and a clear understanding of the rules of the road.
We noted with interest the finance minister's recent speech at the Brookings Institution, in which she committed the government to “fast-tracking...the energy and mining projects that our allies need to heat their homes and manufacture electric vehicles.” We look forward to seeing more details on this important and welcome initiative.
The third and final point is innovation. The new direction of U.S. industrial policy reflects a broader government intervention beyond R and D to support technological developments from idea to market. In Canada, our capacity to undertake industrial research at scale is almost non-existent, and our technology transfer mechanisms have not kept pace with developments in knowledge creation. We still rely too heavily on incremental innovation or safe bets. Canada must become more competitive on technological innovation, and science must be translated into productivity growth and future prosperity.
Thank you for your attention.