Evidence of meeting #68 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was inflation.
A video is available from Parliament.
6:15 p.m.
Governor, Bank of Canada
We do consult regularly, but not necessarily every week. Some weeks, we meet more than once, and others, we may not meet at all. Regardless, we speak regularly.
6:15 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
I see.
Quickly, I'd like to discuss another topic before I wrap up. There are financial institutions, companies and individuals that use tax havens for tax avoidance or tax evasion purposes. Is there anything the Bank of Canada can do in that regard? Can it limit the use of tax havens?
6:15 p.m.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
I'm talking about financial institutions, companies and individuals that use tax havens for tax avoidance and tax evasion purposes.
6:15 p.m.
Governor, Bank of Canada
I see. Now I understand.
That isn't really within the purview of the Bank of Canada. It falls under the Department of Finance's authority.
6:15 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Ste-Marie and Governor.
Now to the NDP, MP Blaikie, you have two and a half minutes.
November 23rd, 2022 / 6:15 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much.
I just want to come back to this question of where inflationary demand lives because it matters a lot for the debates we have in this place. Any light that you can shed on that I think is helpful in respect of the debates we have about fiscal policy.
For instance, there is currently a dental benefit for households with a household income of $90,000 or less. Some in this place say that's inflationary government spending and that when families with a household income of $90,000 or less receive that money, it's going to contribute to overheated demand in the economy. There is a Canada housing benefit targeted at low-income renters: a one-time payment of $500. There are some in this place who say that's more inflationary spending by government.
It matters where that inflationary demand lives, because if it doesn't live in households with a household income of $90,000 or less, then it's hard to believe that the claim—should anyone care to make it—that that's inflationary spending is true.
While I respect that your domain is not fiscal policy, you do spend a lot of time analyzing the economy. I think it would be helpful to understand better where the inflationary demand is coming from. Is there a household income threshold or range within which you think certain households are more likely to contribute to inflationary demand than others?
6:15 p.m.
Governor, Bank of Canada
I think I'm going to ask the senior deputy governor. I've given quite a few answers on inflation. I'm going to let her give her perspective.
6:15 p.m.
Senior Deputy Governor, Bank of Canada
I know there's a very strong desire to figure out who's responsible for inflation, but it's a very difficult thing to do. Excess demand is excess demand in the economy. To say that this demand is worse than that demand is very difficult.
The only other thing I would add to the comments the governor has already made is that it's important to understand demand in relation to supply. We've answered this question in a number of different ways. Ultimately, the pressure on prices comes from a mismatch between those two things. You can act on both things. You can improve supply, but supply constraints, buying more when there's excess demand—
6:15 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
What does government taking action on supply look like in a globalized economy? We hear sometimes, “Well, if the government would just get out of the way and let more oil and gas development happen, Canadians would get cheaper energy prices.” Is there really that direct a line between the rate of energy output in Canada and energy prices in Canada when you're selling on a global market?
6:15 p.m.
Liberal
6:15 p.m.
Governor, Bank of Canada
Yes, in a very short answer, supply is not within the domain of the Bank of Canada, but just to give you some domestic examples, the supply of housing, the supply of affordable housing, gateway transportation that means we can get our products to market so we can sell them to the world, and immigration.... There are supply-oriented policies that are geared to and important to the Canadian economy.
You're right. We can't really affect global supply chains very directly, but there are things in Canada that governments can influence.
6:20 p.m.
Senior Deputy Governor, Bank of Canada
Supply chains are starting to help, too, but there's a bit of a lag and it's not a substitute for monetary policy.
6:20 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you.
Thank you, MP Blaikie.
Now, for the Conservatives, I have MP Hallan.
6:20 p.m.
Conservative
Jasraj Singh Hallan Conservative Calgary Forest Lawn, AB
I'll be quick.
Governor, you said that the carbon tax is contributing to inflation. Would you agree that cutting the carbon tax, even if it's temporary, would help to fight inflation, yes or no?
6:20 p.m.
Governor, Bank of Canada
Do you mean if the carbon tax was completely eliminated?
6:20 p.m.
Governor, Bank of Canada
Okay. Well, if you take the carbon tax down to zero, we estimate that would reduce inflation for one year by about half of a percentage point.
6:20 p.m.
Governor, Bank of Canada
Then, after that year, it would have no further effect.
6:20 p.m.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you, Mr. Chair.
Recently, the Deputy Prime Minister asked for ideas on how to encourage Canadians to spend the money they were saving, and for businesses to spend the money on their balance sheets. Is that something you're also hoping for at this point?