Finance Committee on March 23rd, 2023

[Jimmy Jean]

In Canada, the recovery should be approximately 0.9%, and 1.4% in the United States. This year in Canada, the recovery stands at 0.6%. The economic recovery will therefore be speeding up.

These figures show that the situation is not the same as what happened in the past, with rebounds of 3%, 4%, or even higher. The reason for this is that interest rates are high. In the current scenario, the interest rate environment is not helpful.

Given that the central banks got burned by what they experienced and that there is going to be a lot of volatility and uncertainty with respect to inflation, we think that interest rates will converge towards a neutral point. That's going to stop hurting the economy, but it won't stimulate it. That's why the recovery is rather slow. Inflation, which has reached the target, is no longer converging below the target, and this could justify more significant rate cuts. We don't see that in our scenario, for the reasons mentioned earlier.

The good news for the labour market is that is that the unemployment rate peaked at 6.9%. From now on, there should be a gradual decrease in the unemployment rate and an increase in income that should give households some breathing space.

Once inflation has slowed, real rates will finally be able to grow. It will mean that the situation is positive at last, after two years of negative real rates. That should boost spending and generate an increase in real estate activity.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Jean.

Mr. Gregory, in his earlier answer to my Conservative colleague's question, said that strategic spending on Canada's growth potential is a measure that would combat long-term inflation and enable us to stimulate the economy and increase both income and the GDP.

Could you tell us more about that, Mr. Jean?

[Jimmy Jean]

He was reporting on investments. There's a great deal of talk about infrastructure, for example, including transportation infrastructure. It has been shown that measures like these have led to positive repercussions and elasticity on production and economic potential. There were also gains in the efficiency of investment in information technology and communications. As I was saying before, there is more and more investment today in automation technology, and in repatriating foreign production to become more resilient with respect to regional policies. All of that is part of the equation that makes our economy more productive. There is also climate transition investment, although this will not necessarily strengthen productivity. Indeed, when compared to the counterfactual scenario in which we would do nothing, the economy will be more stable if there are fewer climate shocks in future.

From the productivity standpoint, all these factors matter. But I agree with Mr. Gregory when he says that the sorts of policies that need to be introduced right now have changed. We're no longer talking about handing out cheques and income support because we've seen the effects of doing that. They are not the only things affecting inflation, but they are a part of it. There's a lot riding on capital and investment now. It will be an economic cycle based on increased investment and international competition for investment, including in the technology sector.

That's what we need to focus on if we are to simultaneously increase our productivity and develop a more resilient economy.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much.

These are all fascinating points. Could you send them to us in writing? It is indeed essential to make strategic investments in order to position Canada's economy in a way that will make it truly competitive in the global market as the economic recovery begins.

Thank you, Mr. Jean.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mrs. Chatel.

That is our time. We want to thank our witnesses.

We want to thank Monsieur Jimmy Jean for doing the heavy lifting. I know you had to do a lot of it here today, and thank you to your Internet for working so well.

Mr. Marion, we—

[Jimmy Jean]

I had all the trouble in the world getting it fixed during the presetting, so....

[The Chair, Liberal, Peter Fonseca]

There are some things we have no control over.

Mr. Marion, thank you very much for still participating with us in terms of listening in and then providing your remarks and your answers to the many questions that have been posed.

We lost Mr. Gregory, also, to Internet connection and firewall, I guess, at the bank, or something that went up, and their Internet is down. They say that when it rains, it pours.

We want to thank our witnesses for their testimony and for participating in this study on inflation in Canada's current economy.

I also want to thank, of course, the clerk, who reaches out to everybody, and the technicians and the analysts. They do an amazing job here, I can tell all the members, in terms of the lengths they go to, to bring in witnesses and get them here before us. We love to see witnesses when they're in person, but we have them here today, some virtually, and we will look to bring some back for future meetings.

Thank you very much, everybody.

This adjourns our meeting.