Evidence of meeting #12 for Finance in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was economy.
A video is available from Parliament.
Liberal
The Chair Liberal Karina Gould
Thank you, Mr. Turnbull.
Since there is a little bit of time left, I'm going to use the chair's prerogative to ask a follow-up question to Mr. Lefebvre's question about productivity.
You mentioned that the U.S. is really the country that has achieved greater productivity, and that Canada and peer countries are lagging behind. Could you briefly comment on what those differences are?
Liberal
Governor, Bank of Canada
In any one year—and I don't have the whole time series in front of me—certainly U.S. productivity growth.... If you go back in time, both Canada and the United States had a pretty good pickup in productivity growth in the second half of the 1990s. The difference really is that, in Canada, it kind of petered out in the early 2000s, and it's been pretty weak ever since. In the U.S., it just kept going.
In any one year, that doesn't make a huge difference, but when you accumulate a significant difference in productivity growth each year over 20 years, you get the kinds of numbers Mr. Hallan mentioned at the beginning. Yes, the average income in the United States is well above the average income in Canada, and that is productivity growth.
Liberal
The Chair Liberal Karina Gould
Thank you very much for that.
We will continue with Mr. Hallan for five minutes.
Conservative
Jasraj Singh Hallan Conservative Calgary East, AB
Governor, today we see young Canadians and we talk to a lot of them, and they're losing a lot of hope. Ms. Rogers mentioned someone young owning a home. Unless they have the bank of mom and dad, it is basically impossible. A lot of people say they've given up on the dream of home ownership. I remember the days when, in 25 years, you could pay off the mortgage. Now, sometimes it takes that long for young people to save up for a down payment.
Governor, you talked about it not just being about lowering the interest rate. It's about the cost of a home and the supply itself. I think those also go hand and hand. We are seeing the government's own housing agency say that housing starts are going down this year and they're going to be worse next year. For young people, it's almost impossible for them to get by, let alone deal with what we've seen with the inflation in food prices as well.
We see in this new budget that there's an industrial carbon tax that's going to increase. Because it goes into the steel that goes into a home, and it goes into the concrete that goes into a home, are those some of the inputs that increase the cost? Would you say that, as this industrial carbon tax increases, it could impact the cost of a house?
Governor, Bank of Canada
I don't think we have any work on that. The industrial carbon tax is imposed on very large emitters, and most of what they're producing is exported. It's not having much of an impact on prices here in Canada. Our view is that it's small. I don't have an estimate. You would have to get very detailed, almost industry-level data to chart through that because it's very indirect.
It's very different from the consumer carbon tax, which was applied directly to consumer goods. That has been removed, and we have seen the impact that has had. It dropped the price level by 0.6%, taking 0.6% off inflation for one year.
The industrial carbon tax is very different. It's a small number of large emitters, and most of what they produce is exported.
Conservative
Jasraj Singh Hallan Conservative Calgary East, AB
Let's go back to housing.
With regard to that, what would it take for young Canadians to have hope again to get a house?
Governor, Bank of Canada
If you want to focus on housing, I don't think the place to start would be the industrial carbon tax. I think it would be municipal development charges.
Governor, Bank of Canada
We've talked a lot about productivity. The productivity in building a house has been going steadily down. The graph shows the time to completion of housing is going up.
There hasn't been a lot of change in how a house is built. We need to look at things like new modular construction. We need a lot of houses. How are we going to build those efficiently and quickly, get the cost down and make them more affordable? That's what's going to make housing more affordable.
Conservative
Jasraj Singh Hallan Conservative Calgary East, AB
Right.
We hear a lot about modular builds. I don't think a lot of young people want to be stuck in container houses. People want to start families and move up.
Governor, Bank of Canada
I'm no expert on this, but I did go look at a plant that is making these. They're not trailer homes. They're pretty nice houses. Yes, they're going to look similar, but if you want to build a whole new community rapidly.... They're not going to be for everybody, but I think there would be a lot of people pretty happy to have one.
Conservative
Jasraj Singh Hallan Conservative Calgary East, AB
You said that the supply needs to go up in order for us to have more affordability, but I think that it's still a big barrier for young Canadians who can't save up for even a down payment on a house. Most people can't even imagine leaving their parents' basements today. They're doing all the right things. They're going through school. They're trying to work as hard as they can. I believe that the youth employment rate is one of the lowest it's been in 25 years or something like that.
What I'm trying to say is that you talk to a lot of Canadians. You guys do a lot of research with young Canadians and other people. What is it going to take for this situation to change and for people to be able to afford things in Canada again?
Governor, Bank of Canada
Maybe the senior deputy governor can add to this, but—
Governor, Bank of Canada
Look, I share all of those concerns. I think they're real. Employment growth is weak right now, which particularly affects youth because they're the ones who are coming into the labour market. There haven't been a lot of layoffs, except in certain sectors, but hiring is weak. It's taking young people coming into the labour market longer to find a job. That's not helping.
Do you want to—
Liberal
The Chair Liberal Karina Gould
I'm sorry. We'll have to cut it off there. We're out of time for this round.
Thank you, Mr. Hallan.
We'll go to Mr. Sawatzky for five minutes.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thank you, Chair.
On the same note of youth employment, there's a lot of talk right now about investing in the country and investing in large-scale national projects.
Are there ways in which we can ensure that these investments translate to jobs for youth?
Senior Deputy Governor, Bank of Canada
One important thing is making sure that the secondary education opportunities are matched with the types of jobs that we need and the types of skills that we need.
We need to make sure that we're making trade programs available and, when students graduate, that they're graduating with the skills, degrees, diplomas and stuff that employers need, so they can find jobs. I think that would be one important step.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
On that same note, do you think right now that the changing landscape of artificial intelligence is going to change the landscape? Will there be a mismatch between what people are trained to do and what jobs are available out there?
Senior Deputy Governor, Bank of Canada
That's a possibility. I think that's an area we're going to have to look at, the match between the types of educational programs that exist and the types of jobs that are likely to be in it. You have to kind of project it out over five years. You don't want to go through a three-year program, get to the end and find out the thing you've trained to do is now no longer a viable job in a world with AI.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Absolutely.
I'm not sure if this is too much of a tangent, but could you perhaps elaborate on some of the sectors that might be at risk of replacement with AI?
Senior Deputy Governor, Bank of Canada
There are a variety of opinions out there. I don't really think of myself as an expert on which sectors are most likely to be affected by AI.
To me, what's interesting about AI versus other technologies is the types of jobs that it's having the most impact on—more mid-level jobs, analytical jobs. In the past, we've thought of technology as replacing what are known as blue-collar jobs, but AI's really targeted more mid-sector, analytical jobs.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
I'm taking a bit of a turn here. I'm wondering about the stability of our economy. Of course, we've had major disruptions.
Are there ways in which we can make things more stable so that investors are more likely to invest in large projects?