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.
Conservative
Adam Chambers Conservative Simcoe North, ON
I'm just asking, we have a low term structure. Shouldn't the government be borrowing more long term?
Governor, Bank of Canada
The government determines the term structure that balances these various things. We are the agent for the government. We advise them.
Conservative
Adam Chambers Conservative Simcoe North, ON
I understand you won't want to answer. That's okay.
I have one final question.
I understand the bank may be close to not losing money anymore, but do you wish you still had some gold reserves to offset those losses? We do not have any gold reserves anymore, as of 2016. You can blame a predecessor. You weren't there. Do you wish you still had the gold?
Governor, Bank of Canada
We hold our reserves in interest-bearing assets, high-quality—
Conservative
Adam Chambers Conservative Simcoe North, ON
It would be worth a lot today, though. We're one of the only central banks that have zero reserves now.
Liberal
The Chair Liberal Karina Gould
Thank you. That concludes this round.
Mr. Sawatzky, you have five minutes, please.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thank you, Chair.
Thank you both for coming today.
You've mentioned the importance of having diversified trade partners. I was wondering what some steps are that we could take to ensure we do have more diverse trading partners.
Senior Deputy Governor, Bank of Canada
You're a little bit out of our mandate. Ultimately, it's the companies that have to take those steps. They have to find new markets. That sometimes requires them to shift their products or their services. Developing trade relationships takes some time. It takes some investment both from government and from these companies. It's a little bit out of our wheelhouse.
However, I would say about the steps in general, again the steps the government is taking and we see companies taking—when we talk to companies they do tell us they're taking steps to diversify their trade partners—as the governor said earlier, it takes some time and it takes some cost.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
It seems like there has been some progress in diversifying trade partners, so I can agree that is important.
Just touching on attracting private investment into our country, do you perhaps have any suggestions on ways we could foster investment into Canada?
Governor, Bank of Canada
There are a couple of things.
We've talked about regulatory approval. I spend a certain amount of time outside of the country talking to global investors. People look at Canada and they see a lot of very good things: abundant natural resources, a very well-educated workforce, rule of law, a diverse workforce and high labour-force participation rates. However, one of the things we do hear repeatedly is about regulatory approvals. There are too many levels and it takes too long, and they can't afford to tie up their capital waiting for an uncertain outcome. As the senior deputy governor said, those regulations are there for good reasons, but the more we can harmonize across provinces, get the federal government and the provincial governments working better together, reduce the uncertainty and speed those up, the more attractive that will make us to foreign capital.
Another thing we've talked about is that we need to be able to get our resources to markets. That's transportation. It's pipelines. It's ports. Foreign investment will come if they see the return. We have to look at investments that will make that more attractive. We need to make Canada more investable. That's what's going to attract more investment.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
There is another thing I want to touch on. We're seeing a lot of investment into artificial intelligence and tech companies lately. Some people are concerned about an AI bubble.
Do you see any risks that AI-related investments could become overheated? What would that mean for the broader economy if valuations start to fall?
Senior Deputy Governor, Bank of Canada
We had this question at our last press conference. There are lots of people who are concerned right now.
There are pretty diverse views on whether there's an AI bubble or not. Ultimately, if there was a sharp turnaround in the valuation of AI companies and you saw the stock prices of these companies fall, that can have a confidence effect on spending and on investment. It can have what we call a wealth effect. If people feel that their investments have declined in value, they don't feel as prepared to spend money. A sharp drop in any asset group can have that effect.
The amount and the speed of the investment in the AI sector right now is what's causing the discussion around whether or not there's a bubble.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
My next question is maybe to see if we can translate this to Canadians who might be watching and thinking about inflation rates and interest rates.
How would inflation and interest have an impact on somebody who might be younger and not have many assets versus somebody who might be in an older generation and own a home, etc.?
Senior Deputy Governor, Bank of Canada
As the governor said earlier, we talk a lot about getting inflation back to 2%. It can probably feel frustrating to people who say that inflation might be back at 2%, but it still feels like everything costs more. Certainly for young people who are trying to get a start in life, that cost of living.... For anybody who has to spend a good portion of their income on necessities like groceries or rent, those things have increased a lot.
Young people who have those costs are also less likely to have assets that are earning a return, so if interest rates go up a little bit, they have to—
Liberal
The Chair Liberal Karina Gould
Thank you, Deputy Governor. We're going to have to end it there.
Thank you, Mr. Sawatzky.
Mr. Garon, you have the floor for two and a half minutes.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Mr. Macklem, you talked about the importance of capital investment, which can come from businesses or governments. Today, I'm looking at the budget that was tabled yesterday.
As an economist at the Bank of Canada, do you consider it an investment in the national accounts sense to invest in security services for International Federation of Association Football, or FIFA, soccer games?
I'm going to ask a series of questions, so I'd like you to answer yes or no.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Would a program used to find ways to invest amount to an investment in the national accounts sense?
Governor, Bank of Canada
I'm not an accountant. As I mentioned, we look at the macro level. We don't get into the details.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
I will therefore address the macroeconomic aspect.
Do you consider a tax credit offered by the government to be an investment?
Bloc
Jean-Denis Garon Bloc Mirabel, QC
I'm talking about the tax credit itself.
The deputy governor is shaking her head that it's not. I have my answer.
Senior Deputy Governor, Bank of Canada
May I respond?
As I understand the way the government's describing its budget, it's trying to categorize things into whether they are—
Bloc
Jean-Denis Garon Bloc Mirabel, QC
I understand that, but I'm asking you in the national accounts sense.