Finance Committee on May 4th, 2026

[Pat Kelly, Conservative, Calgary Crowfoot, AB]

Since you were here in November, we have studied the indebtedness of Canadians. I note also, in your report, that the two main drivers of GDP growth right now are consumption and government. Both of those baskets, I guess, are fuelled by debt. Consumers, we are told, are increasingly in debt; they are going deeper into debt. They are struggling because their incomes are not keeping up with their ability to service debt.

Are you concerned about the indebtedness of Canadians, as well as the indebtedness of government?

[Tiff Macklem]

Well, I am concerned about the indebtedness of Canadians. When you talk about Canadians, there are many different experiences. Certainly, some Canadians have gotten more into debt, but actually, if you look on average at Canadian debt, household debt levels have been relatively stable now for a number of years and are even down. They were rising for many years. We highlighted this as a vulnerability. They went down during COVID. They've not been trending up. In fact, if anything, they've been trending down.

There are some different ways to measure it. I won't get into the technicalities, but—

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Macklem.

[Tiff Macklem]

—overall, Canadian households have not been getting into more debt, and the savings rate is higher than it was before COVID.

[The Chair, Liberal, Karina Gould]

Thank you.

We will continue now with Dr. Martin for five minutes, please.

[Danielle Martin, Liberal, University—Rosedale, ON]

Thank you, Madam Chair.

I wish to thank the witnesses.

Mr. Macklem, your report is very compelling and well written, so congratulations for that.

I have three questions, if time permits.

The first relates to this ongoing conversation we're having about affordability being inversely related to prices and directly correlated to wages and that these things are inextricably intertwined. You've said, and I think we all know, that the best way to ensure that wages grow is to grow our productivity, which is obviously a major policy focus of this government. The kinds of infrastructure investments and attempts to attract capital investment to grow productivity in the country are the underlying assumption in that approach.

What are the major policy levers either in your control or in the control of government to ensure that productivity growth leads to wage growth?

[Tiff Macklem]

I'll take the first one.

First of all, the short answer to that is that no levers are in the purview of the Bank of Canada, so your next question is, why do we even talk about productivity? The reason we talk about productivity is that it's a key determinant in how fast the economy can grow without building inflationary pressure. We spend a lot of time trying to understand what's driving productivity and where it's likely to go, because that determines how much the economy can grow without inflation. In this report, as we outlined, we revised our outlook for potential output, and a key element of that is productivity. It's not the only thing; it depends on other things like the growth of your labour force.

You know, key levers is a huge topic, but we've been talking about these things for a long time, particularly in the break glass speech that the senior deputy governor gave. If you look historically at what drives productivity, investment is key. Obviously, if workers have better equipment and better technologies, they're more productive.

[Danielle Martin, Liberal, University—Rosedale, ON]

I'm interested, to pull on that a little bit more, not in what drives productivity growth but what ensures that productivity growth is then shared, such that wages grow and therefore affordability is improved.

[Carolyn Rogers]

This is exactly why the governor connected these two concepts. If you think of it at a business level rather than at an economy level, if a business is more productive and it can produce more of whatever it sells without its cost growing, then it can share that revenue. Ideally, some of that revenue gets shared with the employees. If, on the other hand, every unit they produce costs them more money, they're more likely to raise prices, and they're less likely to share their revenue.

What you want, at the economy level, is the same thing you want at a business level. You want an economy to be able to produce more with every hour of labour that it uses as an input. Then you want that revenue, that extra revenue, to be shared and not passed on as price increases. We worry about wage increases, and I think people got frustrated with us when inflation was going up and we were worried about wages going up, but wages are an input. If you're a business, paycheques are part of what it costs you to produce your product, but if your productivity is increasing, then you don't have that same pressure to increase prices.

[Danielle Martin, Liberal, University—Rosedale, ON]

Thank you.

In my riding, as I'm sure is the case in everyone's riding, the cost of food is a major concern. We've heard you speak about the links between the prices of fuel and other goods and perhaps someday even services in the economy. Can you talk to me a little bit about food and what is driving...? I see in chart 19 optimistic hopes that CPI for food will start to decline. What are some of the inputs into that that we should be aware of as a committee?

[Carolyn Rogers]

Food is always one of the more volatile parts of CPI, and there are a few reasons for that. It's affected by a lot of things. It's affected by energy costs. It is one of the things we're worried about right now as we watch the price of energy go up. As the governor said, we're looking for it spreading into other things. Some of the food that we consume here in Canada needs to be imported, so transportation costs, exchange rates and that kind of thing affect it. Some of it is affected by global commodity prices. In the last year, we've seen things like chocolate, coffee and beef that are all affected by global commodity prices.

[The Chair, Liberal, Karina Gould]

My apologies, Ms. Rogers, as we're going to have to end the conversation there.

Thank you, Dr. Martin.

Mr. Garon, you now have the floor for two and a half minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Mr. Macklem, I'm going to ask you a political question, but I think you're going to answer this one. We'll try to make an exception.

I'd like to know whether you have any concerns about the independence of the U.S. central bank. A nomination is going to be made, and Senate hearings will take place. I'd like to know how a monetary policy that would be less independent from the United States executive or legislative branches would impact your work.

[Tiff Macklem]

That's a good question.

First, we have to ask why the independence of central banks is important, and the reason is simple. History has shown us that central banks that have operational monetary policy independence are more effective in stabilizing and keeping inflation low and stable.

In the United States, the president issued multiple threats about the federal reserve. So far, and particularly under Mr. Powell's tenure as chair, I think the reserve has made decisions based on facts and analyses and not on political factors.

Kevin Walsh is probably going to be the next chair of the federal reserve. I know him, and we worked together during the 2008 financial crisis. He answered several questions during his confirmation hearing, and I believe the same culture and approach will continue.

I recall making a few remarks on this issue because the U.S. federal reserve is the biggest central bank in the world. It's lack of independence would affect us all.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Garon.

We'll continue with Mr. McLean for five minutes.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

Governor and Deputy Governor, welcome, first of all.

I'm going to ask some questions about the balance sheet and its effect on our monetary policy going forward.

This year, your accumulated deficiency is about $8.5 billion—down from about $8.7 billion—but you still have an operating loss and are losing money as a corporate entity. This is going to continue. It has accumulated since COVID, since the quantitative easing, wherein you're buying at low interest rates and having to sell at high interest rates, which means that you're losing money on every sale. That indicates it's about $8 billion for you, but there's another $19 billion in deficiency with the guarantees from the federal government. Therefore, combined, are we talking about a much larger number than is on your balance sheet? Your derivative arrangement with the federal government is $19 billion. When is that going to appear as part of the federal government's actual debt?

[Carolyn Rogers]

There are several questions there. I'll start with a correction. We're actually in a positive net-income situation now.

[Greg McLean, Conservative, Calgary Centre, AB]

That's net income because you're re-marking two of your accounts to market, both your BIS account and your—

[Carolyn Rogers]

No, this is just a straight revenue cost. In Q3 of last year, we were into—

[Greg McLean, Conservative, Calgary Centre, AB]

Okay. I'm only reading your financial statements.

[Carolyn Rogers]

That's in answer to your first question.

The second question was about the indemnity. That is basically a market instrument that adjusts according to the value of the investments on the balance sheet. It doesn't turn into a loss unless we actually sell those investments. It's marked to market quarterly when we publish our financial statements.

Then, as to your third question, our financial statements roll up into the government's every year.

[Greg McLean, Conservative, Calgary Centre, AB]

You've reduced your balance sheet significantly—

[Carolyn Rogers]

Yes.

[Greg McLean, Conservative, Calgary Centre, AB]

—since that point in time, and you're saying that in regard to your deficiency, the government has guaranteed you.... You're not recognizing it for some reason. At one point in time it was much higher. I noticed that. It was around $28 billion.