Finance Committee on May 4th, 2026

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

If I may change the topic a little bit, I noticed that the GDP forecast that you have, particularly for next year, 2027, and the forecast that is included in the spring economic statement, are different. Your expectation is for the GDP to be about 13% lower. Could you explain to us what the difference is there?

[Tiff Macklem]

Different forecasters are always going to come up with slightly different forecasts. The forecast using the spring economic statement was based on the average of private sector forecasters. That was done, I think, in March. We put out our forecast last week, so we're working with slightly different information. If you compare them, we have slightly stronger growth this year than the average of the private sectors.

You're right, in the outer years, ours is a little lower than the private sector. I think, though, that the picture is not that different, whether you use their forecast or ours. We've got modest growth this year, picking up gradually over the projection. The private sector has it picking up a little bit more than we do.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

The reason I ask, of course, is that the difference ends up being fed into the deficit. If there is a difference of three basis points, a 16% difference, then it leads, roughly speaking, to $2 billion of a deficit difference.

[The Chair, Liberal, Karina Gould]

Thank you, Ms. Cobena. That concludes your time.

Mr. Lavoie, you have five minutes.

[Steeve Lavoie, Liberal, Beauport—Limoilou, QC]

Thank you, Madam Chair.

Mr. Macklem and Ms. Rogers, thank you for being here. I'm honoured to have the opportunity to speak with you today. I have a lot of questions and a very short time, and so I'll try to move quickly.

You spoke about the Canada-U.S.-Mexico agreement earlier. I want to spend a moment on CUSMA. I'm fortunate to sit on the Standing Committee on International Trade and last fall, we had a study on CUSMA and made some recommendations. So far, so good.

My question is on potential impacts. The business representatives who appeared before the committee were unanimous that CUSMA must be preserved. The people who came from the United States also said that CUSMA must be preserved. What would be the short or medium-term impacts, if tomorrow morning, our neighbour to the south ripped up the agreement and withdrew from CUSMA, which they can still to do? Have you looked at various scenarios? There may be impacts on businesses in the very short term and others in the medium-term. Have you prepared a scenario for this issue?

[Tiff Macklem]

Yes, we have released a number of scenarios. We looked at various scenario assumptions as soon as the U.S. threats began. We have published these assumptions, and I've spoken about them in a few speeches.

At the moment, most trade is still governed by CUSMA and is therefore not subject to customs tariffs. Yes, things are quite serious for some sectors that have been hit hard. For example, if the United States imposed a 10% universal tariff on all Canadian goods, this would have a huge impact on our economy and the likelihood of a recession would be very strong. We have already published these scenarios.

[Steeve Lavoie, Liberal, Beauport—Limoilou, QC]

Thank you very much.

You spoke about artificial intelligence, or IA earlier. It was very interesting. You tied AI to productivity, but we're starting to see a lot of layoffs associated with AI. It's happening in the United States and it's also becoming increasingly common in Canada.

Where I come from, people are talking about some catastrophic scenarios concerning the unemployment rate because tens of thousands of people could lose their jobs because of AI.

Productivity will certainly go up, but the unemployment rate could soar substantially for quite a long period because people will have to reskill over time, and new trades are going to come up. We know that adjustments will be made, but it could take a long time. The downturn could be swift and prolonged.

Is this something that you also have on your radar?

[Tiff Macklem]

We're monitoring that closely. There are a number of different scenarios on the impacts of artificial intelligence, which is the latest in a long line of new technology, such as electricity, computers and many other types of major transformative innovations. History has shown that certain jobs were lost and some trades were replaced, but new jobs also emerged. New businesses were created with the arrival of computers. Computers were transformative, but unemployment rates didn't go up significantly.

It's a big question. Will artificial intelligence mirror other groundbreaking technologies in history or is something going to be different this time? Yes, it's quite possible.

[Steeve Lavoie, Liberal, Beauport—Limoilou, QC]

This time the difference is the speed.

[Tiff Macklem]

It's the speed.

[Steeve Lavoie, Liberal, Beauport—Limoilou, QC]

The adoption of computers, which are a good example, was slow, while artificial intelligence is advancing at a very fast pace.

[Tiff Macklem]

There are two reasons that may account for the difference. There is the pace, as you have said, and it's also possible that many new trades can be taken over by artificial intelligence. So far, we have not seen a significant increase in unemployment because of AI, including in the United States, which is far ahead of us. Some trades have indeed been impacted, but there is also a new type of demand, far more investment and new jobs.

It's something that needs to be monitored closely. We don't know what will happen.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Macklem and Mr. Lavoie.

We will continue now with Mr. Kelly for five minutes, please.

[Pat Kelly, Conservative, Calgary Crowfoot, AB]

Thank you.

Senior Deputy Governor, it's coming up on two years, I think, that you declared the “break glass” emergency on Canadian productivity. I note in this report that fixed business investment projection, as its contribution for GDP growth, was 0.0% in 2025 and just one-tenth of one per cent in 2026.

Has the glass been broken? Do we see public policy behaviour that would be consistent with dealing with a “break glass” emergency on productivity?

[Carolyn Rogers]

There are a number of things that affect productivity. Investment is definitely one of them. It's a difficult time to measure investment, given the amount of uncertainty Canadian businesses are facing. As the governor said, however, I think we have seen progress in investment. We do expect that as the economy restructures, business investment will pick up, so that is one thing.

The other thing that affects productivity is the structure of the labour market. We have seen investment in training. There were investments last week in improving training to better fit the types of jobs that we need as the economy restructures.

Then, the governor talked a little bit about the effects of AI on the third element, which is TFP. That is how labour and capital investment work together.

[Pat Kelly, Conservative, Calgary Crowfoot, AB]

Is there any evidence that there is a significant uptick, especially in comparison to other investment jurisdictions, in intellectual property?

[Carolyn Rogers]

You gave the numbers, so I think you've answered your question.

[Pat Kelly, Conservative, Calgary Crowfoot, AB]

Okay. Well, I was taking it from your report. The total is 0.0%, but I'm asking about intellectual property, for example. I'm asking you if you—

[Carolyn Rogers]

Are you asking specifically about intellectual property?

[Pat Kelly, Conservative, Calgary Crowfoot, AB]

Yes. The 0.0% number, I'm sure, is for all of business activity, but do you have a breakdown? Are we doing better on intellectual property?

[Carolyn Rogers]

Off the top of my head, I don't—

[Pat Kelly, Conservative, Calgary Crowfoot, AB]

Okay.

Governor, at the November meeting here, you said that the productivity crisis and the affordability crisis are one and the same. Increasingly, Canadians are struggling to afford housing, food and fuel. The only thing that is going bring us out of this is a significant increase in productivity, which will lead to greater wages.

Do you agree with what you said in November? Do you have anything further to add to that?

[Tiff Macklem]

I agree with what I said in November, yes.

Really, the point I was trying to make then was that, when you look at affordability, yes, you need to look at prices and at the cost of things, but you also need to look at revenue. Our affordability crisis really reflects two elements. Certainly, coming out of COVID, many prices were boosted. Inflation came down, but those prices have remained high, and that has affected affordability.

[Pat Kelly, Conservative, Calgary Crowfoot, AB]

Wages haven't caught up.

[Tiff Macklem]

Well, over time, actually, wages have caught up, but that took some time. If you really want to improve affordability, however, you need to grow your revenue. If you have more income, everything becomes more affordable.