Evidence of meeting #43 for Government Operations and Estimates in the 44th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was spending.
A recording is available from Parliament.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Thank you, Mr. Giroux.
I'm going to go back to the question that was left unanswered.
You indicated that you believe that, over time, we are heading in the right direction, between 1% to 3% of inflation.
I was asking if you could give a guesstimate around the timing and how long it would take. What would your estimate be as far as the timing?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
In the current situation with the economic picture that we have right now, we anticipate inflation to gradually decrease over the course of next year. We estimate that probably by the middle to the end of 2024 we'll be in the 1% to 3% range. It will probably be at the upper end of that range, but it will be sometime by the end of 2024, assuming that there are no other unforeseen events that hit us as the war in Ukraine has.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Thank you for that.
Over the last while during the question period and often in the media, we hear our colleagues across the aisle talk about this being a homemade—our government—policy-driven inflation. Can you shed some light on that? What are your thoughts on it? Do you think it's all about the policies that we rolled out during COVID-19?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I think government spending and government supports have, without question, contributed to inflation, and the Governor of the Bank of Canada has hinted at that. It's clear that when you inject money massively in an economy, it is bound to support prices; it supports demand. That was the intention, supporting—
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Absolutely not.
There are supply chain issues, and we've seen that. People have talked extensively about the various supply chain issues with shops or factories shutting down in China, for example, or with the shipping of goods across the globe being interrupted by various events.
Energy is.... Many energy commodities are traded globally, so the price of a barrel of oil, whether we produce it domestically or buy it from abroad, is influenced by external events.
These are two very easy examples to understand that inflation has domestic but also external components. Food is also affected by energy prices, but it is also affected by shortages or lack of supply and increased demand in many parts of the world. There are a lot of factors that come into play when determining overall inflation, some of which are domestic and some of which are global.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Thank you.
In Richmond Hill, I have five community councils. One of the community councils is on affordability. A lot of my constituents were quite happy when we announced the $500 one-time top up on the rent and the $640 for dental care that went into effect today for those low-income families.
These are the expenditures that our government has put on the table during this time that we say we need to make sure that we keep our powder dry, as you said, or need to be fiscally prudent. Some of the concern was around whether and to what extent it will impact inflation.
If you could shed some light on that, it would be appreciated.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's a question that was asked of our office a few times, especially related to the affordability measures announced by the government in September on dental care, housing and the doubling of the GST credit. We call that “dental, rental and GST”.
The total cost in one year is about, I think, $4.5 billion. We looked at the inflationary impact of that, and it's to the second decimal, so there's a very marginal upward impact on inflation, because it's a relatively small amount in the grand scheme of the national economy, and it's temporary.
Liberal
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's $2,700 billion.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's $2.6 trillion or $2.7 trillion.
Conservative
The Chair Conservative Kelly McCauley
Thank you, Mr. Jowhari.
Mr. Chambers, it's over to you, please, for five minutes.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you, Mr. Chair.
Regarding the fall economic statement, in a summary your office put out, the government has claimed that it exceeded its savings target for last year by about $800 million because there were unspent COVID supports. How do you characterize that spending target achievement? Would you consider that a spending target achieved?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
“No” is the short answer. When that review was announced in budget 2022, it was supposed to be in this year or next. The budget was tabled in April, but the government in the fall statement claimed victory for something that happened before the budget. So to me that sounds like claiming that what you did in the past before the budget is sufficient to deliver on something you said you would do in the future. The time zones don't intersect at all when it comes to that specific review.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you.
I'd also make the point that it's not run rate savings being achieved. That's a one-time spending that was not spent. So if the government has an objective of saving money over the long term, they have to find that money again every year in other programs.
Next year we're projected to spend about $43 billion in interest payments on the debt. I think the Canada health transfer for next year is about $45 billion, and it is far exceeding, say, what we spend on national defence, for example, and some other large government programs.
Is there a level of debt interest servicing costs as a percentage of expenditures that you think we should be paying attention to? I think the previous governor of the Bank of Canada, David Dodge, says he has in his mind about 10 cents of every dollar. I think we're close to nine and maybe pushing the 10 now. What are your thoughts on that?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's a difficult question to answer, because I think it boils down to policy preferences. Keeping that “debt servicing costs”, as we call them, lower as a proportion of tax revenues implies that decisions need to be made on areas of spending.
All of that is to say that there is no magical number or line in the sand where things get out of hand or become catastrophically expensive, so there's no clear point where things are deemed to be unviable or too expensive.
But it's true that if you compare the debt servicing costs with other government expenditures, they can seem to be very expensive and they can lead to difficult trade-offs if, for example, you have to spend more on debt servicing costs than you spend on transfers to persons and provinces, if we get there.
I'll stop there.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you.
At the finance committee earlier this week, you had an exchange with a colleague about the fundamental policy change on the workers benefit. I'm not sure we explored that fully, because we ended the exchange with your suggesting that there could be circumstances in which someone could be making a significant amount of money in a future year but still have a government benefit. You expressed some concerns about that.
Could you just outline for us here what that policy change could mean and the results it could lead to?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Sure.
Quickly, the policy change you're referring to is the decision to provide the Canada workers benefit in anticipation to lower-income workers and middle-income workers, but to also not recoup these advance payments should these workers earn more than the maximum threshold. That last part was not announced in the fall economic statement.
I took issue with the fact that that part was not transparently announced in the fall statement, and also with the fact that this change would mean that we could well end up with a situation where somebody who earns $20,000 in a year gets advance payments for the Canada workers benefit the next year, which I think is not a bad thing at all, but in that year for which he or she gets the advance payments, they make $100,000—because they've improved their own situation—and the government decides not to recoup these advance payments.
My question is whether this is the best use of these funds to allocate money to those who earn more than the maximum under the Canada workers benefit.
Conservative
The Chair Conservative Kelly McCauley
Thank you very much.
We're going to go to Mr. Bains for five minutes. Then, we'll finish off with Ms. Block. Then I need about one minute for some committee work.
Mr. Bains.
Liberal
Parm Bains Liberal Steveston—Richmond East, BC
Thank you, Mr. Chair.
Can you comment on how the estimates support Canada's immigration strategy?
December 1st, 2022 / 4:55 p.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I can talk about the amount that's in the estimates for the immigration strategy. If my recollection is accurate, there is about $1.2 billion in voted authorities for Immigration, Refugees and Citizenship Canada to help the government deliver on its new immigration plan in which it seeks to increase the number of immigrants in the country to—I don't have the numbers in front of me—about 400,000 per year, if I'm not mistaken.
Liberal
Parm Bains Liberal Steveston—Richmond East, BC
Sure.
Then, on your own analysis of the supplementary estimates, billions are for the resolution of indigenous legal claims. Are those discretionary?