Industry Committee on Nov. 7th, 2024

[Ryan Turnbull, Liberal, Whitby, ON]

We said it publicly and it was also said privately to Stripe. Okay. That's good. That's helpful. That's clear.

Now I want to go to Ms. Withington.

I note that wages have outpaced inflation for 20 months in a row. That's a significant trend that I'm not sure I've heard other committee members bring up, probably because it's not good for their political narrative.

I want to ask how that is impacting household debt. Are Canadians able to start paying down some of that household debt? Are we seeing any trends there? Are those indicators related? Can we correlate that at this point?

[Jennifer Withington]

While household debt remains high, it's true that the debt-to-income ratio has decreased because income has outpaced the debt level, so their ability to pay off debt has improved.

[Ryan Turnbull, Liberal, Whitby, ON]

Right, or they could service more debt if they were under more financial pressure, but the financial pressures seem to be coming down.

[Jennifer Withington]

Yes.

[Ryan Turnbull, Liberal, Whitby, ON]

Therefore, we would anticipate normal behaviour, which would probably be to pay down that debt with any extra disposable income. Is that correct?

[Jennifer Withington]

That's a possibility. It's up to human behaviour. I can't comment on human behaviour, but yes.

[Ryan Turnbull, Liberal, Whitby, ON]

This highlights why financial literacy might be important, though I don't want to detract from the fact that Canadians have been going through a very tough time with the high inflationary environment following COVID.

You also mentioned that people aged 35 years and under are the ones who are the most exposed to credit card debt. They would also probably be subject to variable rate mortgages—maybe more so.

Could you speak about how those things might be related?

My understanding, from talking to my constituents, is that anyone who is on a variable rate mortgage felt that pressure immediately when the Bank of Canada increased the rates. They probably went to non-mortgage credit card instruments to pay some of their bills, which would be a natural thing to do, I would think.

[Jennifer Withington]

We have seen some evidence of younger generations deleveraging outside of household mortgage debt because of high housing costs. They've opted out of the housing market a bit.

[Ryan Turnbull, Liberal, Whitby, ON]

We've seen those rates come down four times in a row, which is great news for Canadians. That must alleviate some of the pressure on them. However, they're now carrying more credit card debt, I would think, as a result of coming through a period when their mortgage payments may have increased by $900 a month, which is significant.

What is our obligation in terms of financial literacy, and who among the panellists today works on that? Can anyone speak about the Government of Canada's work on raising awareness and dealing with financial literacy?

[Judith Hamel]

The Financial Consumer Agency of Canada is the lead organization on financial literacy at the federal level. I know you've been talking to them. They have developed many tools to foster financial literacy. They have a website that is actually very useful in providing information to Canadians.

On credit cards, they have a comparison tool that compares hundreds of products in Canada, which can guide Canadians in choosing the right card for them.

[Ryan Turnbull, Liberal, Whitby, ON]

I think my time is up, but thank you for that response.

I would highlight that I think financial literacy needs to start young and probably not just include information about which credit card to choose but also develop those skill sets from a very young age.

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Turnbull.

I now give the floor to Mr. Garon.

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

Thank you, Mr. Chair.

I am coming back to the Department of Finance representatives on another theme. Some witnesses we heard from gave us documents and made proposals. Some of them talked about how Canada’s criminal interest rate must be changed through legislation.

In Quebec, if I’m not mistaken, 35% is the maximum rate considered usurious under the Consumer Protection Act. The federal rate, however, is 60%. I would like to know if there should possibly be a reduction in the maximum criminal interest rate. A rate of 60% seems extremely high to me. It should be reduced in order to better protect consumers. Financial institutions and others may be tempted to constantly increase rates; that was the case for credit cards, with a few points added to the rate in recent years. However, we have to send the message at some point that, ultimately, beyond a certain interest rate, it becomes immoral.

[Judith Hamel]

Yes, at the federal level, the maximum interest rate is set out in the Criminal Code. The government already announced a reduction in the criminal interest rate. The new rate, which will be 35%, comes into force on January 1, 2025.

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

Thank you.

Under current market conditions, we know all kinds of companies are charging interest. Of course, banks and credit card companies come to mind, because they are the subject of the study. However, we often forget that consumers are charged very high interest rates on various unpaid bills. Could you tell us which businesses or sectors of activity more frequently go over the famous 35%, with some even reaching a rate of interest of 60%? Which sectors and types of businesses have a tendency to do that?

[Judith Hamel]

We expect businesses to comply with the new criminal interest rate as of January. The new rate mostly affects certain nontraditional lenders. They are not necessarily lenders under federal jurisdiction, and they often charge rates higher than 35%.

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

Mr. Chair, do I have a few seconds left? I would like to direct a question to Statistics Canada’s representatives.

[The Chair, Liberal, Joël Lightbound]

I will grant them to you, Mr. Garon. Go ahead.

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

That comes from your pure kindness, Mr. Chair.

Ladies and gentlemen from Statistics Canada, Sylvain Charlebois, a witness nicknamed the “Food Professor,” recently raised a subject here at committee. In various fora, he accuses you of miscalculating the inflation rate, saying you do not take shrinkflation into account. He said he met with you, but you were not convinced.

Basically, he collects his own data. He publicly stated you do not calculate the inflation rate correctly. It surprises me, because you are one of the few federal institutions in which I still trust. I know this witness does not have the relevant education and is certainly not an economist.

Do you calculate the inflation rate correctly? Do you take shrinkflation into account? How is it that some academics can attack you on that point? Do you think you are not communicating well enough about the way you do things?

[Jennifer Withington]

Thank you, Mr. Garon.

We were asking ourselves the same question: Why does he think we are not measuring inflation in the right way?

Just to speak clearly, our consumer price index is of very high quality. We follow the best practices. We're world leaders. We follow international methodology.

To be very clear, we do account for shrinkflation. In no way do we measure apples to oranges. We always measure apples to apples and account for any changes in quantity. We have something called quality change, which also incorporates quantities, and we make adjustments to compare like to like, so we do account for shrinkflation.

I would say to your point on communication that we have a number. We've done podcasts. We had an infographic on shrinkflation. We've made many efforts to be clear in our methodology. Our methodology is also up front and very visible to all users; however, we will continue to try to communicate this to ensure that it's 100% clear to all users, including Professor Charlebois.

Thank you.

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

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Just following up on that, I'll grant myself a bit of time as well.

The CPI, at least in the U.S. and in Canada a little bit, has been very controversial over the years. Does it adequately monitor inflation? There has been a change over the years; it has gone from a fixed basket of goods to the cost of living. Then what is the standard of living? It fluctuates.

How different are the ways we calculate CPI here and in the U.S.? The example I've read would be, for instance, the change in consumer behaviours. If filet mignon goes up, then you change to a T-bone, and that maintains inflation at the same level, because the price of the T-bone has gone up too.

How do you respond to that? How is it different in Canada? Is it different in Canada from what it is in the U.S.?

[Jennifer Withington]

I will speak to that, and then, Matthew, you can add if there's anything else.

Our consumer price index is one of our critical products. We put in a lot of effort into make sure it's of the highest quality.

What you're talking about is the substitution effect. We used to have fixed baskets every two years, and we would revise the weights, but, to account for the substitution effect, we've moved to an annual basket so that we account for that substitution more frequently.

[The Chair, Liberal, Joël Lightbound]

Is there, then, a fixed basket that does not account for substitution? Is that a statistic you provide as well, and what would be that statistic?

[Jennifer Withington]

Within a year, we would maintain the same fixed basket. We would not see the substitution within a given year, but every year we update our weights.