Public Accounts Committee on May 7th, 2024

[The Chair, Conservative, John Williamson]

Let me ask you then, what's the bank's view currently on the amount of debt we're seeing spent at the provincial level? What impact is that having on inflation?

[Carolyn Rogers]

Different provincial governments have made different decisions.

Again, I would repeat what the governor has said. If governments are spending at a pace in excess of the growth rate of the economy, that is naturally going to be inflationary, no matter which government is doing that spending.

[The Chair, Conservative, John Williamson]

Thank you.

You and Mr. Scheer were in a discussion about productivity gains. Your statement was that a more productive economy would be beneficial in—I don't know the term—sticky inflation or a less-conducive inflation environment. That's basically what you said.

Is that...in response to this question?

[Carolyn Rogers]

Yes. Basically, I said that when we look ahead.... Somebody asked me earlier about demographic shifts, and I've also talked a little bit today about—

[The Chair, Conservative, John Williamson]

I want to talk about productivity.

[Carolyn Rogers]

I'm getting there.

I've talked about climate effects. There are a number of things going forward that we expect will make it a less benign inflationary environment. It will be more upward pressure on inflation.

A really good way to buffer the Canadian economy in that environment going forward would be to improve our productivity.

[The Chair, Conservative, John Williamson]

You were saying that anything that kind of impacts capital flows would have a negative impact and therefore contribute to inflation, possibly. Is that right?

[Carolyn Rogers]

What I said was that one thing that would boost our productivity is to increase investment. Creating a climate to encourage investment would be—

[The Chair, Conservative, John Williamson]

Mr. Scheer didn't go where I thought he would, which is this: What's the bank's view of the capital gains tax increase, which of course is the tax that most impacts capital flows in and out of a country?

The capital gains tax inclusion rate, of course, is going to go from 50% to two-thirds, and we see all kinds of warnings. What's the bank's view on that?

[Carolyn Rogers]

Thanks for your question, Mr. Chair.

We are not tax experts. We do not take a view on any one tax measure. The government has a number of decisions to make to balance its budget and to create the right conditions for the economy.

[The Chair, Conservative, John Williamson]

Look, you're the Bank of Canada. You had a lot to say previously about the impact of climate policy. Are you telling me the bank does not have a position on a capital gains tax increase that investors are worried about?

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

I have a point of order, Chair.

[The Chair, Conservative, John Williamson]

Yes. Go ahead, Mr. Desjarlais.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

I believe that your latitude as our chair in this regard has stepped into overreach, and I believe that the questions you're now pursuing are largely in favour of the Conservative Party.

[The Chair, Conservative, John Williamson]

Well, I can take the side. I don't believe that. I think I'm asking some pretty non-partisan questions that I'm hearing across the country, Mr. Desjarlais.

I have about 45 seconds, and I'd ask your leave to continue. I'm going to check with the clerk here, so just one second.

Why don't I finish my last bit of time, Mr. Desjarlais, and I'll let Ms. Yip take the chair. Would that satisfy you?

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

I'm happy for you to finish your questioning, just as long as we know the parameters of the questions.

[The Chair, Conservative, John Williamson]

Thank you. I think it's a fair question. One leads to an example. I hope the deputy governor can give us any insights she might have, or the bank might have, on a tax that impacts capital flows, which she said would be a problem.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Do we all get this equal amount of time? Will I have another question to ask about why and not why?

[The Chair, Conservative, John Williamson]

I'm sorry, Mr. Desjarlais. I've taken the Conservative spot. I thought I had said that at the top. Pardon me.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

I understand. I apologize, Chair. I thought this was stepping into our other time. I understand. Please carry on.

[The Chair, Conservative, John Williamson]

You have the floor.

[Carolyn Rogers]

I would repeat my previous answer. We at the Bank of Canada are not tax experts.

[The Chair, Conservative, John Williamson]

Let me stop you, then, because you mentioned something else that is really interesting.

You said that at the height of the crisis, in 2020-21, when the government was looking at providing benefits to individuals, the bank took the position that it did not think it was worth hitting Canadians with a credit crunch.

It sounds like you put aside monetary policy as well, and made a policy decision. Instead of looking at the fundamentals, you made a decision to not worry about inflation.

I suppose my last question for you is this: Does the Bank of Canada have any responsibility for the inflation and affordability crisis that we find ourselves in today, given that you misjudged the inflationary cycle we were in, you waited to raise interest rates, and then when you finally hit the brakes, instead of tapping them, you had to slam them on? What's the bank's role in today's affordability crisis and interest rate environment that is also hurting home ownership?

[Carolyn Rogers]

I think what I said, Mr. Chair, was that in June 2020, when we were making the decision to take extraordinary monetary policy actions—

[The Chair, Conservative, John Williamson]

I'm sorry, but I don't want you to repeat your.... I want you to answer my question about the bank's role in today's affordability crisis. That's what I want you to answer. You've mentioned the Ukraine war and you've mentioned all sorts of other variables, but you have not addressed the bank's role in today's environment.

What is it? Does the bank take any ownership of today's environment? That's my last question, and I look for your answer.