Public Accounts Committee on May 7th, 2024

[Carolyn Rogers]

I'm not sure I understand your question.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Have the increasing costs as a result of an aging population had an effect on your long-term economic projections?

[Carolyn Rogers]

Demographics are definitely one thing that affects an economy.

I mentioned earlier in response to Mr. Scheer's question that when we look ahead at the different forces in the economy, some forces will have a greater or lesser degree on inflation. Demographics are definitely one. As people age, they spend more than they save, so it can be upward pressure on inflation.

Yes, demographics have an effect. I think I'm answering your question.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

What are your thoughts on the launching of the new Canada disabilities benefit in terms of the budget, future projections and so forth?

[Carolyn Rogers]

We take government policies as given and we incorporate them into our forecast. That benefit would be incorporated into our forecast.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

The PBO has reported how higher-than-projected spending by provincial governments poses an upside risk. If provincial governments step up to help Canadians the way we have, how much could that positively impact our federal finances?

[Carolyn Rogers]

I'm sorry. Can you repeat the question? You're cutting in and out. I'm having trouble hearing you.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

I might be too close to the mic. I'm sorry.

The PBO has reported how higher-than-projected spending by provincial governments poses an upside risk. If provincial governments step up to help Canadians the way we have, how much could that positively impact our federal finances?

[Carolyn Rogers]

I think that's a question for my colleagues.

[Evelyn Dancey]

There are probably a few ways, both direct and indirect, that federal finances could be affected. I'll offer a couple of thoughts, but that's all they are.

In the first instance, to the extent that provinces direct their expenditures to supporting Canadians in policy areas where the federal government is seeking provincial co-operation, some of those are identified in this budget. There are pre-existing areas like early learning and child care, for example. This could be a partnership that alleviates pressure to spend at the federal level when the federal and the provincial governments can work together to support Canadians.

I'm not sure if the question is more in relation to inflation or macroeconomic impacts. All I'll offer on that point is that we talked earlier about our strong credit ratings. That's a function of—

[The Chair, Conservative, John Williamson]

Actually, Ms. Dancey, I'm going to interrupt you. The answer is repeating and your time is up. You're welcome to come back to it with maybe more precision instead of trying to kind of guess around the question.

It is now over to Mr. Lemire for two and a half minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chair.

I'd like to ask you the question again so that everything is clear. I'm expecting more of a straightforward answer so that it's easier for me to understand.

Can you explain what caused the just over $3 billion in losses? How did those losses affect the Government of Canada's fiscal position?

Did the change in your rate practices have an impact? I'm talking about the operating band. Does the fact that you went from a corridor system to a floor system explain the $3‑billion loss?

[Carolyn Rogers]

I'll try to be as direct as possible.

What caused the loss is that the rate we pay on our settlement balance is variable and it moves with our policy rate. The rate on the bond that we purchased is a fixed rate. When the policy rate exceeded the rate we're getting on the bond, we have an income differential. We have a net interest rate differential. That's what generates the loss.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Ultimately, Canadians are the ones on the hook.

The switch to the new system began in 2020. Wouldn't we be better off going back to the old system if the current one is causing losses, which are being passed on to Canadians?

[Carolyn Rogers]

I think I would separate what we call our extraordinary monetary policy, which is the actions we took during the pandemic that I described earlier. The losses are being generated by our government bond purchase program.

In our normal operations we also have settlement balances. In our normal operations we're able to manage our interest rate risk by offsetting those settlement balances with investments of a similar duration so that we don't get that interest income differential and we don't run losses.

That's normal operations. The losses are generated by the extraordinary monetary policy we took in response to the pandemic. The losses are temporary. We can give you the exact numbers and duration, but they are temporary. We will go back to a surplus position.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you.

[The Chair, Conservative, John Williamson]

Thank you, Mr. Lemire.

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

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Mr. Chair.

I'll return to the Department of Finance on its response to some of the serious deficit issues and their attempts to manage or get a hold on them. I believe we often talk about these issues in the House of Commons, but I think the policies and procedures related to the deficit are often missed and those nuances are missed.

We know there was a capital gains tax implemented in this last budget. It's something that we support, of course. We think that the very small upper 1% of the country should be paying its fair share. We know, however, that over the course of the last 20 years in Canada, we've seen the share of the tax burden decrease for the wealthiest 1%, particularly corporations, and we've seen this tax burden fall to regular Canadians. We often hear from the Liberals or the Conservatives that the only solution to this is to either cut services or ensure that regular Canadians pay more.

In fact, there's another solution to all of this, which is to ensure that those companies—like Loblaws, most particularly—are held more accountable for their actions. How does the department recommend or create policy recommendations to the government in relation to trying to curb the greed of mega corporations like Loblaws, the same corporation that was charged by our Competition Bureau just recently in a bread price-fixing scandal? There seems to be no path forward for Canadians who are seriously considering how they move forward in life when these kinds of outrageous bad actors are plaguing our system.

What advice do you have for Canadians who are suffering from this kind of greedflation that's predominant in groceries and in gas? Most particularly, what advice do you have with regard to solutions? What do we have in terms of tools that Canadians—particularly the government—have to ensure that this kind of greed is tempered so that situations like a price-fixing scandal don't happen again?

[The Chair, Conservative, John Williamson]

Mr. Desjarlais, is that a question for the Department of Finance or for the government?

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

It's for the Department of Finance.

[The Chair, Conservative, John Williamson]

Okay. Thank you.

[Evelyn Dancey]

I'll offer a short reply, recognizing, once again, that we came to support the public accounts versus this kind of broader policy area.

The government has taken a number of steps. Just to be economical with your time, I'll let you know that they're summarized in the budget that was tabled recently around supporting affordability for Canadians—including with regard to groceries and junk fees—using a suite of measures such as competition policy, among others, that are consistent with federal powers.

If Canadians are looking for answers in terms of what the federal government can do, there is quite a nice summary that's only a couple of weeks old in the budget on this.

[The Chair, Conservative, John Williamson]

Thank you very much. That is your time, Mr. Desjarlais.

Next is Mr. Stewart. You have the floor for five minutes, please.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you, Mr. Chair.

I'd like to welcome the representatives from the Bank of Canada and the Department of Finance. Thanks for being with us today.

While it's a sunny day in Ottawa, dark clouds, storm clouds, are looming across Canada, as the Liberal government's inflationary spending has driven interest and mortgage rates way up. With all of this borrowed money and an astronomical annual interest payment of $53 billion on $1.3 trillion of debt, Canada is now spending more on debt interest than on health transfers. It's so sad to see more money being given to bankers and bondholders than to the provinces to pay nurses and doctors in our health care system, an unfortunate reality in my home province of New Brunswick.

Would the senior deputy governor agree that Canada's inflation problem, national debt problem and endless annual deficits under the Liberal government are closely related in damaging Canada's overall fiscal position?

[Carolyn Rogers]

I'm sorry. Could you repeat your question, sir?