Evidence of meeting #41 for Public Accounts in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was funding.
A video is available from Parliament.
Conservative
The Chair Conservative John Williamson
Thank you very much.
Mr. Deltell, you have three and a half minutes, and then Ms. Yip will close us out for three and a half minutes.
Mr. Deltell, you have the floor.
Conservative
Gérard Deltell Conservative Louis-Saint-Laurent—Akiawenhrahk, QC
Good afternoon, ladies. Welcome.
Senior Deputy Governor, I checked, and you're from Winnipeg.
Conservative
Gérard Deltell Conservative Louis-Saint-Laurent—Akiawenhrahk, QC
Earlier, you talked about productivity. To what extent do you currently assess productivity in Canada?
To what extent does this affect public finances and, of course, the Bank of Canada?
Senior Deputy Governor, Bank of Canada
I'll be clearer in English.
Your question is, how do I assess productivity as it affects the country's finances and the bank's finances? Do I understand that correctly? Okay.
I'll start with the bank's finances, because that's fairly straightforward. It doesn't have a direct effect—or really any effect—on our balance sheet or our income statement. The speech I gave talked about how it affects monetary policy in the sense that an economy that has high productivity can grow faster before it starts to create inflationary pressure. That means an economy can heat up, can get going and can grow quickly, and it's not going to create inflation, which means that the bank will not have to intervene to try to damp down the economy to keep demand and supply in balance and make sure that we don't get an inflationary surge that comes with a growth surge.
As I said in answer to the previous question, it creates a nice buffer in the economy that lets you buffer shocks and surges in growth. It kind of inoculates you against some of the inflationary pressures you get. That's how we think about productivity in the context of monetary policy decisions.
In some sense, it does a lot of the same things for the broader fiscal position of government. It allows the economy to grow. If productivity gains are shared across the economy, that improves the standard of living for everybody.
If you think about it, you realize that productivity is fundamentally that we create more output per hour of input of labour. If you have a company and can create more of whatever you're making for every hour your employees work, then your company is going to grow and become more profitable. It's the same with a country. If a country can create more GDP per hour of labour it has, then the country's wealth will grow. Assuming that wealth is spread broadly across the economy, it helps everyone.
Conservative
Gérard Deltell Conservative Louis-Saint-Laurent—Akiawenhrahk, QC
Since I don't have much time left, I'd like to ask a question to satisfy my curiosity. You mentioned that cash is still being used in 20% of transactions. Over the past 30 years, the Bank of Canada has phased out thousand-dollar bills, pennies, dollar bills and two-dollar bills. Pennies were phased out, but the dollar bill and two-dollar bill have been replaced by coins.
Are there any upcoming changes to the currency we use in the Bank of Canada's plans?
Senior Deputy Governor, Bank of Canada
We are going to be releasing a new $20 bill later this year with the new monarch on it. We also have a new five-dollar bill in production.
Conservative
Senior Deputy Governor, Bank of Canada
It will not be a coin. It will be a bill.
I would say that most of the changes and advancements we're making.... For one thing, we do the notes. The mint does the coins. The advancements and gains that I think we focus on most now are about anti-counterfeiting—making sure that bills are not easy to counterfeit and that people continue to have confidence.
You talked about getting rid of some of the very large bills. You can imagine that small businesses worry if they take a five-dollar counterfeit note. That's different from taking a $100 counterfeit note. If you're a counterfeiter, you're always going to counterfeit the big bills.
These new notes that are coming out are going to have enhanced counterfeit measures. Overall, the Bank of Canada has an extremely good record on counterfeiting, with very low parts per million.
Conservative
The Chair Conservative John Williamson
Thank you very much.
Ms. Yip, you'll close us out.
I will just let everyone know that I am watching the clock. We're not voting at the top of the hour. We're voting at around 1:05.
You have three and a half minutes, Ms. Yip. You can use it all or as little as you'd like.
Liberal
Jean Yip Liberal Scarborough—Agincourt, ON
Thank you very much.
Ms. Rogers, you talked about the importance of increasing productivity and said that business investment is required. Could you elaborate on that?
Senior Deputy Governor, Bank of Canada
I'll come back to the description I was just using.
If a business can produce more with each hour of labour input it has, it will become more productive. If we do that en masse in the economy, the economy becomes more productive.
Often those improvements take a certain amount of investment, whether it's in training your employees or buying them different equipment. It also can be in our digital economy. It can be on intellectual property. Business investment that helps a business become more productive will help increase overall productivity.
Liberal
Jean Yip Liberal Scarborough—Agincourt, ON
How will the productivity superdeduction and the SR and ED reforms impact government finances?
Senior Deputy Governor, Bank of Canada
Those are examples of trying to incent businesses to make investments.
Liberal
Jean Yip Liberal Scarborough—Agincourt, ON
You had a chart in your deck talking about the asset profile. Why has the asset profile declined in recent years?
Senior Deputy Governor, Bank of Canada
When I was talking to Mr. Scheer earlier, he talked about normalizing our balance sheet. Our balance sheet grew during the pandemic. Once we were through the worst part of the pandemic, we started to normalize it back down to its normal level. It's smaller.
Liberal
Jean Yip Liberal Scarborough—Agincourt, ON
This is my last question. Can you update us on the statutory reserve?
Senior Deputy Governor, Bank of Canada
I'm sorry. Are you talking about...?
Liberal
Liberal
Senior Deputy Governor, Bank of Canada
Normally, the Bank of Canada returns any excess income to the government, and we keep a small portion of equity. I'm assuming that's what you're talking about with the statutory reserve. It hasn't changed, if that's your question.
Conservative
The Chair Conservative John Williamson
Thank you very much.
We have votes, so I will thank the Bank of Canada for coming in today. I appreciate you coming back for a second time to help clarify some issues the committee had.
This meeting is adjourned. We'll see you back here on Wednesday. Thank you.