Mr. Speaker, it is with pleasure that I participate in the debate on this bill in the sense that financial issues are something which all Canadians are concerned about. The direction in which the government is going and the sense of commitment in terms of education on financial matters are something that we should all have concerns about.
It was not long ago when the U.S. took a nosedive. Many economists did their best in trying to explain the circumstances that led to it. When I reflect on the discussions that I had with constituents from, at that time, Inkster, but all residents of Winnipeg North, many of those discussions pertained to what we thought had taken place that caused the American economy to take that radical turn. As people will recall, the price of housing dropped quite dramatically in certain areas of the United States and there was a great deal of speculation as to why. Many individuals sat around the table in discussion groups and we talked about the American debt, loans and mortgages, and the way in which housing was being financed in the U.S. I raise that because there is a general need for us to appreciate how important it is that the population as a whole has a sense of how finances are administered, both at the micro-level and the macro-level.
There was a time when going through school we had a basic economics class and that was it. There was nothing more to trying to understand finances. Today, depending on the high school one goes to or even in elementary schools, we are starting to see more interest and education in that field. That is something which we think is a good thing because the economy and the way in which we manage our financial affairs is so important. If we look at the types of decisions we need to make, the better informed and educated the population is on financial matters it is at the end of the day better for government.
An example for which people could get a good sense of an appreciation is the issue of retirement. The amount of financial planning to be considered for retirement is significant. When I was a bit younger, 25 years ago or so, first getting elected when I was 26, a pension was not an issue for me personally. I never thought about pensions. There were other bigger, broader pictures that I wanted to think about, at least at that stage in my life, and I think many of my peers would have thought likewise. When we are 25, we are not thinking of retirement but it is critically important for us to be thinking about that. Upon reflection and with hindsight, there are a number of things that I would have done differently.
We need to look at the role that government needs to play from both the consumers' perspective and the government's perspective. We need to bring it to the government. The government appears to be on the brink of making a decision to reduce the benefits for old age supplement. People who are 55 years old today will not be able to retire when they hit 67.
If we go to that generation, many individuals in the workforce, some of it very labour intense and other aspects of it requiring people to work as lawyers or whatever it might be, planned on the 65 retirement age. Once people start hitting the age of 40 or 45, they start thinking more about retirement and then bank accordingly. People need to learn what it is they need to do in order to retire at age 65. There is that learning curve.
We need to recognize that there are hundreds of thousands of people who will be affected by the anticipated decision by the government to increase that age. As a result, it will have an impact on the finances of many Canadians across Canada as they will need to start reviewing what sort of retirement funds they will have. They reflect on their homes and where they are investing their moneys today. A lot of people are on fairly tight budgets but they know they will need to increase their RRSPs if they still want to retire at age 65 to bridge the gap between 65 and 67, something we hear a great deal about from the government. People may not necessarily have the same sort of cash flow as they once would have had or they may have allocated their disposable income and it will be difficult for them to generate the type of resources they will require in order to continue with their plans to retire at age 65. There are many different options for people to be exploring at a younger age. That is just one component.
To bring it around to housing, people need to have a good understanding of the housing market and how it relates compared to mortgage rates. It was not that long ago, in the late 1970s, when there were skyrocketing mortgage rates on homes. It was in and around 18% or 19%. We can talk about a relatively small amount of money being financed in order to own a home, but when it is rated at somewhere around 18% or 19%, it takes away a good chunk of a person's disposable income.
Over the last 20 years, if we look at interest rates, they have been considerably better than what they were during the 1970s. As a result, more middle-class Canadians are buying homes that cost $250,000 or $300,000 and they can afford it because interest rates are so low in comparison to the 1970s in particular, but also the 1980s. If the interest rate today were to go up two or three points, we can only imagine the profound impact that would have on thousands of families across Canada. When people finance homes for $300,000, it is often two people working in order to support their lifestyle in that house.
I have had opportunities to have discussions with individuals who are in that sort of situation. Their homes are their futures and they are literally banking on it. People get mortgages for 25 or 30 years nowadays with an interest rate of 4% or 5% and two individuals are working. We can only think of the impact if the interest rate were to go up by two points. They would not have the disposable income, for the most part, in order to address that.
There is a great deal of pressure, whether it is on the Bank of Canada or on the government, to be cognizant of the interest rate because of the impact it would have on consumers and their life savings. The home can be the single greatest expenditure that people have.
We could continue talking about other types of expenditures by consumers, individuals who go out and purchase large ticket items, such as vehicles. They are brought in, in good part, because of low interest rates.
When we talk about financial literacy, it is a disseminating of information that will ensure there is better overall education for all Canadians. I think that could be done in many different ways.
On the surface, the bill looks great. We all support financial literacy and moving in that direction is something we want to encourage and promote. In essence, the government is saying that it will create an office of sorts and there will to be a reporting mechanism for this particular officer.
Within the Liberal Party, we see financial literacy as a major issue. Therefore, we are wondering why the government is not providing a better definition of exactly what it is it is proposing with the legislation. What sort of a budget are we talking about? I believe it is a bit vague or unclear in terms of where and how it might reach out into our communities.
I believe the provinces have a critical role to play in this discussion. To what degree has the federal government worked in co-operation with the provinces to ensure we are moving in the right direction? At the provincial level, we could go right into the schools, which could involve the school trustees or administrators.
What I am suggesting is that there are many different stakeholders who have a vested interest in trying to do what this bill is hoping to do, which is to achieve a higher level of financial literacy. To what degree has the government done consultations to bring forward legislation that is all-encompassing and that will provide for a better level of literacy for all Canadians?
In my short time in the House, I have found that there is a different attitude from the present government and the way in which it approaches public policy compared to members on the opposition benches, in particular with regard to the Liberal Party. We in the Liberal Party believe that the national government has a strong role to play. I would suggest that it is a leadership role in trying to ensure that there are standards across the nation and that we have something that reaches out in a co-operative manner, supporting provincial and other initiatives where we can.
I believe the gambit is wide, which is why it would have been good to have received some sense of a commitment from the government as to how much money it is prepared to commit to a commissioner of this nature. What sort of office will it be? The government may be looking at the possibility of the banking industry having to cover the cost of this new office or to facilitate the needs of this particular legislation. However, we do not know what the dollar value of it is. We also do not know how the government will bring in the stakeholders with regard to this important issue.
I started off by talking about the financial crisis that occurred in the United States. It did not take long for people to get an appreciation of exactly what was taking place, how people had overextended themselves on loans and how the housing market and its artificially high prices led to the crash of the housing market. Ultimately, hundreds of thousands of Americans went bankrupt because of what the banking industry was unable to do, because of a lack of healthy, strong regulations.
In Canada, there was a great deal of pressure to allow for more deregulation of the banking industry. However, there were safeguards in place. During the nineties, individuals like Paul Martin and Jean Chrétien said that we needed to have regulation to ensure that mortgages did not become 40 or 50 years in duration. People learned a lot by watching the news and hearing how so many Americans were losing their homes. Canada was in good part able to avoid a lot of that because of good policy decisions made during the nineties.
This brings us back to the issue of what we can do to ensure that Canada's financial markets, industries and consumers are best protected. That is the reason we talk about the importance of education. That is really what it is all about. When I make reference to issues such as RRSPs, owning a home or making major purchases, we want citizens to be educated to make the best decisions possible. The only way we can achieve that is to ensure that there is some sort of an educational process regarding financial literacy from coast to coast. The greatest challenge the government has in regard to financial literacy across Canada is to demonstrate that it has a national, strong, healthy leadership role to play in this area. I am not convinced the government members believe they have to play that lead role.
I know some provinces have gone a long way in providing better consumer education on financial matters, from banking fees to cheque cashing stores. They have increased the level of consumer awareness. There are many initiatives which have been taken by individual provinces. This bill brings forward the idea of the need for the federal government to play a role in financial literacy. I would challenge the government to reflect on what degree it is prepared to say that Ottawa needs to get all of the stakeholders working together to ensure that a financial literacy office has teeth and the ability to make a difference.
