Finance committee  Thank you for the question. Very quickly, we collaborate very closely with OSFI, the federal Department of Finance, CDIC, and other federal agencies. There is no desire to change any of those relationships. I'll just assure the committee that we do work effectively together and, I think, to good end.

Finance committee  Exactly--well, this is in the most extreme versions. Now, the issues we have with that are multiple. First off, let's just all stop and think about the prospect of having such a fund and it actually being there when it was needed, global or domestic. That's the first point. Secondly, what would that do to the behaviour of the individual institutions and other market participants, knowing that the state was behind these institutions through a fund?

Finance committee  There is a difference, if one considers the responsibilities of the Bank of Canada. The main motivation of countries that are in favour of a tax on wholesale financing is financial stability. In our view, the important issue is determining if this tax is the best way to reach our financial stability objectives.

Finance committee  That's entirely correct. The issue that the recovery will turn on is the full response of the private sector. We've seen, as I say, quite strong housing activity, and consumption has held up. What has been lower than the general experience in recessions has been business investment.

Finance committee  The availability of capital on the whole is very strong, but there is still some tightness in the availability for small and medium-sized enterprises. We've seen that. The conditions tighten more for small and medium-sized enterprises than for large enterprises. Large enterprises obviously have the benefit of access to capital markets, which are quite open at this stage.

Finance committee  Very briefly, the adjustment for the Canadian core and total CPI is that what is removed from total CPI are the most volatile items in that basket. But what is important here is that while there's less variation in core CPI—and core CPI is the best predictor of future CPI levels, so you see much bigger swings in total CPI—if you look over a longer period, the level of those prices as they move over time is consistent.

Finance committee  It's not the theme of the report, Mr. Wallace, but certainly fiscal policy has been important, and it particularly is important in 2010. The contribution of government, federal and provincial, is an important contributor to growth in 2010. We would say that our expectations on fiscal policy thus far have been met; in other words, the contributions have been consistent.

Finance committee  I assure you that the monetary policy will suit Canadian circumstances.

Finance committee  Thank you for the question, Mr. Wallace. Yes, flexibility of labour markets is an important aspect of productivity. Flexibility in product markets and openness in trade markets are all factors that influence the productivity growth. Canada does have relatively flexible labour markets.

Finance committee  Mr. Paillé, there is no risk of the Bank of Canada making changes too quickly or too slowly. Our objective is very clear, as you have just stated. It is a rate of inflation measured by an overall CPI of 2%. This is not a religion, but a mandate from the people of Canada, represented by the government of Canada.

Finance committee  I would generalize it, because we have been clear.... We generalize in global imbalances, but I want to talk specifically about fiscal: very much the risk is getting the balance right on fiscal policy. That means both: accelerating the fiscal adjustment too quickly or delaying it too long, in a number of major economies, the United States perhaps being the most prominent.

Finance committee  Thank you. You left one institution out of that list of people who have been warning about the levels of household debt, and that's the Bank of Canada. We began warning about this issue in the fall of last year--

Finance committee  --very clearly supported by quite detailed simulations. I would say that we share the concern that there are cohorts of Canadians, or groups of Canadians, who run the risk of being overextended in their personal finances. We've used every opportunity, and I'll use this one as well, to encourage people when they consider taking on additional debt to look at that obligation over the fullness of time, or in other words, over the long term, and to think about it in more normal circumstances.

Finance committee  Well, I think the question was on what we see as the largest risk over the medium term.

Finance committee  Thank you very much, Mr. Chair and members of this committee. I'm very pleased to appear before you today to discuss the bank's views on the economy and our monetary policy stance. Before I take your questions, I would like to give you a few of the highlights from our latest monetary policy report, which was released last Thursday.