Finance committee  Did you mean the Bank of Canada or chartered banks should be holding 20%?

Finance committee  I think the point we would make on Canadian chartered banks is that they are well capitalized. They have higher capital ratios. They're at 9% plus, or above, in terms of capital to total assets on a risk-weighted basis. They're very well capitalized versus internationally. The issue during this slowing period in the Canadian economy is the extent to which they are going to extend their balance sheets.

Finance committee  Yes.

Finance committee  Absolutely. I expect that the projection will change in the next three months. We'll get additional information, and things will happen. We're talking about balanced risk for inflation ultimately. I understand why you're focusing on growth, but balanced risk means--

Finance committee  It was 1.8%.

Finance committee  As I said in response to the previous question, this is our base case projection. The risks are balanced around it. I wouldn't want to ascribe a probability to that. This is our mean projection.

Finance committee  I'm sure my former colleagues from the Department of Finance would be happy to answer this question more fully. But I'll make the important point that for government revenues, nominal GDP is very important. Nominal GDP is not CPI plus real growth; it's the GDP deflator plus real growth.

Finance committee  Thank you for asking that. It is quite important. We have a clear mandate. I think one of the strengths of our system is that Paul Jenkins, I myself, and the Governor in Council have a very clear mandate in terms of inflation. It is total consumer price inflation, it's 2% per annum, and we're measured against that mandate.

Finance committee  You don't really want me to answer that penny question. It's not our domain--it's that of the government and the minister--but our research indicates that we would not expect an inflationary or dis-inflationary effect from the elimination of the penny. So rounding up or rounding down will have no impact.

Finance committee  I would say that we are concerned about the development in these innovations and their increasingly widespread application. I wouldn't go as far as the way you've posed the question in terms of making any direct comparison to the situation in the United States. Really, the CMHC and the mortgage insurers are best placed to speak to this, but our understanding is that the vast majority of people who are taking these longer amortization mortgages qualify under a traditional 25-year amortization mortgage.

Finance committee  We're seeing, as I'm sure you're aware, some moderation in house price increases in Canada. As we've said in our report, we expect further moderation, in part because of the softening. We see the conditions in the housing market as being not comparable to the situation in the United States--vastly different.

Finance committee  There are a number of differences. One is on a variety of affordability measures. In fact, the IMF's affordability measure showed that Canadian housing is the cheapest, along with Austria, in a 20-odd country comparator of all the major economies. That's one example. Secondly, the debt service ratio of Canadians is still very achievable, or very modest, at around 7.5% to 8% relative to historic averages.

Finance committee  I'll make a couple of comments on that. Thanks for the question. First, you are correct, the headline inflation in Canada is 1.5% on total and slightly less on core inflation. In the report--I won't use up all your time going through the details--we have illustrated some adjustments that would suggest that the trend of inflation is closer to 2% right now, because there have been some one-off effects with the GST cut and some things that are happening in the price of automobiles.

Finance committee  I can give you what we are projecting--this is probably a little fairer, actually--for the United States, which is 1% in 2008, 1.7% in 2009, and then back to 3.4% in 2010, and with a very different composition. The other point I would make is that whereas in Canada, as we discussed earlier, there's real strength in domestic demand and a drag from the external sector or from the trade sector, in the U.S. there is a material contribution from exports given the past depreciation of the U.S. dollar.

Finance committee  The Canadian economy has a number of strengths. The U.S. economy is going through a number of challenges. Those challenges will have implications for the Canadian economy, as I indicated in my opening remarks. We're vigilant to those. We are focused, in the end, on achieving our mandated target of 2%.