Finance committee  At the end of our monetary policy report, we pointed out that certain risks surround our forecasts. Some of these risks are upward, while others are downward. The upward risks certainly include the war between Israel and Hamas, the attacks on ships in the Red Sea and the lower water levels in the Panama Canal.

Finance committee  Yes. I think what is helpful about your new fiscal guardrails is that they assign a number and a date. What that does is provide some limits on how much spending can increase going forward. In that respect, I think they are helpful. The—

Finance committee  That's exactly what I was talking about. What's important about that is that you have a goal—less than 1%—and you also have a date on it, so that going forward, in order to respect that target, you won't be able to increase spending substantially.

Finance committee  I'm going to ask the senior deputy governor to talk about productivity.

Finance committee  Look, nothing worries us more. We know that inflation is affecting the most vulnerable Canadians the worst. Food price inflation is high. You can't really economize on your purchase of necessities. They're necessities. So, yes, this is hurting. The best way to solve that problem is to get inflation down.

Finance committee  If real government spending at all levels of government is growing materially above 2%, that will make it more difficult to get inflation back to 2%.

Finance committee  Yes, I think you summarized the numbers. As you said, there are planned increases in the carbon tax going forward. The direct impact of that on the three fuel components.... It would have an impact of about 0.15% each year on the CPI going forward. If you eliminate the tax, you'll get a one-time 0.6% decrease in inflation.

Finance committee  Well, we're not experts in housing policy, but I think the message is that policies that are focused on supply are going to help fix the situation. Policies that are focused more on demand are simply going to make the situation worse, because prices will just start going up, making houses less affordable.

Finance committee  I think that's reasonable.

Finance committee  Well, there's no question that we have seen weakness in consumption. On a per household, per capita basis, we've actually seen declines in the level of consumption. At an aggregate level, that's being offset because there are more people in the economy, so on average aggregate-level growth has been roughly flat.

Finance committee  We're concerned about the housing shortage. We need to understand the shortage. However, we don't have the tools to solve it. I want to point out that high interest rates affect the housing sector. However, the impact is greater on the demand side than on the supply side. Yes, supply is affected.

Finance committee  I think you've described, actually, the difficulty in the housing market quite well. Exactly as you described, when interest rates were very low, demand for housing was very strong. We saw a large appreciation of house prices. As you're well aware, house prices through COVID went up more than 50% over two years.

Finance committee  The short answer is that the policy interest rate is our main monetary policy tool. We call it a blunt instrument. It affects everything. We can't target sectors. This makes the monetary policy more difficult, but also explains its effectiveness to some extent. We can't avoid raising interest rates.

Finance committee  If it's in the range of 2%.... The economy is growing at roughly 2%. The population growth is at roughly 2%. It's growing in line with the size of the economy. In that sense, it's not helping to get rid of inflation, but it's not contributing new inflationary pressures. As I underlined, two and a quarter per cent is at the upper end of that.

Finance committee  Just to correct, we don't actually have all the data for last year yet. It's roughly 2% last year and two and a quarter per cent this year.