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Results: 61 - 75 of 380
View Chrystia Freeland Profile
Lib. (ON)
I have a very quick response, Mr. Chair, which is simply to say, with really great respect for Mr. Fast, that the characterization of the borrowing authority limit as a blank cheque is simply false. This is a transparent and open authorization of a level up to which the government may borrow. Spending authorizations are separate.
View Pierre Paul-Hus Profile
CPC (QC)
When the government talks about economic forecasts and expenditures, it often brings up the argument that interest rates are very low, almost at zero. I find that short-term way of looking at things very troubling because we know that interest rates can go up very quickly. So if we extend the forecast out to five or 10 years, we could be in a bind.
The last time we met, I believe we estimated that, considering COVID-19 only, interest repayments on the deficit for that year would come to about $15 billion per year at current rates. If the rates increased to 2% or 3%, those costs will explode.
Should we take a much more prudent approach in the future? Is it not unwise to continue spending money on the assumption that interest rates are low?
Yves Giroux
View Yves Giroux Profile
Yves Giroux
2021-01-27 18:15
A rise in interest rates is one of the risks we established in our economic and budgetary forecasts. We do not see interest rates rising in the short or medium term. That should not happen before the end of 2023 or 2024. Basically, any rise in interest rates will be modest.
We are never free from turbulence. We saw that in February and March 2020. Unpleasant shocks and surprises can occur. We are not sheltered from a financial shock that could happen elsewhere on the planet and that would cause interest rates to rise. If that did happen, funding the debt would cost much more. But that is not on anyone's radar.
Certainly, a deficit like the one we are forecasting for the current year cannot be repeated for a number of consecutive years without putting the federal government's financial viability into peril or without medium- and long-term financial consequences.
View Majid Jowhari Profile
Lib. (ON)
You mentioned that you perceive that our interest rate is going to stay low some time in 2024 and it's not going to change. When we look at the debt, even at the debt we've accumulated or the investment we have made to make sure our economy holds in the $200-billion to $400-billion range, still at that type of interest rate the servicing of that debt seems to be very low.
Yves Giroux
View Yves Giroux Profile
Yves Giroux
2021-01-27 18:38
You make a good point, so that could be a fiscal anchor in itself. We will ensure that our debt does not exceed a level at which we have to pay more than x per cent of our tax revenues towards interest.
That's why I am saying that if a fiscal anchor is necessary, or is useful at least, the choice of a fiscal anchor is up to the government. Multiple fiscal anchors can be chosen.
To get back to a point you made, if the government spends and incurs additional debt to make the economy more productive, eventually that will reduce the debt-to-GDP ratio, other things being equal, because that will lead to more economic growth, which will reduce the relative size of the debt.
Livio Di Matteo
View Livio Di Matteo Profile
Livio Di Matteo
2020-12-11 13:03
Thank you, Mr. Chair.
Good afternoon. Thank you for the invitation to speak at these pre-budget consultations in advance of the 2021 budget. I commend the committee for reaching out to the academic community of economists for public input on this important process.
It's been said many times that the COVID-19 pandemic is an unprecedented event in recent history, and this context frames my input into this process.
The fall 2020 economic statement documented the unprecedented effects of and response to the COVID-19 pandemic. For fiscal year 2020-21, real per capita revenues have declined by 20% from the previous year, while spending is up by 70%. In real terms, this is the highest per capita amount ever spent in Canadian fiscal history—nearly $16,000. As a share of GDP, the projected deficits will be the second-largest in Canadian fiscal history, exceeded only by those during World War II.
The fall statement reveals that spending will eventually decline and the deficit approach 1% of GDP by 2025-26, but also a federal net debt that will rise to $1.5 trillion and a net debt-to-GDP ratio remaining in excess of 50%. Despite current low interest rates making current debt management look manageable, it remains the case that any sudden future shocks to the economy or to interest rates could be more difficult to manage as debt burdens rise.
The size of the initial fiscal response to the onset of the pandemic in the February-to-April period of 2020 was appropriate. However, the continuing, unprecedented fiscal response generated results that have not paralleled the fiscal support provided. The fiscal assertiveness of the federal response to the pandemic was not matched by assertiveness in targeting the response as might have been afforded under federal spending power or the power of quarantine that exists under the Constitution. Moreover, much of the spending went toward individual income transfers in excess of the pandemic-generated income losses. After all of this unprecedented response, we are now in the midst of a more severe second wave that threatens the economic recovery that began over the summer.
The federal 2021 budget must learn from the past and better target any additional projected fiscal response with a view to long-term economic recovery and growth. The additional spending must be directed towards productivity-boosting investment. Even prior to the pandemic, the business investment-to-GDP ratio had been faltering. While the short-term income support provided at the peak of the pandemic was important, if we are to continue to spend at these record levels, there must be more to show for it.
Government spending priorities should be directed towards initiatives for boosting our long-term productivity via investment in physical and human infrastructure. Public infrastructure in roads and transport; bridges; communications; schools; health care; water, sewer and environmental systems all require investment. Education has taken a major blow during the pandemic, and we need to ensure that students at the elementary, secondary and post-secondary levels do not fall behind in educational achievement and opportunities and reduce future labour productivity growth.
Then there is the matter of our national defence and security in a more multipolar and unstable world that requires equipment and resources and vision.
There is also a need for private sector investment in sectors producing goods and services that we can export so that we can continue to earn our way in the world. If our export markets falter and our incomes drop, there will be no international emergency response benefit payments offered to us. The federal government, therefore, should work with the private sector in assessing its investment needs.
Historically, excessively large amounts of government spending are not well correlated with long-term economic growth. It's not that government cannot help the economy, but that effective government requires knowing when to spend and when not to spend and, more importantly, what to spend the money on.
If we are to embark on a program of infrastructure spending, we must ensure that projects with the best return are selected. Assorted public projects should be assessed by an arm's length panel of key leaders with expertise in business, accounting, engineering and economics who can make recommendations in areas of national interest. It would be extremely unfortunate if federal infrastructure money flowed to community or sports centres rather than, say, roads and sewers, simply because shovel-ready plans exist for the former and not the latter.
Thank you very much for the opportunity to speak to you all, and I look forward to the discussion.
View Pierre Poilievre Profile
CPC (ON)
Exactly. The minister has no control over when they rise and can't guarantee they'll be low for long. That's why she's claimed that she's locking in our debt for the long run. It's kind of like a homeowner who takes on a long-term mortgage rather than a variable rate.
She can tell us then, what share of the new debt that the government has added since March is locked in for more than four years.
View Chrystia Freeland Profile
Lib. (ON)
We were clear in the fall economic statement and in our printed documents that 10-year and longer bonds make up 50% of the issuance in 2019-20. They're planned to make up 29% of the issuance in 2020-21.
View Pierre Poilievre Profile
CPC (ON)
That clearly contradicts the data on page 139 of the fall economic update, which shows that the combination of short-term treasury bills and short-term bonds of four years or less equals 75% of all of the debt that the government has issued since March, and that issues of 10 years and up represent a combined 25%. In other words, three-quarters of the new debt is short term and susceptible to sudden increases in interest rates.
Why are you contradicting the data that's in your own report?
View Chrystia Freeland Profile
Lib. (ON)
Mr. Chair, I am in no way contradicting the data. In fact, the numbers I am citing come from table A2.2 from the fall economic statement. As I said, what that table shows is the reality, which is that 10-year and longer bonds make up 15% of the 2019-20 issuance. Our intention, our target, is that they should make up 29% of the 2020-21 issuance.
View Pierre Poilievre Profile
CPC (ON)
I will go back to the original question. What share will be for less than four years?
View Chrystia Freeland Profile
Lib. (ON)
Mr. Chair, we were clear in the fall economic statement on our plan to push out along the curve, and that is a prudent plan. It's something that we have signalled clearly to markets, and that was an important objective of the fall economic statement.
View Pierre Poilievre Profile
CPC (ON)
What share are for four years or less?
View Chrystia Freeland Profile
Lib. (ON)
I have been clear, Mr. Chair, about our government's intentions of moving to longer maturities.
View Pierre Poilievre Profile
CPC (ON)
Yet the data in your own report shows that almost all of it is on short maturities, and it's susceptible to interest rate hikes, which you admit could come at any time.
Even the CBC is reporting that of the $240 billion of COVID spending, your government is refusing to release the recipient company names of that funding. Will you commit to publish all of the amounts and recipient companies of COVID-related spending before we vote on authorizing another $700 billion worth of debt that you're now asking for, yes or no?
Results: 61 - 75 of 380 | Page: 5 of 26

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