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Results: 76 - 90 of 380
View Chrystia Freeland Profile
Lib. (ON)
Let me first just take issue, Mr. Chair, with the little slur there implicit in the “even the CBC” reports.
As a former journalist, let me just say that the CBC is a fantastic news organization. I think it contributes hugely to the national fabric and the public discourse in Canada, so I couldn't let that pass.
When it comes to the information members of Parliament feel is necessary for them to be comfortable supporting our government's measures, it's going to be up to each member to make—
View Pat Kelly Profile
CPC (AB)
It's mostly short term. We heard that in the opening statement in the opening round. We heard that most of it is short term.
Soren Halverson
View Soren Halverson Profile
Soren Halverson
2020-12-08 17:12
At a very high level, just to do an abstraction of that, you've got about $1 trillion in debt, and so you're looking, on a steady-state basis, at 1% of $1 trillion.
View Pat Kelly Profile
CPC (AB)
Okay. Thank you.
The concern is that we've just heard in the opening panel that the government has no ability to gauge when interest rates are going to rise. The minister admitted to not possessing a crystal ball, and I don't think anybody expects she does.
What has your department built into its expectations around interest rates? Are you expecting that 1% addition to our debt service cost, or is it 2%, 3%? At some point rates are going to go up, and we need to know what that's going to do to the Canadian economy and Canadian public finances.
Soren Halverson
View Soren Halverson Profile
Soren Halverson
2020-12-08 17:13
If the question is focused on federal debt management, the answer is that the approach the department takes in terms of providing advice on debt management strategy is looking at a range of scenarios. It's an approach that is robust under a range of different interest rate conditions, and it's also mindful of smooth market functioning.
In the context of the crisis, the front end of debt, the short-term debt, was where the shock absorber was located. It's the easiest part of the market to place debt in, and then over time, there's a plan that has been communicated in the fall economic statement that involves terming out that debt. You're seeing a substantial increase in issuance in the 10 and 30-year range, in accordance with that approach.
View Pat Kelly Profile
CPC (AB)
How long will it take to shift the majority of that into longer terms?
Soren Halverson
View Soren Halverson Profile
Soren Halverson
2020-12-08 17:14
You are looking at a multiple between 450% to 600% increase, if you're looking at the 10- or 30-year issues right now, year on year from where they were last year. Those are big increments of debt going into specific sectors. If you were to maintain that, if you kept doing that for four years in a row, you would see a very large percentage of your overall debt burden reflected in that long end. You're sort of moving to that trajectory, but it's not a switch you can flip overnight.
View Sean Fraser Profile
Lib. (NS)
View Sean Fraser Profile
2020-12-08 17:19
Thank you very much, Mr. Chair.
I think Mr. Halverson will be best positioned to answer my question. I want to dig in a little on the cost of borrowing, given the nature of the conversation we've had to date.
The policy rate of the Bank of Canada, which is at the effective lower bound, is currently at 0.25%. The Conservatives keep raising fear about a potential 1% increase, which would represent a 500% increase if it were to shoot to 1.25% overnight. In any event, the Bank of Canada, during the testimony before this committee, has explained that there is no plan to do that for potentially the next few years, and in any event, the conditions that would justify such a radical increase would essentially tell a story that the economy is doing very well.
Mr. Halverson, to come back to this question, you explained previously that even if there were a short-term hike in the interest rate, the existing debt would need to term out first. I assume you mean that the term for each debt that's owed would have to pass before that would become due.
In your view, does this window of time, given the remaining term on debt that we hold, create an opportunity for us to effectively refinance our debt at a much lower interest rate, given what's happened in the world, so we can save significantly on borrowings that may be required to finance spending in response to the pandemic?
Nicholas Leswick
View Nicholas Leswick Profile
Nicholas Leswick
2020-12-08 17:20
Thank you, Mr. Chair.
I wanted to point out that the fall economic statement prints a forward-looking expectation for the yield curve. It prints an interest rate path through to 2025. You can most clearly see that, if members want to jot notes, on page 121. The department surveys 14 private sector economists as a group and takes the straight average of their macroeconomic variables, which include a path for both short- and long-term interest rates. In that context, as the economy strengthens, there is an expectation that there will be a backup in rates across the yield curve, across three-month rates all the way through to 10-year rates—
Nicholas Leswick
View Nicholas Leswick Profile
Nicholas Leswick
2020-12-08 17:21
I will cut to the chase. A path for interest rates is published in the fall economic statement. That path and the cost are imposed on the term structure of the debt and the debt management strategy and brought into the fiscal framework that's presented in the document. It is explicitly outlined that there is an expectation of a backup in rates, and those costs are brought into the fiscal framework as published in the document.
View Sean Fraser Profile
Lib. (NS)
View Sean Fraser Profile
2020-12-08 17:22
That's very helpful. That was going to be question number two.
I'll skip to question number three. A lot of fear has been raised on this committee around the potential that we're going to fall into a position similar to the one that the federal government saw in the 1990s before significant measures were taken to erode the debt.
Obviously this is not the 1990s; the interest rates are not the same. Can you give a sense—perhaps Mr. Leswick or Mr. Halverson would be positioned to answer this—as to what percentage of the total expenditures of the federal government is expected to be used to service debt, as compared to the 1990s?
Soren Halverson
View Soren Halverson Profile
Soren Halverson
2020-12-08 17:23
I'm not sure it's as good as yours. Essentially what I can point to is that the maximum point in the data that I've seen in terms of federal debt charges would have been in the early nineties, and at that time you were looking at a multiple of six times what we have today. It was a number just over 6% of gross domestic product, whereas today the overall federal debt charges represent 1% of gross domestic product. There's a pretty significant interval between those two.
View Sean Fraser Profile
Lib. (NS)
View Sean Fraser Profile
2020-12-08 17:23
Mr. Halverson, that includes spending that was part of the government's COVID-19 response to date.
Soren Halverson
View Soren Halverson Profile
Soren Halverson
2020-12-08 17:24
Those are the debt charges that we are paying today on the debt that is currently being issued, which would include the debt that was issued to support the government's COVID-related activities.
View Pierre Poilievre Profile
CPC (ON)
I'd like to get the officials to tell us how much debt the government will add this year and how much the Bank of Canada's holding of government debt will increase in this fiscal year.
While they are searching for those numbers, I'll just answer the minister's question to me as to whether Conservatives believe in the independence of the Bank of Canada: Of course we do.
She cites Jim Flaherty. Not only did he believe in the independence of the Bank of Canada, but he also never funded his deficits by having the Bank of Canada print money to lend it to the government.
In fact, throughout the entire great global recession, we never relied on the bank to print cash to fund our operations. That is something that this minister and this government are doing. They are dependent on the bank, and therefore cannot be independent from it.
To go back to my question, how much will the debt grow this year, and how much of that debt is being newly held by the Bank of Canada?
Results: 76 - 90 of 380 | Page: 6 of 26

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