Remarks by Robert Asselin to the House of Commons Standing Committee on Finance in pre-budget consultations.
The state of the world today reminds us of the inherent fragility of our international order and the global economy. For a country such as Canada, geopolitical shocks such as these have a deep impact. The global environment is only further compounding the challenges we were already experiencing domestically.
Here at home, Canadians are feeling the weight of high interest rates, low productivity, and persistent inflation. Canada’s GDP per capita has been trending down for several quarters, and without our natural resources, Canada’s trade deficit would be structural and significant. Our population is also aging fast.
Going forward, private sector economists’ forecasts point to no growth in 2024 and very weak growth thereafter. Whether there is a technical recession will be of little comfort to Canadians as interest rates are expected to remain high for the foreseeable future. For the federal government, debt servicing costs will continue to be much more prohibitive than previously forecasted in Budget 2023.
Instead of working in concert, the government’s three core economic policy objectives — growth, equity, and price stability — could become increasingly in conflict. Growth rates that are lower than interest rates will have a dramatic impact on fiscal policy. Governments can no longer run permanent large deficits without fear. This fiscal year, the federal government will use as much of its revenues to service the debt than providing health care transfers to provinces and territories.
This is why we continue to urge the government to adopt a new and credible fiscal anchor, one which would limit debt servicing costs to a maximum of 10 per cent of revenue going forward. By doing this, we think it will preserve the government’s capacity to fund programs Canadians rely on and not put an excessive and unfair fiscal burden on future generations. The more the federal government spends on servicing the debt, the less it has to fund its core missions.
More deficit-financed spending at higher interest rates will eventually and inevitably lead to levels of indebtedness that will force future governments to cut spending and raise taxes. It will lead to a weakened economy with considerable uncertainty for businesses looking to invest, hire and grow in Canada. It will also put in jeopardy the social programs Canadians value. This is precisely what we must avoid.
We are not of the view new spending is required in the next budget. Over the last few budgets, the federal government has introduced many measures that have yet to be implemented. We also urge the government to move ahead with a real, comprehensive program review as well as implementing measures announced in Budget 2023, such as the commitment to outlining a concrete plan on permitting reform by the end of this year and accelerating the implementation of measures and incentives towards the energy transition.
In the aftermath of last week’s Supreme Court ruling on the Impact Assessment Act, it is essential that the government move quickly to provide clarity, certainty, and predictability on the rules for major projects. We must not lose out on once-in-a generation business investments that are necessary to reduce our emissions and foster economic growth for the benefit of all Canadians.