Proceedings of the Standing Senate Committee on
National Finance

Issue No. 35 - Evidence - June 13, 2017


OTTAWA, Tuesday, June 13, 2017

The Standing Senate Committee on National Finance met this day at 2:15 p.m., in public and in camera, to study the Main Estimates for the fiscal year ending March 31, 2018.

Senator Percy Mockler (Chair) in the chair.

[Translation]

The Chair: Welcome to the Standing Senate Committee on National Finance.

[English]

My name is Percy Mockler, senator from New Brunswick and chair of the committee, and at this time I would like to ask senators to introduce themselves.

Senator Neufeld: Senator Neufeld from British Columbia.

Senator Stewart Olsen: Carolyn Stewart Olsen, New Brunswick.

Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.

Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.

The Chair: Today we continue our consideration of the Main Estimates 2017-18. The steering committee decided to invite Mr. Kevin Page, President and CEO of the Institute of Fiscal Studies and Democracy, University of Ottawa.

The institute published a number of reports this spring that are of great interest to this committee. Before we consider our draft report, we wanted to hear from Mr. Page to see whether events such as the potential housing market crisis, which we studied, could have an impact on the fiscal framework and the government expenditure plans.

We welcome to the committee, Mr. Page. Thank you for accepting our invitation to share and inform the committee with your comments and your opinions. There is no doubt that following your presentation senators will be asking questions. We have a time frame of 45 minutes.

As the chair, I would like to say that we have a common denominator, which is an acronym I did: TAP. It's about transparency, accountability and predictability of the financial framework of Canada, and, for the people at Tim Hortons and McDonalds, we call it a budget.

That said, Mr. Page, please make your presentation.

Kevin Page, President and CEO of the Institute of Fiscal Studies and Democracy, University of Ottawa, as an individual: Thank you, chair, deputy chair and members of the Standing Senate Committee on National Finance. It is an honour to be here with you today. Thank you for your work in scrutinizing the 2017-18 Main Estimates. Given the shortness of time, I will make a few remarks that may provide context for your questions.

The remarks reflect analysis and opinion articles publicly released by the Institute of Fiscal Studies and Democracy, IFSD. IFSD is a new independent research institute at the University of Ottawa that focuses on public finance issues at that nexus of public policy and governance institutions.

[Translation]

We have seven staff members.

[English]

We work with undergraduate and graduate students at the University of Ottawa and across the country.

IFSD will focus on public finance issues that impact all levels of government in Canada and support parliamentary strengthening at home and abroad. Current issues of focus include the economic and fiscal outlook and planning, innovation and skills, infrastructure, health care, and First Nations child welfare.

I have three points.

First, our estimates system is broken. You are reviewing Main Estimates for 2017-18. These estimates are aligned with Budget 2016, not Budget 2017. We are a year behind. There are systemic weaknesses with respect to accounting, voting structure, and the link between financial and non-financial information.

[Translation]

The government committed to reforming the system. Parliamentarians should lead by example.

[English]

Second, Canada's fiscal policy has changed. The context for Main Estimates 2017-18 and 2018-19 is deficit-financed program expansion. We have a weak fiscal planning framework. There are elevated risks to the economic outlook related to household debt, housing prices and international political stability.

[Translation]

Future generations will have to pay for the program expansion.

[English]

Parliament must help ensure intergenerational equity. Future generations must see the benefits for today's unbalanced budgets.

Third and last, Canada's federal government has committed to addressing long-term policy challenges. In a world of growing political cynicism and public mistrust, we need resiliency and progress in Canada. IFSD has highlighted developing fault lines on policy related to health care, infrastructure, innovation and skills.

[Translation]

The stakes are high.

[English]

We need sober second thought. We need a non-partisan, long-term perspective that is rooted in the lives of Canadians across the country. If the Senate was looking for an environment to facilitate institutional renewal, it has arrived.

Thank you for listening. I look forward to your questions.

Senator Stewart Olsen: Thank you, Mr. Page, for your presentation.

It's fairly startling, but I think Canadians are beginning to understand that fiscally we're not in the very best of positions and are declining.

If you'll forgive me, I need to ask you about the proposed infrastructure bank. Did you have a chance to look at the changes to the Canada Pension Plan and the infrastructure bank together? I'll tell you why I'm asking that. In the second phase or the new part, it's my understanding that those monies will be used in the infrastructure bank to finance the infrastructure bank.

I'm worried about a very shaky house of cards that the budgeting is being planned on. That's one leg of it, but it seems to be quite a major leg. I'm worried about all of the things that are happening with not very much background.

Could comment on that, please?

Mr. Page: Senator, for me, the potential fragility around the infrastructure bank and the pension plan lies largely in the lack of work that was done in supporting the needs and the future infrastructure plan for Canada. I think it's hard for members of Parliament and senators to see how the infrastructure bank fits in without that broader needs assessment and plan.

The vision around the structure for the infrastructure bank is evolving. For me, it seemed more the government was looking for a private sector, arm's-length type of institution and perhaps a much more narrowly defined scope in which the infrastructure bank will play. It's less clear to me now, having seen the legislation and the budget implementation bill. Given the closeness of the connection between the government and the infrastructure bank, I see the infrastructure bank more as a political arm now of the government. I find it more confusing.

I think the more we can put the infrastructure bank on a strong legislative footing that the Senate is comfortable with, the concerns about investments of pension funds in Canada and elsewhere dissipate somewhat and are mitigated.

Senator Stewart Olsen: Thank you.

Senator Marshall: Thank you, Mr. Page, for being here today.

One of the issues we have been looking at for the past several months is the housing issue in Canada, and there just seems to be a new development every week. We were looking at different aspects of it. One was the elevated consumer debt. That was a concern. Then we were looking at the housing situation in Vancouver and Toronto. We had officials of CMHC testify because of the extent of the mortgage insurance program. Then there was an increase in mortgage insurance premiums, so whether that was coincidental I don't know.

Then we had the situation with Home Capital. That was followed by Moody's downgrading of the six banks. We have heard rumblings in the past, but it seems to be intensifying now, and that's the pending interest rate increase in Canada. It seems like we might be creating a perfect storm.

What are your views with regard to what you see as the risk to the economy and the risk to the government?

Mr. Page: Thank you, senator, for the excellent question.

The risks are building, actually, from the housing sector. They have not dissipated since the 2008-09 financial crisis. Many other countries, particularly the United States, saw significant adjustment in housing prices relative to income, whereas in Canada we continue to see house price growth. There are markets like the ones you mentioned — Vancouver, Toronto and a few others — where risks are now very elevated. They present a risk to the macroeconomic outlook of the country.

There was an economist, Herb Stein, who said back in the 1970s if something's not sustainable, it's going to end. It's not sustainable. We need adjustment. We were hoping for a soft landing. I think the Governor of the Bank of Canada is hoping for a soft landing. Meanwhile, we see prices continue to elevate. We are seeing the costs of carrying mortgages now rising. The connection between housing prices and high household debt is obvious.

If we were to find ourselves in a scenario where we had a big dip in the economy, the impact from the housing sector — just the sheer loss of jobs — would result in quite a severe recession in Canada. We have not been able to reduce these risks. They're there, and we're trying to manage them.

What would it mean? For our economy it means we're quite susceptible to a more significant downturn. For our fiscal situation, it means that while the government is targeting a debt-to-GDP ratio of 31 per cent five years down the road, if we were to see — and again, this is all predicated on continuous nominal GDP growth, growth in the economy — a hit to the economy, those targets would not be achievable with a housing crisis.

Senator Marshall: The government in its projections is assuming a certain scenario, but even with that, if you look at the current budget bill, it's projecting that within three years our public debt will exceed $1 trillion and our interests costs will go up by about a third. I think they are at about $24 billion now, and they are projecting maybe $33 or $34 billion. That's almost like a best-case scenario.

Even if those numbers hold, do you have any concerns with regard to the amount of debt as well as the increase in the interest that we're paying on that debt?

Mr. Page: Senator, we should all be concerned. I'm somebody who started in the public service in the early 1980s. I was working at Finance and those departments. I lived through those deficits in the 1980s and early 1990s. I saw what it was like to be in Canada in the mid-1990s when we had debt-to-GDP ratios of the federal government approaching 70 per cent and with all governments close to 100 per cent.

Then going through a period of 10 or 11 years where we had surpluses year after year, it feels a bit like déjà vu for me, honestly, senator. Since 2007-08, we have been running deficits every year. Under the previous government, I think we added close to $150 billion to the debt. If you look at the next five or six years with Budget 2017, we're talking about adding another $140 billion to federal debt — in the neighbourhood of $600 billion. So that stock of debt is going up.

The only thing masking the true impact of that debt, even though, as you noted, interest costs are going up from something like 24 or 25 billion to 33 billion at the end of that forecast, is these record-low interest rates. That's incredible monetary accommodation, which is also creating, ironically, a problem in the housing market. When people can afford large mortgages because of these unusually low interest rates, it's encouraging people to take on more debt. In some senses, we're actually feeding the risk.

I am actually quite worried about it. I'm quite worried about the buildup of debt. The ability to hit current debt-to- GDP targets is based on maintaining these record-low effective interest rates. As they start to move up, and that was already predicated in the chair's opening remarks — that we could possibly see increases in interest rates sooner rather than later — the scenario changes dramatically.

We will add over the next six years more than 20 per cent to the stock of debt. Then the question becomes, who will benefit from that increase? My generation is paying less taxes for these benefits. My kids' generation and their kids' generation will pay more taxes. They will have less room to manoeuvre.

There is a real cost to this, and I don't think we're talking about it enough. We had a release of the National Defence white paper. I applaud the government for releasing it, but even there we're talking about an increase in half a percentage point in GDP in defence spending alone over the next 10 years. That means these deficits we're looking at of $20 billion are not going away. In fact, they may go higher.

Senator Marshall: They'll go higher. Thank you very much.

Senator Ogilvie: I have two questions. The first is to make sure I understood you correctly to say that the current budget estimates we're looking at are actually based on the 2016 budget. Did I hear you correctly?

Mr. Page: Again, looking at the authorities that Parliament is asking for in Main Estimates 2017-18, which were actually tabled before Budget 2017, they are based on spending plans consistent with Budget 2016, not Budget 2017. That's the context.

Senator Ogilvie: Based on your experience of looking at these things, if the Main Estimates are based on the previous budget context, yet we have within the current operating year promises of government significant spending into the future — you just mentioned the Defence budget, for example — in any normal business sense, I would think this is a recipe for disaster.

Mr. Page: It's not a healthy recipe, senator. I think it's a very unhealthy recipe.

The government committed back while it was in opposition that it would realign the budget with the estimates. In the situation in which we find ourselves, where the estimates are actually being tabled before the budget and the budgets are coming forth with new measures, as you've alluded to, it means the whole supply process will put undue pressure on the supplementary estimates process. It means that you're reviewing, effectively, Main Estimates really without departmental spending plans that are consistent with the appropriate budget, which is Budget 2017.

It's no way to run an enterprise where we're spending $300 billion a year, senator.

Senator Ogilvie: Thank you.

My second question is to follow up relative to Senator Stewart Olsen's question. I was interested when I first learned of this proposal for the partial funding of the infrastructure bank and part 2 of the CPP program. My understanding is that there will be a new category of the CPP, which will operate under slightly different roles than the traditional CPP. First of all, is that your understanding?

Second, it seems to me that what we're seeing here is the potential for a significant undermining of the strength that was developed in the CPP program over its time of existence. It has come to be a very important part of all Canadians' basic planning structure. Any weakness in the oversight and fiscal planning for the part 2 of this would, it seems to me, add a significant increase in risk to the ultimate payouts from part 2 of the CPP. Is this a reasonable observation?

Mr. Page: It's a very reasonable observation or concern. The state of the infrastructure bank as we know it today and how it will operate — if I can back up just a little bit, there was no white paper for this infrastructure bank. As I have alluded, we saw a white paper on a national defence strategy.

If you go back to the fiscal update, a page in the fiscal update on the infrastructure bank — a couple of pages in a 300-page document, Budget 2017, on the infrastructure bank. There are many fundamental questions around particularly how pricing will take place through the infrastructure bank and how risks will be shared between organizations like the Canada Investment Board or the Canada Pension Plan and the investment bank. We don't really know how it will work.

This is all undermined by the fact that there is no national infrastructure needs assessment, which the IMF and other organizations say are absolutely essential.

We're talking about an instrument we don't know how to fit into this broader context. Should we be more concerned about the state of our investments in the Canada Pension Plan? There are some pretty good advisers at the Canada Pension Plan. They will work hard to make sure there are appropriate risks.

Right now, I'm more concerned that the Canada investment bank is being set up to subsidize businesses in their investment in infrastructure. Canadian taxpayers will pay two ways: They will pay through taxes, through the $35 billion that you've alluded to, and through the Canada Pension Plan, and they may potentially pay through higher user fees.

Until we really know how pricing and risks will be shared, it's hard to answer those questions. But I think the Canada Pension Plan will be very astute. They will ask for high returns. I don't see that changing.

Senator Neufeld: I want to touch on a couple of things. In your estimation, is there a great need for an infrastructure bank in Canada? I come from a province that has a municipal finance authority, where municipalities borrow their money at reasonable rates, I assume, and have for decades, and I believe that is consistent across the country.

Why do we need something else to mirror what's already in place? What would be your response to that, sir?

Mr. Page: Thank you, senator, for the question.

In terms of the need for the infrastructure bank, really, there is a lack of analysis on the infrastructure needs in Canada generally. We talk about current infrastructure gaps. We haven't really defined what these infrastructure gaps could be in capacity and dollar terms 10, 20 years from now, which I think is relevant when you're talking about capital investment.

This infrastructure bank, what purpose would it fulfill? If we haven't defined the broader needs and put together a plan, it's hard to situate the infrastructure bank in that broader sense.

As a macroeconomist, I am actually quite supportive of this investment infrastructure. I am actually even quite supportive of deficit financing infrastructure if we have a strong sense it's going to be well managed.

The infrastructure bank is an instrument to achieve these ends. If there is a niche within this broader needs assessment where the private sector, the public, or political leaders such as yourself may feel that we don't necessarily need to use taxpayer dollars, that we could tap into the private sector, that there may be a group of citizens willing to pay user fees for a certain toll road or use of a bridge, it's possible that this could be very useful. If we could define that broader needs assessment for infrastructure, put together the plan and situate the infrastructure bank in that context, I would feel much better about it. It's quite possible that there is a need.

I found myself on a business news network yesterday facing pressure that the private sector would love this. If I was in the private sector, I would love this. If somebody told me we could subsidize your participation through taxpayer dollars, I would be lining up. Who wouldn't be lining up? So I see the incentives.

I think the onus is on the government, the public service, to define and do the homework which is around needs, around the plans, around setting up this institution so you feel comfortable with its role and purpose and you understand how pricing will take place and how risk will be shared between the public sector and the private sector. Until then, I think more work needs to be done.

Senator Neufeld: I appreciate that answer very much.

Coming from British Columbia, I look at user fees and think of the Port Mann Bridge. We did that on user fees. What's happened — an election and the new government says we're going to wipe out the user fee. So some of that stuff doesn't seem to be consistent through time.

We have, from the other end of the country, P.E.I. saying you should reduce the fare to cross the bridge like you do in other places.

So when I look at those user fees and having the private sector involved, I don't know how you make it so that you have a user fee that lasts for whatever it is, 50 years, for the life of the project to actually get it paid. I'm a little, shall I say, head shy about some of those things.

I want to go to your third point about the Senate and sober second thought and the time is now. What did you mean by that?

Mr. Page: Walking over here from the University of Ottawa, I was reading a column from one of the best journalists in the country raising concerns that maybe the Senate shouldn't be kicking the tires and suggesting amendments on a budget bill because senators are not elected. My perspective as a former Parliamentary Budget Officer in the public service, I want checks and balances. If the Senate feels comfortable recommending amendments, I want to see balance between what the house is comfortable with, what the Senate is comfortable with, and a resolution of those balances.

I say that as somebody who has been involved in a long list files like the infrastructure bank, some of which we read about in the papers on a daily basis, like fighter planes or shared services or pay systems. If we don't do the financial due diligence early, we will pay a bad price for it.

We need the Senate, honestly, as much as ever, if not more than ever, to play that role. These are long-term issues that are going to affect future generations and that go beyond political cycles.

Senator Neufeld: I appreciate that. I wanted to clarify it a bit more. There are others who say get rid of it because it's not elected.

Senator Cools: I would like to welcome Mr. Page here before us today. I have a question that on the face of it seems quite simple.

Mr. Page, I've been in the Senate for over 30 years, and I'm on the home stretch of my time here. A year from August, I will be a former senator, so I tend to use my time here as wisely as I can.

In your notes by which you introduced your thoughts, at point 2 you say:

Canada's fiscal policy has changed but context for Main Estimates 2017-18 and 2018-19 is deficit-financed program expansion.

Pay attention to these words. You're saying we have a weak fiscal planning framework. Could you explain what you mean by that, please?

Mr. Page: I'd like to thank you for your service, just in case I don't get another opportunity to come back.

Senator Cools: Thank you.

Mr. Page: In terms of point number 2, senator, from the mid-1990s to 2007-08 we were running surpluses. We were looking at Main Estimates where governments were asking for provisions of authorities where we were actually paying down debt. Now we're generating debt. This debt will get heavier and heavier and will be passed on to further generations.

When we're here talking about programs like infrastructure spending or other programs that are in Budget 2016 which underpinned Main Estimates 2017-18, they're being deficit financed. The full freight of them will be paid by future generations. It's a very different context than a surplus context.

When I say we have a weak fiscal planning framework, the only real constraint that exists on the government right now, which they have imposed on themselves, is a debt-to-GDP ratio five years out. No annual targets. We're going to keep the deficit below $25 billion this year or $20 billion in the following year. No spending control targets — we won't have spending control growth this year or next year above a certain percentage, just five years out.

When the denominator is a $2 trillion economy and the numerator is $300 billion, you can move up and down. That's a very loose planning framework. When a recession hits, as Senator Marshall had spoken to, even then we could roughly maintain debt similar to the debt target right now.

Other countries in Europe are confined on an annual basis to nominal deficit targets, cyclically adjusted deficit targets, and they have independent analysis around their ability to hit those targets. We have nothing like that and yet we're going to effectively expand over the next six years at $140 billion plus to the stock of debt, which is more than 20 per cent of the stock of debt.

The question now is reviewing the estimates. What do the citizens today get for this, senator? While you're sitting here, you have to deliberate on what the citizens of future generations are going to get for this debt because they're going to have to pass it on.

Senator, I go back a solid 30 years in public service. I lived through the finances of the 1980s and 1990s. I still remember what it was like to brief finance people in the mid-1990s with 38 cents of every revenue dollar going to public debt interest charges. Now, as Senator Marshall alluded to, it's roughly $24 billion we're paying in public debt interest, and that's 8 or 9 cents. Can you imagine the difference of governments in the early- and mid-1990s paying 38 cents on every revenue dollar just to pay their credit card? We've got it down to 9 cents, and now we're adding significantly to the stock of debt. Once interest rates go up, the carrying cost of that debt will rise quickly with it.

So as you're deliberating these Main Estimates in the context of this loose framework, we need to ask ourselves what future generations are going to get. When you're asking questions about the infrastructure bank or pensions, these are intergenerational equity issues. It was in this context, senator, that I said in point number three that we've never needed the Senate more to look at this long-term perspective of fiscal sustainability and intergenerational fairness. Those words are not even used in the House of Commons.

Senator Cools: Maybe they will be used more in the near future if we repeat them enough. Thank you very much.

Senator Marshall: Mr. Page, I know in some of your reports you've mentioned performance indicators. You have an innovation one and I think I've seen it with regard to your commentary on infrastructure. This government has made a big deal of being results-focused, saying everything will be results-based. Right now, Treasury Board is going through and making sure that they have good, robust performance indicators. They have started the process. How far along they've gotten is open to debate.

You've been around government a long time. Can you give us some insight into performance indicators, what the history has been, where you think we are now and where you think we're going? I don't have a whole lot of confidence in where we're at or where we're going, but I would like to hear your views on it.

Mr. Page: Senator, that's an excellent question about performance, value for money, deficit finance and a big, significant program expansion. We're probably adding almost a full percentage point to GDP, which is $20 billion plus to program spending relative to the Budget 2015 track.

What are we going to get for it? We're launching these new programs. We're saying we are going to close real income gaps for middle income people. We say we will narrow infrastructure gaps. There are performance frameworks that are already out there — for example, around infrastructure — espoused by the International Monetary Fund. We're not using them as far as I can see, so I worry about the future.

I'm somebody that worked at all three central agencies, plus line departments. I remember working in Agriculture Canada. I was in the farm financial programs there. I remember the agriculture minister at the time — I won't mention his name, but a good minister — would see me in the hall and ask, "Kevin, how are we doing in terms of processing? What do our service times look like for stabilization programs and crop insurance?" I think there are ministers and departments where that culture is very important. We need to develop that type of performance framework.

Back to your point, thank you for alluding to our work done on innovation and skills. I'd like to just spend a minute on that file.

We spend in excess of $20 billion on innovation and skills-type programs in Canada every year on roughly $300 billion in terms of budgetary spending. We have well in excess of a hundred different programs on innovation and skills. I know this because I asked two fourth-year students to take a couple of months and go through every single department. Start with Agriculture and end with the department that ends in Z, and pick out every single innovation and skills program.

Obviously, you will find them in Human Resources and Social Development, but you would be surprised, because you will find them in Indigenous and Northern Affairs programs, agriculture programs, research councils, et cetera. Pull out every single program. Pull out the program descriptions, pull out the spending amounts and the performance indicators. Plus, at the end of it, you tell me: As a young 22- or 23-year-old, if you were sitting as a member of Parliament or a senator, would you be able to assess performance? Would you say that we're getting value for money? Would you say that this program needs to be re-evaluated because of poor performance or good performance? Maybe we should spend more money. And they came up with less than 10 per cent that they thought were well-documented performance programs.

When the budget came around, we had already done that work. Two students did the work at the University of Ottawa. We knew in 2016 that this was going to be an innovation and skills budget. The government could have done that review. Honestly, senator, I was getting calls from public servants asking, "Where did you get that data?" That was the government's own data. It came right from their own reports, plans and priorities.

If students could painstakingly go through every single program, develop spreadsheets and make it available to all Canadians, if we had known a year ahead that we were going to do an innovation and skills agenda, we could have done our own review. Departments have the capacity to review their own programs: "Are we getting performance?"

So there is scope to do amazing and important things around performance in government. Some departments already have that culture.

Am I confident? I'm not confident. Senator, I share your concerns.

Senator Marshall: As you know, we have a number of departments in here testifying about their programs and we almost always ask about performance indicators. I must say that I am surprised at some of the answers even with regard to even the innovation one, asking what their performance indicators are, how knowledgeable witnesses are and how robust the performance indicators seem to be.

The other issue that we've been interested in is evaluations, because quite often when departments are talking about programs, they talk about having an evaluation carried out by a third party and they were satisfied. But when we looked at some of the evaluations last year from, I think, the Department of Health, it was on some of the Aboriginal programs and I must say that I was very disappointed with regard to the quality of the evaluations. So it seems that the government needs to do a bit more work in that area.

I know that there is an initiative underway, but you just wonder how quickly. For a government that's supposed to be focused on results and they're going to use this to guide where they're going to spend their money, then the speed at which they're doing it is questionable.

Thank you very much for those comments.

Senator Neufeld: You explained low interest rates, and I think everybody knows that's why there is so much personal debt. So what I take out of that is that you think we should be raising interest rates. What effect would that have on the whole economy? If it's basically just interest rates, is there some other thing that we should be looking at to maybe dampen that a little bit?

Regarding debt-to-GDP, when I was a minister in British Columbia, Premier Campbell said the debt-to-GDP will grow no more than 13 per cent: "I don't care if we have to stop everything, but it's not going to grow more than 13 per cent."

I know there are probably many other measurements, but what larger measurements, ones that really mean something, should we be using instead of debt-to-GDP? You explained that can go up and there is a lot of room there. What else could we use?

Mr. Page: Thank you, senator, for the question.

Regarding interest rates, we have a very accommodating monetary policy right now. So if you look at the key rates set by the bank, the bank rate is at historically low levels. It's been basically plus or minus 1 per cent since the 2008-09 recession, which is unheard of in my lifetime. Borrowing and mortgage rates at one to five years, variable rates, are incredibly low. It's not surprising when you're offering such cheap credit that people are going to want to use debt as a way to finance activities.

Eventually, there's going to be some normalization. We've heard talk for a year now in the United States about the Federal Reserve pushing interest rates upwards.

I think we've seen an upsurge in Canadian growth since the spring of 2016, senator. Now we have year-over-year growth of probably around 3 per cent if you look at GDP and basic prices for the latest month and compare with the latest month last year. That's getting to be a significant year-over-year growth.

We've heard from the deputy governor that we need to be mindful that these interest rates might go up sooner rather than later.

If we're sitting on this incredible household debt relative to income and there are different measures, how do we manage that? What other variables do we need to be mindful of?

Clearly the governor and the finance minister are mindful of the fact that we need the economy to continue to grow. To have a recession right now would be quite significant, very serious.

We need to be looking at real income growth. How do we make sure that wages are growing and that the employment rate continues to move upwards? And it is moving upwards, so that is positive. That's something people like myself are looking at.

On the debt issue, in terms of strengthening the fiscal framework, we could learn a lot from other countries. We even have our own experiences. If we want to be mindful of what it is like to tackle a deficit problem in Canada, we need to go back to where we were in the mid-1990s where we committed to annual targets and to making sure of reserves around those targets. Those are short-term targets.

In addition, when we launch new programs, as we did last week when we told Canadians that we're going to increase defence spending from roughly 1 per cent of GDP to 1.5 per cent of GDP in the next 10 years, we need to bring in an assessment immediately. What does that do to the fiscal sustainability of our country? There is analysis that countries are mandated to do.

The Parliamentary Budget Office does this type of analysis. The ministry of finance has not really done this type of analysis. It should be automatic when we release major papers of that nature. It should be part of the paper.

The Chair: Honourable senators, we have been informed that there is a vote at 3:15. Therefore, Mr. Page, if you want to stay and we can come back after the vote, or if not, this will conclude —

Senator Cools: Perhaps I'll ask my question and then we can adjourn.

The Chair: Ask your question, Senator Cools.

Senator Cools: Thank you again for your testimony. You have awakened many questions in my heart and mind.

I was just thinking to myself as you were speaking about this proposed infrastructure bank. Could you tell me what is the nature of this new proposed animal called the infrastructure bank? I want to know the character of it and exactly what is being proposed. We all think we know what a bank is, but if you could tell us in as few words as possible.

The Chair: We have to go. I don't have a quorum.

You have received the question, Mr. Page. Can you come back in writing to us on that question, please?

Mr. Page: Yes.

The Chair: Thank you very much. We will adjourn due to Senate responsibilities in the Senate Chamber.

(The committee adjourned.)