QUESTION PERIOD — Finance
Downgrading of Canada's Credit Rating
June 25, 2020
Honourable senators, my question for the government leader today concerns the announcement yesterday that the Fitch credit rating agency has downgraded Canada’s AAA status. For years now, leader, the Prime Minister has brushed off questions about his government’s huge deficits by pointing to Canada’s AAA credit rating. He has never recognized that hard work goes into maintaining the country’s credit rating. Budgets don’t balance themselves, and you cannot spend yourself into oblivion. No one disputes that the government has had to bring in emergency programs in response to COVID-19, but the Trudeau government headed into this disaster in a weak position.
Leader, how will losing our AAA credit rating impact your government’s ability to service its massive debt, not just in the near term but in the years ahead?
Thank you very much for your question, senator.
Before the pandemic hit us, and heading into it, Canada was in a strong economic position, as I have mentioned in this chamber on a number of occasions, as has the Minister of Finance and others. This government agrees with you, and with all members of this chamber who voted in support of the economic measures that the government put in place to help Canadians, that had the government not acted during this time we, as Canadians and our country, would be far worse off, as would the economy.
I’ve been advised that notwithstanding this downgrading by one credit agency, Fitch, that global markets continue to invest in Canada, they continue to buy Canadian bonds and our cost of borrowing remains at historic lows. As we were advised by the Minister of Finance in this chamber earlier this week, the government will be providing us with information about our fiscal situation on July 8. At that point I think we will have more information about the state of affairs, but it is the government’s position that it has and will continue to act responsibly to manage our economic affairs as we navigate through this crisis.
Well, leader, your government has never concerned itself with Canada’s debt level — not before the pandemic, not to date, not ever. Fitch warned over a year ago that Canada’s debt level wasn’t compatible with AAA status and nothing has been done to rein in the spending.
The mandate letter of the Minister of Finance instructs him to preserve our AAA credit rating, yet Minister Morneau came here on Tuesday, as you just said, and couldn’t answer basic questions about the debt: How much it is? Who owns it? He either didn’t know or he refused to answer. His lack of answers and poor grasp of detail doesn’t instill much confidence in his ability to restore Canada’s AAA rating.
Leader, why should Canadians believe that Minister Morneau’s so-called snapshot in two weeks will provide us with a path forward?
Thank you for your question. I think the Minister of Finance made it very clear that given the tremendous uncertainty, not only with regard to where the Canadian economy may be in 6 or 12 months, but the world economy, upon which our economy so depends and with which it is inextricably bound, we will receive a snapshot, meaning a portrait as opposed to a projection into the future.
It would be irresponsible to rely upon guesses when there is so much that remains uncertain, and point only to the uncertainty south of our border to report on how the economy might adjust as COVID-19 seems to rip through a number of states.
I understand the senator’s position on deficit reduction. It is one, and only one, measure of the financial health of an economy, and it is only one measure, and not necessarily this government’s primary measure, as to the appropriate way to steer our economy forward. This government has made investments in a number of areas, most recently in helping the economy stay alive so that it can return properly, and the government remains confident that it has the fiscal capacity to get us through that. We will return in a strong position and very well positioned to pay down the debt we are accumulating through this crisis.
