Hon. Colin Deacon: I wonder if Senator Smith would take a question.

Senator Smith, I wonder if you would agree with me that you just did a fabulous job of summarizing one of the best reports that the Banking Committee has produced in the last while. I don’t think it could have been better summarized by anyone other than you. Would you agree with me?

Hon. Larry Smith: Honourable senators, it’s my privilege to speak to the outstanding report of the Standing Senate Committee on Banking, Commerce and the Economy entitled The State of the Canadian Economy and Inflation.

I would like to recognize our chair, Senator Wallin; our deputy chair, Senator Colin Deacon; the members of the committee; as well as dedicated analysts and support staff for their tireless efforts in producing this comprehensive report. I strongly encourage everyone to take the time to read this report, as it is a testament to the excellent work that takes place in our Senate committees and, just as important, the pivot that North America and Canada are going through economically.

[Translation]

Our committee heard from 18 witnesses over the course of nine meetings. Two former governors of the Bank of Canada, Mark Carney and David Dodge, the current Governor of the Bank of Canada, Tiff Macklem, the former parliamentary budget officer, Kevin Page, and the current Parliamentary Budget Officer, Yves Giroux, all shared with us their perspectives on the current economic situation. We also heard from economists, academics and monetary and fiscal policy experts, who shared their opinions with us.

[English]

The breadth of knowledge and expertise presented in this report offers insights into the many pressing issues we face today — notably, the role of monetary and fiscal policies, the housing crisis, regulatory burdens, low investment, productivity growth, lack of competition as well as our aging population.

Despite differences in opinion on various topics, including the causes of inflation, the scale of fiscal stimulus and how the federal government can work towards addressing many of the problems that we face today, I would like to briefly discuss two areas for which our committee heard strong support.

First, one of the main takeaways for me was the need for the federal government’s fiscal policies to work in accordance with the monetary policies of the Bank of Canada, especially during an inflation crisis, and that there be more deliberate and sustained efforts by the Bank of Canada to maintain transparency about its policy decisions.

Former governor of the Bank of Canada Mark Carney, while speaking about the role of monetary and fiscal policies in today’s context, told our committee:

. . . it’s counterproductive for fiscal and monetary policies to work at cross purposes. Colloquially, if one foot is on the brake with monetary policy, it’s foolish for the other to stomp on the gas. . . .

While the magnitude of the Bank of Canada’s response to fighting inflation was a point of debate during our study, it was clear that a tightening of monetary policy is necessary, and it is the role of the Bank of Canada, as an independent institution, to ensure it carries out its mandate of keeping inflation between 1% and 3%. In other words, when it comes to monetary policy, its foot must be on the brake.

What was concerning for me, however, was a lack of transparent communication from the Bank of Canada about some of its policy decisions through a period of uncertainty like the COVID-19 pandemic, which included the claim that inflation would be transitory, and it slowed reaction to the changing economic conditions relative to the other central banks.

Of course, in retrospect, the policy decisions taken by the Bank of Canada were not easy, as alluded to by the governor in his testimony. This does, however, further the need for Parliament to closely monitor the work of the bank moving forward.

On the fiscal side, there was a robust debate on the extent of the federal government’s response to COVID-19. In general, witnesses agreed that supports were necessary to keep the economy functioning, but that these supports should now be phased out and any additional spending in response to the inflation crisis be minor and temporary, providing targeted help to vulnerable Canadians. If the federal government continues large-scale spending measures, it will only add to the inflationary fire the Bank of Canada is trying to aggressively put out.

This point was echoed by Dr. Jack Mintz of the University of Calgary, who noted the discrepancy between fiscal and monetary policy in Canada by saying:

Fiscal policy is still not consistent with monetary policy. Monetary policy is focused on price stability, raising interest rates to bring down the rate of inflation, but fiscal policy at the federal level is not being sufficiently consistent with our aims of monetary policy. . . .

Metaphorically speaking, we need to take our fiscal policy foot off the gas.

The second and final topic I would like to briefly discuss is Canada’s aging population and the changes this presents for our labour force and the economy as a whole.

According to StatCan, as of July 2022, one in five Canadians, or approximately 7.3 million people in Canada, was at least 65 years of age. Colleagues, it bears repeating that more than 20% of our population currently is of retirement age, which is an all‑time high in the history of census keeping in this country.

These changing demographics will slow the growth of the labour force, negatively impact productivity and place upward pressure on prices and interest rates in the medium term, according to Mr. Dodge.

While there was general agreement during our study for increasing the level of immigration to fill this gap, I was struck by the comments of Dr. Mintz, who noted:

We are now going through rapid aging of the population, and it’s not just Canada. It’s all high-income countries and many middle-income countries. International markets for labour are going to become more competitive . . . .

[Translation]

Given the reality that is a shrinking labour pool, we must also look to other, more creative ways to fill this gap in the workforce through the creation of a reskilling program and the reintegration of retired workers into the workforce.

[English]

This sentiment was shared by a number of witnesses, including Janet Lane, Director of the Human Capital Centre at Canada West Foundation, who stated in response to my question on the topic:

I think we definitely do need to keep more of the aging workforce in the workforce.

For some people — for instance, in the trades — it’s not going to be quite so possible to do the actual physical work of a physical job in the trades, but their skills and expertise are very useful in the training of the next generation.

The evidence for retraining and retaining retirement-age workers in the labour force is overwhelmingly positive, and the research goes back decades. A 2016 literature review in the journal Canadian Public Policy entitled “Understanding Employment Participation of Older Workers: The Canadian Perspective” highlighted the fact that access to suitable training programs for older workers played an important role in worker retention. However, the article noted that a very small fraction of organizations in Canada were actually engaged in producing those types of training programs. What an opportunity.

Colleagues, I would like to conclude by saying that the COVID-19 pandemic, in our view, should accelerate the sense of urgency with which we confront the many persistent problems facing our country today, whether it be the role of fiscal and monetary policies, an aging workforce, regulatory burdens, a housing crisis or chronic underinvestment. I believe this extensive report presents an excellent framework for all levels of government, as well as industry, about where we are today and how we can move forward into a post-pandemic future. Thank you very much.

Senator Smith: Thank you very much; your bill is in the mail.

I think what’s important in this is that the committees we have inside the Senate do fantastic work. The committees don’t get any recognition, and we’re not always looking for recognition. What we’re looking for is people picking up messaging and using that to make our country better.

I think it’s really important for us, as a group, to publicize and speak amongst each other in here to make sure we all understand something about each other and what the other committees are doing. I just think it’s a great thing. Thank you.

(On motion of Senator Clement, debate adjourned.)

(At 9:44 p.m., the Senate was continued until tomorrow at 2 p.m.)

Appendix—Senators List