Transcript: Minister Morneau Launches Pre-Budget Consultations – January 6, 2016

PRINCIPALS: The Honourable Bill Morneau, Minister of Finance

SUBJECT: Minister of Finance Bill Morneau participated in a Google Hangout with students from various Canadian universities to launch the pre-budget consultation process at 2 p.m. on Wednesday, January 6, 2016.

Hon. Bill Morneau: So we’re now live, and I’d like to start by saying good afternoon and thank you to everyone for joining me today for this Google Hangout to mark the launch of our 2016 pre-budget consultations.

So I should start by letting you know that this is the first time I’ve actually hosted a Google Hangout, so I hope that you’ll bear with me, and especially those of you out there, in case we encounter any glitches technologically. But I want to say that I also hope to be doing more of this kind of thing in the future and for those of you who might be interested, I’ll be taking part in two Facebook Live events very soon.

Just as background, next week, I’ll be on the road travelling from Halifax to Surrey across the country, and my Parliamentary Secretary François-Philippe Champagne will also be travelling across the country. Together, our goal is to meet as many people as we can ahead of the delivery of our 2016 budget later this year.

But I want to start off this dialogue with you today. I guess as a father of four I can say, with two kids in high school and two in university, I know how important it is to listen to your challenges. And more importantly, I think I have some context to understand the tremendous insight that you bring to the table.

For some background, as you know, in recent years the economy has really not lived up to what our hopes and expectations are. And now, more than ever, we really do need to focus on a plan to grow the economy, create jobs and help those in our society who need it most. And in particular, I really understand how important a growing economy and good jobs are to young people who are completing or looking towards finishing their education.

So for us, this means setting out a fiscal plan that’s realistic, sustainable, prudent and transparent. It means for us, as we mentioned in our campaign, investing in middle class families. It means, again, creating jobs by making the right kind of investments in roads, in bridges, in transit across the country, in housing and in infrastructure, in green infrastructure. And for you, for those people on this session today, it means making sure that you really have every opportunity to succeed when you graduate from your courses.

But what I’m here for today is to make clear that we don’t have all the answers. We’re today asking for your help.

In recent years, the economy has not lived up to our expectations. More than ever, we need a plan for growth. That means implementing a fiscal plan that is realistic, sustainable, prudent and transparent. It means investing in middle class families, creating jobs and investing in roads, bridges, public transit, housing and green infrastructure. And it means ensuring that you have every opportunity to succeed when you have your diploma in your hands.

I chose to start this dialogue with you today because, as a father of four—with two kids in high school and two in university—it is very important for me to listen to your challenges and I understand the importance of the insight that you can bring to the table.

So thank you for taking the time to share your ideas with us. I hope that today is only the beginning of a conversation between you and your government.

And to the people who are watching the live stream online, I want to say to you welcome and thanks so much for listening in. I encourage you to visit our website at budget.canada.ca or our Facebook page, which is at Your Money Matters Canada, so that you can submit your ideas to us directly for the next several weeks.

So I’d like to now turn it over to the students. I want to get to as many comments as possible as well as your ideas and your questions. And to make sure that everyone gets a turn, I’ll take as a starting point one question from each class, and of course if we have time, we’ll do another round of questions as we move along.

We’ll begin with the University of New Brunswick. Welcome.

Question: Hello, Minister Morneau. First, I’d like to thank you on behalf of students across the country, specifically here at UNB. My name is Katie. I’m the President of the UNB Student Union, and I’m joined by a fourth-year economics class here at UNB as well as Member of Parliament (inaudible). I would just like to kind of have my question target at New Brunswick specifically. Students here in New Brunswick graduate with the highest average student debt in the country, at around $35,200. As student loans are 60 per cent federally funded, I’m just wondering how you’ll help to reduce the financial burden on students.

Hon. Bill Morneau: Well, you know, I’m going to start by thanking you for your question. You know, my main goal here today is really to listen to ideas that you might have in terms of helping us to understand how to prioritize and think about what we should be doing in our 2016 budget. We did, as you probably know, make some observations of the huge challenge of student debt in our campaign. We talked about some important things that we might be able to do about that, and those campaign promises are critical to us as we think about forming our budget in 2016.

What we’re trying to do now, really, is focus as much as possible on economic growth. So the screen that I’m using as we go about in our budget deliberations is thinking about how growing the economy can make an enormous difference for your fourth-year economic students, so most of you, I hope and expect, are looking towards getting great jobs when you finish. So our job is about growing the economy, so that we can create jobs, and making it possible for you to deal with what is a very challenging level of debt when you get out. And of course, what we plan on as well is having some policies that will make it easier for you once you get out to deal with that. But growing the economy will be critically important.

So thank you from University of New Brunswick.

I would now like to turn to the Université de Sherbrooke for a question from Sherbrooke, if possible.

Unfortunately, for the Université de Sherbrooke team, I want to say, unfortunately, we’re not hearing what you said. I can see that you were speaking, but we’re not hearing you. Can we come back to you? We’ll come back. And right now I’d like to turn to Western University for comments from Western.

Unfortunately, I can’t hear from Western University either. I’m going to have to start making stuff up. Can I move to Laurentian University, and we’ll come back to Western University in a moment. So those from Laurentian University, you have a question or something to say.

Question: Yes, can you hear me?

Hon. Bill Morneau: Just a moment

Question: Can you hear me?

Hon. Bill Morneau: That’s better. Go ahead, please.

Question: Okay. My name is Marika Robert. I’m in the Faculty of Management at Laurentian University. Our question for you is this: Does the Bank of Canada (inaudible)?

Hon. Bill Morneau: Can you repeat that for me, please? Does the Bank –

Question: Does the Bank of Canada plan to raise the key interest rate?

Hon. Bill Morneau: That’s an interesting question. As you know, I think, the Bank of Canada is independent. So what I can tell you is that they make their decision themselves without direction from the federal government. Of course, I often speak with Governor Stephen Poloz. But it’s a decision that he must make himself. That’s really not our decision. What I can tell you is that I believe that the current economic situation in Canada is more difficult than expected. That means the level of overall growth is lower than expected a few months ago. The price of oil is lower than two or three months ago. So, unfortunately, we are in a more difficult situation than expected, which means that it’s important to invest in our economy. So fiscal investments are important, and that’s a decision for the federal government, but for the central bank, that’s a decision for the Bank. But thank you very much.

And now can I move to the University of Saskatchewan?

Question: Yes. Can you hear us?

Hon. Bill Morneau: Oh, perfectly. Apparently technology in Saskatchewan is excellent.

Question: Well, Minister Morneau, this is Andrew from the Johnson-Shoyama Graduate School of Public Policy at the University of Saskatchewan. And our first question for you is: how will the budget reconcile with the multiple campaign commitments made to alleviate the social, education and health crises experienced in many indigenous communities across Canada?

Hon. Bill Morneau: Well, thank you very much for that question. Creating a budget is one of the most important things that a government can do because it sets an understanding of the things that we’re going to try to achieve. By going out across the country, we’re doing our best to listen to people from communities across the country. We’ll be visiting cities, but we’ll even be going to a rural environment. We’ll be in pretty well every region across the country. And it is a balance of making sure that we address issues of importance to people across the country and in every different sector.

Specifically, some of the social, education and health issues around our Aboriginal communities, these are very important commitments that we made during the course of our campaign. We believe that it’s very important that we keep the commitments that we’ve made. We want to listen and understand if there are ways that we can best implement them and how we should prioritize. But we believe that Canadians have given us a mandate to follow through on our campaign commitments, and our commitments around helping Aboriginal Canadians with their very significant challenges are critically important to us. I’ll be anxious to be hearing not only from communities about that, but hearing from my cabinet colleague Carolyn Bennett, who is the Minister responsible, and you can be sure that that’ll be a high priority in our coming budget.

If you have any specific ideas on how to best prioritize our spending on issues that are most important, I’d invite you to be back in touch with us because this exercise is really very much about listening to Canadians and getting their input, both against the challenges we face and the commitments we’ve made, so that we can make the best decisions.

So I’d like to thank you. If I can move to the University of Ottawa. I hope I can hear you.

Question: Can you hear me?

Hon. Bill Morneau: Yes, perfectly.

Question: Ah, perfect. Well, hello from a couple of blocks away. We’re here from the University of Ottawa.

Hon. Bill Morneau: If I look out my window, maybe I can see you?

Question: Yeah, we’re —

Question: I think that we’re actually in one of the buildings that the folks can see behind in the buildings, so we’re not —

Hon. Bill Morneau: Can you wave? You’re waving out your window for a second, we’ll —

Question: Well, thanks again for having us on today. We had a couple of questions about some of the campaign promises that your department made a couple of months ago. During the campaign, reforms were promised for the ATIP process, for the estimates, but also strengthening the Parliamentary Budget Office, which we’re very attached to here at the university as we’re the new home for the first Parliamentary Budget Officer, Mr. Page, but also to bring costing measures before Parliament. That’s a hefty load of things for the department to have taken on. When can we expect to see the rollout of these promises? And for the ATIP and estimate reforms, will there be consultations held?

Hon. Bill Morneau: So you didn’t want to give me an easy question, I guess. You know, obviously among the most important things we’ve said to Canadians is that we believe that an approach to government that is open and transparent is critically important. We heard loud and clear during the course of the election campaign that our approach to being open and transparent was something that Canadians really care about. So the promises that we made around how we can deal with Parliament with respecting institutions—you mentioned the Parliamentary Budget Office as an example —they’re very important to us.

For me personally, I can say in my role, among the very first things that happened in my first few weeks were, you know, we put out an estimate around what we thought our economic and fiscal situation looked like, and the Parliamentary Budget Officer put out an estimate that was, you know, broadly similar, but was different. And I think there’s always a possibility that people are concerned that the numbers aren’t exactly the same. My perspective was quite the opposite. Hearing different points of view, understanding how they got to their numbers is very helpful for us as we evaluate what we think the financial situation will be like. So our view here was that’s a welcome interjection. We’re trying to listen to different voices, and that’s the way we’re going to try and comport ourselves.

And certainly in Parliament, you know, putting forth, costing measures, helping people to understand our deliberations process, that’s something we want to do well against and maintain a sense of openness and transparency. It won’t be easy, but it’s important. In the budget process, the way we can deliver on that is giving people as clear as possible a sense of not only the immediate, but the longer-term costs of the proposals we put in our budget, and then in addition come back to people during the course of the year to give them a sense of how that’s actually working. And we aspire to do exactly that.

Question: Thank you.

Hon. Bill Morneau: So I’ll move a little farther afield, away from Ottawa out to the University of British Columbia.

Question: Hi. Can you hear us?

Hon. Bill Morneau: We can, everybody from B.C.

Question: Hi. My name is Creea (ph) and I’m here with a Bachelor of International Economics here at UBC. So climate change is one of the most important issues of our time. Therefore, it’s really important to us as students that we focus on sustainable economic growth in the budget, not just following through with the international agreements in the climate talks that we were made this past November, but also to go beyond that. This would include regulations of two of Canada’s largest industries, which would be oil as well as beef, which are two great emitters of greenhouse gasses here in Canada and around the world.

So a question I have for you then is how do you see your role in executing these regulations while helping to grow the Canadian economy at the same time?

Hon. Bill Morneau: Well, thanks very much for the question. I think it’s imperative that we don’t consider our economy without considering our environment at the same time. And as we said very regularly on the campaign trail, we really believe that the possibility of investing in environmentally sustainable activities can actually help our economy over time, so we don’t want to draw any sort of inference that investing in growth is somehow something that’s negative for the environment. We need to think about that as we move forward.

Our main focus, as I’ve said, in crafting the budget is to be thinking about the economic situation that we find ourselves in and that, for us, means that we need to recognize that the challenges of global growth are greater than we’ve seen over the last, you know, number of years even. We’re facing a real challenge. So in that context, we are looking at how we can make investments to grow our economy and that will be our first screen. But as we do that, we’ll be thinking about whether there are any negative ramifications of any other actions.

In the budget process, there’s not as many of the regulatory issues that will be addressed. There will be some issues that we’ll have to consider in terms of measures around taxation that will have an impact on organizations across the country. And we’ll want to do that in a way that both is growth-enhancing, but also recognizes that we want to be conscious of not causing any further damage to our environment, of course, but also making sure that we’re encouraging investments in green technology, encouraging investment in green infrastructure that can actually make a difference going forward to the environment.

So that’s one of the screens, but I would very much invite you to get back to us with your point of view or the collective point of view of you and your colleagues in the classroom as to what you would see as the measures that we would take that would both be helpful from a growth standpoint in terms of investing in the green activities, for example, and help us with the environment at the same time. It’s very important for us, and I’d assure you that that’s something that we would not only consider this year, but in years going forward because we’re working on Budget 2016, but we’re also thinking about what we can do in subsequent years to make a difference to our economy and to our environment.

So thank you for that question, and with that, perhaps I could move to the Université de Montréal, if there is a question from Montréal.

Question: Hello, Minister.

Hon. Bill Morneau: Hello.

Question: And hello to all the other students. Thank you for this opportunity. My name is Steve Chenju (ph) and we’re a group of undergraduate, masters and doctoral students in the Department of Economics at the Université de Montréal. My question is as follows: We’re in an era today in which governments are financing their economies by reducing budget deficits. We see it in the euro zone with Germany, Spain, France, Portugal, and also with England and the United States, but in Canada it’s sort of the opposite. Instead, the government is increasing the budget deficit. Are you, as Minister of Finance, not afraid that the international community could see that in a negative way, as well as lenders from whom Canada borrows? Aren’t you afraid that, in two or three years, interest rates could rise because of this signal? Thank you.

Hon. Bill Morneau: Thank you very much. That’s a very important question and I understand your question, but what I want to say is that our situation in Canada is slightly different from the situation in the other countries you mentioned. Here in Canada, we have a net debt-to-GDP ratio of 31 per cent. This means that our ratio is much lower than in the other countries you mentioned. We’re in a better situation. Therefore, we can make more significant investments in our economy.

For us, with a level of growth that is now lower than expected, we feel that it is very important to invest in infrastructure, but also in our middle class. We’ve decided to reduce their taxes and to increase the Canada Child Benefit. In our opinion, that’s also an investment in our economy. We have an opportunity to do that because we’re in a good situation, and it’s an important decision to improve our level of growth through significant investments in Canada.

And I believe, because I’ve spoken with a number of our allies in other countries, that they understand our situation and more or less agree that it’s a good idea to make major investments in our economy now with lower-than-expected economic growth. So that’s our program and I believe that it’s a good idea for our economy.

Thank you very much. Now, if possible, I’d like to turn to the Université de Sherbrooke.

Are you on mute, Sherbrooke? I can’t hear you right now.

Question: Can you hear me?

Hon. Bill Morneau: Ah, now I can hear you.

Question: Thank you. That’s good. Hello. My name is Guillaume Poirier. We are students in the faculty of the School of Applied Policy and Taxation. My question is about the fact that, given the announced reduction in certain revenues and the importance of human capital in Canada, what role will the Government of Canada take on in the coming years regarding post-secondary education, particularly in terms of grants, funding, including funding for research, particularly through education transfers for example?

Hon. Bill Morneau: That’s a good question. It’s Guillaume?

Question: Yes.

Hon. Bill Morneau: Yes. Okay. Same name as me, William. Guillaume. Okay. As you know, the education system is a provincial system. That means that funding for education is a provincial responsibility. We want to work with the provinces to improve our situation, of course, but one way is to invest in innovation and in research and development across Canada. And that’s one of the things that we will be thinking about during our budget discussions. But we know that we must work with the provinces to improve the situation because it’s their responsibility.

For me, what I want to be clear on is that for everything we consider, our goal must be to improve our economic situation in terms of growth because I know that, especially for students, it is important to have a job after they graduate. And improving our level of economic growth will increase the number of jobs across the country, and that’s how to do it. But also, investments in research and development, in innovation, will be important. And that’s one of the things that I want to hear from you if you have any ideas. There are universities across Canada that have centres of innovation, for example. We want to hear about opportunities to increase our investment in centres of innovation, for example. That was in our campaign and it’s something that’s important. So if you have ideas, please send them to me because we will listen; all of your ideas are important.

And thank you very much, Guillaume.

If I can move to the University of Western Ontario, maybe we can have a chance there again. No, still not working there. I can tell you you look really good. Okay. For the people at Western, I will come back again. I’m bound and determined to hear from you. Can you try one more time? No luck. So I’m going to move back to University of New Brunswick, and we’ll come back to the really good-looking guy from University of Ontario. Can I go to New Brunswick?

Question: Good afternoon, Minister Morneau. My name is (inaudible). I’m currently a fourth-year BA student from UNB on economics. So I would like to say given the expected spending priority of the infrastructure investment and middle class (inaudible) tax, I think additional investments in education and innovation should be a priority in the next federal budget since it will create for the long term (inaudible). And investments in innovation will encourage graduates to start in business, create jobs and increase Canada’s competitiveness in the global economy. So this is what I have to offer. Thank you.

Hon. Bill Morneau: Well, thank you. Thank you for the comment. And I’ll start by saying this is exactly what I’m hoping to get from these comments and questions. We really do want to get your input on how you would prioritize the things that we should be investing in. And you’re right, we’ve made commitments to invest significantly in infrastructure. We’ve made commitments to help the middle class through tax breaks, to help Canadians who are really struggling to raise their kids with the Canada Child Benefit. We think all those things are important for the economy. We think that’ll help stimulate the economy and help growth, which we know is important.

You point out that education and investment in infrastructure are also important in terms of growing our economy more in the medium and the long term. And let me start by saying I couldn’t agree more, and we recognize the importance of having a high level of education in our workforce. The importance of enabling people to get a strong education is critical to the future. Additionally, we recognize the importance of helping both universities and businesses to be more innovative, so that we can create more opportunity in future. So those are all things that we are thinking about.

As I mentioned to Guillaume from Sherbrooke, we recognize that education is a provincial jurisdiction, and so we want to respect that jurisdiction. We’ll work together with the provinces, but we do want to seek ways that we can help to be more innovative across the country. We recognize that there have been university centres of innovation that have been very effective over the last number of years in creating new start-ups in different parts of the country that have helped, you know, young people to start new jobs. We’re interested in hearing those ideas and are certainly open-minded to engaging, to think about how the federal government can be part of those initiatives to help us to grow our economy and create more opportunity for people like you. So thank you very much for that.

Should we try and go back to Western? Can we try and go back to Western again? We’ll take one more crack at it from Western.

Question: Hello?

Hon. Bill Morneau: Yes, we hear you.

Question: Oh, finally. Okay. My name is Gurpreet Sandhu from Western University, your alma mater. So my question to you is: with slow, but positive, growth expected for the foreseeable future, what is the rationale behind planned budget deficits? Deficits are not Keynesian stimulus, but rather represent opportunities for investment in the future. Why not make budget deficits past the year 2020?

Hon. Bill Morneau: So would you mind saying that one more time, just because we didn’t catch all of it?

Question: Sure. So with slow, but positive, growth expected for the foreseeable future, what is the rationale for planned budget deficits? If the deficits are not Keynesian stimulus, but rather represent opportunities for investment in the future, why not maintain deficits past the year 2020 if the debt-to-GDP ratio (inaudible) go down?

Hon. Bill Morneau: Okay. Well, I think just to repeat for other people who might not have heard that question, the question was: with low growth, you know, why make investments in stimulus and if the answer is that they’re Keynesian stimulus efforts, why not continue them over the longer term as long as our net debt-to-GDP is acceptable. I think that that’s a very important question and maybe gets to the heart of what we’re concerned about.

So we’re concerned that we’ve come out of an era of low growth. In 2015, as you know, in the first couple of quarters, we had negative growth. We were in a difficult situation, and what’s emerged in the last quarter of 2015 as well is that we were challenged with growth. We know that oil prices have a significant impact on Canadian investment levels, and that’s a continuing impact that we’re going to see into 2016.

We also know that the growth engine of international growth has less likelihood of being as positive as it’s been in the last little while. The IMF reported to us that we could expect global growth to be about 3.1 per cent versus more robust growth previously, most recently reported. And even more recently, you know, Christine Lagarde from the IMF this past week came out and talked about, you know, the new mediocre. So the challenge is we’re facing lower growth. We have demographic challenges as well, which are an additional headwind in our growth.

So it’s in that context that we believe we should be making investments in infrastructure. We also have the advantage of very low interest rates right now, so it’s a time when the cost to make infrastructure investments is low because of low interest rates, and the opportunity to improve our productivity through these investments is great, that’s around long-term growth opportunities. And to create some short-term fiscal stimulus, as you mentioned, is also very helpful because it will enable us to get people out and working during a time where growth is lower than we might have hoped.

So it’s not just about short-term fiscal stimulus. It’s about long-term enhancing our productivity at an opportune time, and that’s how we came up with the plan to do this.

With respect to your question about why not continuing to do it, we know that Canadians want us to do more than just focus on growth. They want us to make sure that we’re prudent as we do that. So we need to be careful in all of our efforts to invest in the economy, and that means not think about it as spending, but think about it as investment. So we’ll be prudent, and we will, as you mentioned, focus on our net debt-to-GDP and try and reduce that over time, which is, you know, an important measure of the health of our balance sheet.

What we’ll do in 2020, I think I should leave it until the budget of 2019 to be thinking about that. That’s a time when we’ll have a better understanding of our economic situation, but we remain committed to be focused on growth, growth that will, you know, help our economy today. And in the long term it will help create jobs for people like you and your colleagues in your classroom and the people that are coming behind you.

So if I can just stop us there for a moment, I want to thank everyone for taking some time today. I want to invite you, please, to consider sending any other ideas or thoughts that you might have to us. It’s critically important that we get as many Canadians’ point of view as possible. You know, we’d like it if you continue this conversation, send us your ideas. You know, we recognize the importance, as I said, of listening to you, but of sticking with our principles. And our principles really are we’re going to make significant investments to focus on growth. And we’re going to do that in a way that’s responsible by focusing on bringing down our net debt-to-GDP, by being prudent, and by getting ourselves to a balanced budget over the course of our mandate, which we know by focusing on those three things that we can make an important difference for our economy. And you can help us by deciding what and where we should be making investments to make the greatest difference.

For everyone at the Université de Sherbrooke, Laurentian University, University of Ottawa and Université de Montréal, I would like to thank you for taking the time to share your ideas today, and I encourage you to continue the conversation by submitting your comments on our website, budget.canada.ca, and on our Facebook page, Your Money Matters Canada. Thank you for being here today.

Thank you, everyone, for being here. And I look forward, hopefully, to getting further information from you and further submissions from you and hopefully doing this again in the not-too-distant future. So thanks very much, everyone, for taking some time. And study hard. I know you’re the future of our country. Thank you.

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