December 14, 2015
Canada’s Plan for a Stronger Middle Class and Economic Growth
Check against delivery
Thank you for that extremely generous introduction. It’s an enormous pleasure to be here today.
I want to start by thanking the Toronto Region Board of Trade for hosting this luncheon today and for providing me with my very first opportunity to give a speech as your Minister of Finance.
Before I get going, I want to acknowledge some of the Toronto Centre constituents who I have seen in this room today, and tell them how honoured I am to have been elected as their MP. I take my role as an MP very seriously. I want you to know that I will work very hard to represent both the people who voted to send me to Ottawa, and those who didn’t vote for me. I intend on working for all of the people I now represent.
I’d like to take you back a couple of months. It was quite an election. 78 days of some of the hardest and most rewarding work I’ve ever done. And also a huge amount of fun.
I enjoyed every moment of it. And we’re pretty happy we won a majority government!
On October 19th, Canadians gave us a clear mandate for real change.
It’s worth stopping for a moment to talk about what real change means.
It means pursuing an ambitious agenda and charting a new course for the country.
But it also means doing politics differently.
I want to tell you what it meant to me when I walked to my office the first day as Minister of Finance.
The first thing I noticed were the pictures of former Finance Ministers on the wall of the entrance to the Minister’s office. 38 of them going right back to 1867.
It was an extremely humbling moment—I was daunted and exhilarated—but most of all, I felt the weight of responsibility to make a positive difference in the lives of my fellow Canadians.
Then I met with senior officials from my department. They gave me several enormous binders—what they call briefing books—which was their way of saying: welcome to the Department of Finance.
I went to my desk and I read my mandate letter. Basically, the Prime Minister gave me my to-do list, before I even knew where to find the washrooms, with 27 pretty challenging tasks.
But most importantly, the Prime Minister reminded me—as he reminded all of my new colleagues of the Cabinet—that I have a responsibility to engage constructively with Parliamentarians, the media and Canadians.
I can’t overstate how important this is.
We have a duty to treat our democratic institutions with respect.
Politicians from different backgrounds and political parties can always find a way to disagree with each other, but you’ve given us the opportunity to set a new tone and press “refresh” on how we engage Canadians.
Everyone in this room knows that tone is instrumental to success in any enterprise. Positive, motivated and optimistic people can literally change outcomes for the better—even for a country. As someone I know who now sits two seats away from me in the House of Commons would say, sunny ways.
Sunny ways matter.
Today, my objective is two-fold: first, I want to provide you a clear and honest assessment of our economic and fiscal situation, and second and most importantly, to give you a sense of our plan to help grow the economy.
As we embark on an agenda of economic growth and long-term prosperity, there are no doubts we are facing considerable headwinds.
A few weeks ago, I had the privilege of travelling with the Prime Minister to our first G-20 meeting of Leaders and Finance Ministers in Turkey.
I found myself in a room with President Obama, President Xi of China, Prime Minister Modi of India, Chancellor Merkel and Prime Minister Justin Trudeau.
Canada was ready to play its role once again on the world stage.
I witnessed a clear consensus as the outcome from our discussion: it is a challenging time for the global economy.
The IMF now expects global growth to be at 3.1% in 2015—the weakest it has been since 2009.
Although the recent performance of the US economy is encouraging, the European and Chinese economies are causes for concern.
In Canada, our economic performance in the first half of 2015 was poor, mainly due to the collapse in oil prices that occurred late last year.
Think about it. In the 2015 budget, the government projected the oil price to be at US$54 a barrel by the end of this year. As I speak, oil is trading well below $40 a barrel.
On top of that, commodity prices are softening, affecting our terms of trade and making important inputs—so vital for our manufacturing sector—more expensive.
As a result, the Bank of Canada revised downward its economic forecast twice over the last 12 months and undertook two rounds of interest rate easing.
We now know that growth will be lower than was expected in the last budget projections.
Going forward, it is very likely that global economic conditions will remain unfavourable, and that subdued commodity prices will persist.
This of course has important implications for our currency and our fiscal situation.
In the last budget, the previous government told Canadians the federal government would register a small surplus of $2.4 billion in 2015.
Now, even without considering the investments we laid out in our platform, I told Canadians in my recent Economic and Fiscal Update that our projected budgetary balance will be reduced by about $5.4 billion per year, leaving us with an expected deficit of $3 billion in 2015–16.
I know you won’t be surprised when I tell you that when an economy is not performing as expected, the government will face a shortfall in revenues and higher social program costs.
It’s against this backdrop that I want to talk about where we plan to take our economy.
Let me reassure you that, as a government, we are not daunted by the challenges before us. We fully intend on taking all means necessary to support an economic growth strategy that will benefit all Canadians.
Our government was elected on ambitious economic measures.
We knew that there has never been a better time to make targeted investments to support economic growth.
Our campaign platform is turning out to be more prescient by the day as recent market developments continue to turn our attention towards the downside risks to the economy.
However, and I want to be clear on this: we are not—and we won’t be—embarking on a spending spree.
We will strike a balance between fiscal responsibility and delivering on our commitments to Canadians.
We will do this by adhering to three fundamental principles:
- We will keep the debt-to-GDP ratio on a downward track throughout our mandate;
- We will manage our expenditures prudently; and
- We will return to a balanced budget by the end of our mandate.
The investments we will make will be responsible and will have one clear policy objective: create long-term economic growth for Canadians.
On my very first briefing as Finance Minister, I remember sitting on one side of a long table in my new boardroom, facing at least 12 officials from my department on the other side. Just to give you a better sense, I walk into the boardroom. I’m sitting completely alone on my side. I didn’t have any staff yet. There are a dozen economists and tax experts on the other side. They’ve been studying the issues we’re about to discuss for years, even decades. And now they want to know: what do we plan on doing?
Well, the first thing I said when they asked me my reaction to a particular issue was: will this help grow our economy? And can we realistically implement it?
Let me tell you—there were genuine smiles on the other side of the table.
Why am I telling you this?
Because going forward, this will be the screen we will use to guide our decisions.
It is important to remind ourselves the last 10 years have been characterized by low growth.
This is our starting point.
We are facing two particularly important challenges:
The first is restoring middle class economic progress, the backbone of our economy.
We’ve said it many times, but I’ll say it again: we can’t be prosperous as a country if our middle class is struggling.
This is why, as the first order of business, I tabled in the House of Commons a Notice of Ways and Means Motion to cut taxes for the middle class.
This is the fair thing to do, and the smart thing to do for our economy.
In the next budget, we will introduce the new Canada Child Benefit, another important measure that will provide increased support to 9 families out of 10 and raise hundreds of thousands of children out of poverty. That’s right, hundreds of thousands. Of children.
In contrast to the existing regime, the Canada Child Benefit will be simpler, more generous and tax-free.
Put together, these two measures will help strengthen the middle class, putting more money in their pockets to save, invest and grow the economy. More broadly, they will help grow our economy in the context of a difficult global economic climate so that all Canadians benefit.
The second challenge we face—and the most important one—is creating the long-term conditions for strong and robust economic growth.
We know our growth will be affected by the challenges facing our resource sector.
We also know that our population is aging and household indebtedness is high.
As a country, we face these challenges from a position of strength.
Overall, our fiscal position is enviable. Our debt-to-GDP ratio is well below the G-7 average. We have a well-educated population. We have abundant natural resources. We’re fortunate to have the world’s largest economy as a neighbour.
But we can’t afford to stand still and do nothing.
That is why, last Friday, we made some positive changes to the eligibility rules for new government-backed insured mortgages.
These changes will help protect all homeowners, including many middle class Canadians whose greatest investment is in their homes.
And they also help to strengthen the resiliency of Canada’s housing finance system to promote long-term stability and balanced economic growth.
As you know, we promised historic new investments in infrastructure. Interest rates are at historic lows. Now is the time to invest.
Canadian cities have been growing at a rapid rate, and all governments have a shared challenge to make investments in infrastructure that create economic advantages for Canada and more sustainable urban areas.
Over the next decade, we have pledged to invest $125 billion in public infrastructure. These investments must grow the economy, get Canadians moving and open up more cost-efficient trade options for our exporters.
Strengthening the middle class.
Investing in public infrastructure.
Committing to a comprehensive and ambitious trade agenda. You’ve already heard about improved relations with the US. It’s not just about President Obama hosting a state dinner for Prime Minister Trudeau—although that is an important statement—it’s about working together productively with our neighbour and biggest trading partner to improve our economy. But we won’t stop there. We will make concerted efforts to engage productively with China—I’ll be there three times next year as they host the G-20 meetings. We want to better position us in China and across Asia to drive business opportunities.
This is some of what we have committed to in the short and medium term.
But we must also do more to ensure the long-term economic health of our country.
There are issues we need to tackle to achieve better long-term growth.
An inclusive growth strategy for Canada will include elements such as:
- Placing environmental sustainability at the heart of our resource sector. Canada, with its North American partners, can and should be one of the world’s most efficient and responsible energy producers;
- Supporting growing firms to help them secure the talent, capital and innovation support they need to realize opportunities in the global marketplace;
- Ensuring that Canada’s tax system is competitive for foreign investment, including attracting global research and development mandates; and
- Engaging with the provinces on a skills and labour strategy with better participation of under-represented groups.
These are big, meaningful measures that can have a significant impact of our long-term growth.
But there are no quick, easy fixes.
They require that we devote time to look at evidence to inform our decision-making process.
In early 2016, I will be announcing a new advisory council on economic growth.
It will be composed of people from various backgrounds, with experience in the private and public sectors.
And it won’t be just composed of Canadians. It will include leaders and citizens from other countries, people with global experience in growing successful and inclusive economies.
The mandate of the advisory council will be to help us think about how we can best tackle our longer-term economic challenges.
Let me say a few words to conclude.
We are extremely privileged as Canadians to live in such a diverse, prosperous country.
This is a time with tremendous opportunities to seize.
As we are about to kick off our consultations for our very first budget, I am looking forward to engaging with Canadians from all walks of life.
I’m going into this with an open mind.
But on my radar screen, there is one important word.
Our government is committed to grow the economy.
This is Canada.
We can do it.
Let’s get to work.