February 22, 2016
Ottawa

A New Path Forward: Providing Economic Growth for the Middle Class

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Good morning.

Thanks for being here today. It’s been a pretty incredible three months since I became Finance Minister.

I wake up every morning feeling privileged, and very aware of the responsibility we have to work with you to make our country better.

I spent much of January in rooms like this one—travelling the country from Halifax to Surrey, hearing from people about how we can work together to grow the economy.

My colleague and parliamentary secretary, François-Philippe Champagne, also spent a lot of time in places like Quebec City, Moncton and Yellowknife.

As we work towards the budget, I’m inspired by Canadians like you, who have been active alongside us, and who care about the future of our country.

I saw this first-hand in Halifax when small business leaders from across the city joined me first thing on a stormy Monday morning, in spite of a power outage. By candlelight, they spoke of the challenges, but also of the satisfaction that comes from managing their businesses day-to-day.

On a freezing cold day just outside of Winnipeg, Calvin and Sandra Vaags took the time to show me their beef farm in Dugald, Manitoba, unable to disguise their pride as we sat around their kitchen table. Their son was there, equally beaming, proud to be carrying on his parents’ dream.

And I was particularly touched by the tens of thousands of young Canadians, who are reaching out through social media to ask really good questions and demand equally good answers of their government.

Today is no exception, and I want to acknowledge those who have tuned in through Facebook Live today. We’ve had over 200,000 interactions with people so far—through social media and in person—the equivalent of about 10 sold-out NHL games—and you can rest assured that we will continue to stay in touch with as many people as possible so that they can have their say as we build a better Canada.

***

One of the most telling things about what we’ve heard across the country is that people see the big picture. They know that oil prices have contributed to the fall in the dollar, and they are worried.

But they know the recent downturn is really just a symptom of what they’ve been feeling for a long time now. The economy is just not working for the middle class, and those working hard to join it.

Over the last four decades, almost every group in our society has seen their income go up. But when you look at the numbers carefully you see that the top one per cent and 0.1 per cent have benefitted from much more of these gains than the middle class.

Levels of Income Inequality,19762013, Canada
Notes: The Gini coefficient is a commonly used summary measure of the extent of inequality in income distribution that can take values between zero (where every person has identical income) and one (when all income goes to one person). This Gini coefficient is based on income measures adjusted for family size.
Source: Statistics Canada.

Income inequality is an even bigger challenge in times of economic stress, especially for blue collar workers who tend to be the first to feel the effects of economic downturns. For anyone watching us from Alberta, Newfoundland and Labrador, or Saskatchewan this morning, this will come as no surprise.

It’s also something that disproportionately affects the most vulnerable members of our society, like women, seniors, refugees and Indigenous communities.

There is no question that times are tough right now for many Canadians.

A less ambitious government might see these conditions as a reason to hide, to make cuts or to be overly cautious.

But our government believes strongly that the economic downturn makes our plan to grow the economy even more relevant than it was a few short months ago—an approach supported not least by the Organization for Economic Co-operation and Development (OECD), which advised all countries to raise public investment to boost economic growth.

The time to act is now.

We will invest in Canada. It is the right thing to do, both from a public policy perspective and from a human perspective. We need to make smart, necessary investments that will stimulate growth, support our middle class, and care for the most vulnerable members of our society to ensure that we all thrive together.

When it is tabled in exactly one month from now on March 22nd, Budget 2016 will be the first major step in enacting this new direction and plan.

But that’s only the beginning. Over the coming months, the Government will develop a robust growth strategy designed to deliver strong and sustainable growth that will benefit us all, and higher living standards for all Canadians—and we will deliver this strategy to Canadians before the end of the year. 

In support of that strategy, I am also announcing today that Dominic Barton, Global Managing Director of consulting firm McKinsey & Company, has accepted to lead a new Advisory Council on Economic Growth, whose members will meet regularly and report to me with advice on concrete policy actions to help create the long-term conditions for economic growth focused on the middle class.

Their first job will be finding ways to increase our productivity, so that even as our demographics shift, we can still continue to enjoy the highest possible standard of living.

This is a long overdue conversation.

At its core, this approach will be about middle class Canadians—our quality of life, the kind of communities in which we live and work, the standard of living we can expect to enjoy, and the kind of opportunities our children will have in the coming decades.

But I want to be upfront with you.

Our starting point is much further back than we thought. And I know that it’s important to be open and transparent with you about our economic situation as we plan the next budget.

Ten days ago, I met with private sector economists who now expect oil to trade at an average of US$40 per barrel in 2016 compared to the US$54 per barrel expected in our Fall Economic Update. They also expect the growth rate for our country to be 1.4 per cent in 2016, down from 2.0 per cent growth predicted in the Fall Update.

Canada finished 2015—and is heading into 2016—on a weaker note.

Why? After 10 years of weak growth, Canada’s economy was simply too vulnerable when faced with a combination of the drop in oil prices and economic uncertainty around the world.

West Texas Intermediate (WTI) Crude Oil Price
Note: Daily data up to and including February 17, 2016.
Source: Commodity Research Bureau.

This has a real impact on many families, and it also has an impact on the Government’s revenues.

In order for us to provide the growth the middle class needs, short-term deficits will be larger than expected.

Our priority is to solve these challenges for the long term.

Although the cries will get louder over the next few weeks, I won’t have Budget 2016 simply become a knee-jerk reaction to recent economic shifts. We will be acting out of reason.

We have a plan moving forward, and we are committed to help strengthen the middle class and those working hard to join it.

We are prepared to take longer, if it means getting there together.

***

Long term, Canadians have every reason to be optimistic.

We have the resources and the resourcefulness to endure these short-term challenges.

We have the manoeuverability to position ourselves for future success.

Our philosophy is simple—focus on the middle class, help those who need it most, and make smart investments in infrastructure that helps create jobs, get to work faster, move goods further, and make our communities greener. 

We’ve already taken the first steps by cutting taxes for 9 million Canadians this year. As part of that, we asked the wealthiest to pay a little bit more.

We have also taken action to help young Canadians by investing up to an extra $113 million in the Canada Summer Jobs program. This will help our young people get the valuable work experience they need, and create an additional 35,000 summer jobs for students this year.

And we’ve announced plans to create a new, simpler, more generous Canada Child Benefit that will benefit 9 out of 10 families, and raise thousands of children out of poverty. We expect it to reduce Canada’s share of children living in substantial poverty.

Share of Children Living in Low-Income Families, Selected OECD Countries, Late‑2000s
Notes: The OECD uses a relative measure of low-income, with relative poverty defined as someone living in a family with less than half of the median income, adjusted for family size. Data year varies by country, from 2011 to 2013. Data refers to 2011 for Canada.
Sources: OECD, October 2015; Department of Finance calculations.

We will also make smart, targeted investments in infrastructure. Not just for short-term gain, but to ensure the government plays its role in supporting businesses that need access to markets, increased productivity and sustained long-term economic growth.

***

This is a good start. What comes next is improving our economy to take full advantage of our country’s strengths and diversity.

Now is the time to carve out a new path:

  • One that builds upon our highly educated population, and proven leadership in scientific research and infrastructure project management;
  • One that champions our abundant natural resources as both an economic resource and an essential inheritance for future generations;
  • One that transforms Canada into a low-carbon economy that can drive a new innovation agenda, unleashing the creative power of Canada’s diversity;
  • And one that takes advantage of global opportunities, so that our companies can grow and thrive on the international stage—a message I will be taking to Shanghai later this week at the meeting of G-20 Finance Ministers and Central Bank Governors.

Budget 2016 will set the stage for this future, bringing into greater focus long-term goals, while remaining responsive to the realities facing middle class families right now. And I’m pleased to say there will be some positive surprises in store on March 22nd.

But re-imagining the Canadian economy cannot be achieved in a single year or a single budget.

Instead, it will be the combined efforts of many voices that will help to reinforce and shape our vision.

If I can paint you a picture, the situation we’re in is like when you wake up after a snowstorm and your car is snowed in.

Digging out will take time, and you need to get to work.

But here comes your neighbour with a shovel in hand. The teenagers across the street are offering to help you push. The plow is thundering down the road.

This is Canada. We’ll dig out together.

And that’s why we are here today, not just to lay out our vision and the challenges we face, but to hear from you about what your community needs to thrive.

I would stress that pre-budget consultations remain open for two more days—closing on Wednesday at midnight. Canadians can have their say by visiting budget.gc.ca, connecting with us on Facebook, or using hashtag PBC16.

Tomorrow, I will be before the House of Commons Standing Committee on Finance to discuss the economic situation and to take their questions.

It’s important that the conversation continue not just now, but throughout our mandate.

And I invite you to join me now in having it.

I’ll be taking a few questions from the audience, and in a few minutes, I’ll also be taking questions from the media. Thanks again for coming. The floor is yours.