June 23, 2016
Speech by the Honourable Bill Morneau, Minister of Finance
Economic Club of Canada
Check against delivery
Good morning. Thank you very much to all of you for coming out.
I'd like to thank the Economic Club of Canada for hosting this event, and in particular Brian (Tobin) for that very kind introduction.
I also see Adam Vaughan in the audience—thanks for being here.
What a week! As some of you may know, earlier this week in Vancouver we saw something we hadn't seen in a while.
We witnessed federalism at its best.
We witnessed the federal and provincial governments come together to achieve what I think will be a very meaningful public policy for generations to come.
It was truly an historic day.
Canada Pension Plan
Our agreement in principle to strengthen the Canada Pension Plan (CPP) will boost how much each Canadian will get from their pension—from one quarter of their eligible earnings now, to fully one third, with an increased earnings limit.
Simply put, there will be more money waiting for Canadians when they retire.
And I want to take a minute this morning to talk about why that's important—why we felt now was the time to act.
You'll remember that we made a promise that we would focus on helping Canadians succeed—throughout their lives.
So the first thing we did was introduce a tax cut aimed at the middle class.
Since January 1st, 9 million Canadians have a bit more money in their pockets.
Next we brought in the Canada Child Benefit (CCB) to help families with the high cost of raising their kids.
Starting in July, 9 out of 10 families with children will begin receiving bigger cheques—$2,300 a year more, on average.
But while more money every month will make a real difference—the CCB alone will raise 300,000 kids out of poverty—we know that longer term, too many of our friends and neighbours are worried about saving enough money for their retirement.
As many of you know, I've spent my entire career being a witness to the decline in workplace pension plans.
I've actually seen first-hand the challenges that Canadians have in saving for a secure retirement.
The stats on this are astonishing.
In 1977, 43 per cent of Canadian employees were covered by a secure, defined benefit workplace pension—by 2013, that figure had fallen to 27 per cent.
The situation in the private sector is even more stark, with the level of defined benefit coverage down to a mere 11 per cent.
And for young Canadians, the prognosis is even more worrying.
We know there are many young Canadians not saving enough, while companies have changed, eliminated or never implemented pension plans.
When I speak to young people in college or university, it's shocking to me how few of them even think to ask about a pension plan when they look for their first job.
In the budget we took measures that will help seniors now.
For example, we increased the Guaranteed Income Supplement for single seniors by up to $947 annually—helping 900,000 single seniors across Canada, many of whom are living in poverty.
But we knew that unless we could come together as a country to secure and modernize the CPP, the next cohorts—including our kids and grandkids—risk being worse off than us when they want to retire.
So we did what one does in this country. We started talking.
Back in December, at my first federal, provincial and territorial Finance Ministers' meeting, there was goodwill around the table, but no consensus.
We all recognized the need to ensure retirement security, but couldn't agree on what steps needed to be taken.
But we stuck with it. Everyone agreed to continue the discussion. Officials went back and developed options.
We listened. We bridged the gaps. We developed more options. We worked hard.
And at the end of the day, we agreed.
And I think Monday's historic agreement shows that Canada works best when its governments come together in the interest of the people we serve.
I think it's fair to say that everyone left with their heads held high, knowing that the interests of their province or territory were well served, and that we had a pan-Canadian agreement that's good for everyone.
That's a win.
One of the things we agreed to was to phase in the enhancement in a way that is very gradual.
We decided to put in place an improvement in the system that starts in 2019, which is still two and a half years away, for businesses and employees to adjust.
And it won't fully come into place until 2025.
Now, here are the most important changes for Canadians:
As I mentioned a little earlier, we agreed to increase income replacement from one quarter to one third of pensionable earnings—this means that, at maturity, a Canadian with $50,000 in constant earnings throughout their working life would receive around $16,000 instead of the $12,000.
That will put $4,000 more per year in their pocket than they would have had.
And we also agreed to increase the maximum amount of income subject to CPP by 14% so that the maximum earnings subject to CPP reaches roughly $82,700 in 2025.
And, crucially, we made sure the proposed changes are affordable for businesses and individuals by introducing a long and gradual phase-in, as I mentioned; enhancing the federal Working Income Tax Benefit to lessen the impact of increased contributions on low-income workers; and providing a tax deduction—instead of a tax credit—for employee contributions associated with the enhanced portion of CPP.
By making these changes, we wanted to complement private savings and pensions in a way that would make our retirement savings system even healthier and more effective.
In fact, a complementary multilateral agreement with several provinces on Pooled Registered Pension Plans and Voluntary Retirement Savings Plans took effect on June 15th that will provide even more options for people as they plan for retirement.
By now you know that collaboration is important to me.
It's our way of doing things, and this week we've proven that it can produce results.
And so I want to take a few minutes to talk to you about another topic of importance for Canadians' long-term financial security on which we think collaboration is key—and that's the issue of home ownership.
It won't surprise anyone that this topic came up around the table in Vancouver.
It is, after all, an issue that is top of mind for many Vancouverites and Torontonians who are struggling with the high cost of living and seeing their dream of home ownership seem to get further and further out of reach.
People are concerned. And understandably so.
Housing prices have surged by 15% in Toronto and 17% in Vancouver in the last year alone.
People want to know what's going on.
I hear from young families in my riding who want to know if they'll ever be able to buy their first home.
Those who already own their homes want to know that their most important investment is safe.
As I've said before, this is an extremely complex problem—one we are watching closely.
The Prime Minister was in Vancouver just last week hosting a roundtable on the issue.
And I know my colleague Jean-Yves Duclos, the Minister of Families, Children and Social Development, is working hard on affordable housing and hosting roundtables of his own next week.
As Minister of Finance, I have two overriding priorities when it comes to Canada's housing market.
The first is addressing the concerns of middle class Canadians who are worried about buying their first home.
The second is much bigger picture: making sure the market remains stable, meaning that borrowers and lenders are resilient and able to withstand economic shocks.
The factors that drive housing markets are complex, and require in-depth analysis to fully understand. That's why we have been doing a deep dive on this.
And we will continue to make evidence-based decisions.
We are looking very carefully at data on the housing market across the country and what's driving demand and limiting supply.
We also put some money in our budget to improve our understanding of the issue of foreign ownership.
But affordability is only part of the issue.
A home is the single biggest and most important asset for most families.
We need to protect that investment.
We need to make sure the market is stable.
Overall, the housing market and financial system remain sound.
But, since the financial crisis, we've seen pockets of risk emerge, and we've taken action through a series of coordinated actions in conjunction with Canada Mortgage and Housing Corporation and the Office of the Superintendent of Financial Institutions to address borrower vulnerabilities and reinforce the need for lenders to be prudent.
These measures take time to take effect, but as they do they will help.
And if warranted, further steps can be taken to protect borrowers and lenders, which would help to maintain a stable and secure housing market and economy long term.
But it's important to understand that while the federal government has some levers it can pull, we don't have all of them.
This is a shared responsibility, with provincial governments and municipalities having regulatory and taxation powers to respond to unique local conditions.
It's important that we work together on this issue because there isn't one single unified housing market in Canada.
But we need to be coordinated in our approach because taking action to help Vancouverites could have unintended consequences on Calgarians or Haligonians.
That's why, right after the federal-provincial meeting on Monday I spoke to Mike de Jong and Charles Sousa, and reached out to Mayor Robertson in Vancouver and Mayor Tory here in Toronto. I am announcing the creation of a working group of officials from the Government of Canada, the Province of Ontario, the Province of British Columbia, and the cities of Vancouver and Toronto.
The working group will review the broad range of policy levers that affect both supply and demand for housing, the issue of affordability, and the stability of the housing market.
They will meet throughout the summer months, and will bring advice to the Ministers and municipal governments.
With the help of this group, and even closer collaboration with our provincial and municipal partners, we will continue to monitor and better understand the housing market, and I'm confident we will come to the right conclusions.
And let's remember the goal here.
We want to ensure people are well served.
People should know that the Government of Canada has their back.
And we're planning for the future.
Whether it's strengthening the CPP, monitoring the housing market or making investments in transit, our priority is and always will be the success of Canada's middle class.
The House of Commons rose last week.
School is out—or just about—and I'm willing to bet that as I was speaking more than a few of you were daydreaming about long summer days on the dock.
But I, for one, am feeling pretty good about what we've delivered for Canadians in our first session of Parliament.
Taxes are lower for 9 million people.
Families who need it will start receiving bigger cheques in the coming weeks.
We worked with the provinces to help people get to a strong, secure and stable retirement.
All in all, not a bad shift.
But there is work yet to do.