October 28, 2016
Toronto Region Board of Trade

Setting the Foundation for Middle Class Growth

Keynote Speech by the Honourable Bill Morneau, PC, MP

Check Against Delivery

Greetings.

Thank you very much for that introduction.

I want to thank the Toronto Region Board of Trade for hosting me again.

It's my second time at this podium as your Minister of Finance, and it's a real pleasure to be home.

A year ago last week, the people of Toronto Centre put their faith in me, and the country opted for real change.

Next week will mark the one year anniversary of the Government's swearing-in at Rideau Hall, where I was given the incredible responsibility for our country's finances.

I will tell you it's been an exciting, challenging, busy and exhilarating year.

Anniversaries are special moments when we get a chance to reflect.

We look back, we take stock, but more importantly, we look ahead at what's coming and make plans for the future.

From that perspective today's speech is well timed.

In just a few days I will deliver the Government's Fall Economic Statement.

It's a mid-point between budgets.

It's a chance to update our economic outlook, and to show progress, to build momentum and reconfirm the Government's agenda.

But before I get too far ahead of myself, let me take a minute to look back on the year that was, and the progress we've made not just here at home but around the world.

One of the first things I did after being sworn in as Finance Minister on that sunny fall day was board the Prime Minister's plane for the G20 Summit in Antalya, Turkey.

We were introducing the world to a new, positive, warm and energetic Canadian Prime Minister.

We said we can't claim success unless the most vulnerable members of our society benefit from the economic activity and growth we create together.

We were concerned with retirement security. Health care. Indigenous issues. Climate change. Fairness.

We said that with the best balance sheet in the G7, we would make long-term investments to improve our productive capacity—and our future wealth.

And I can tell you, in the summit rooms in Antalya, some weren't quite sure what to make of our sunny ways.

There was optimism, to be sure.

The International Monetary Fund (IMF) agreed with us. There was an understanding that focusing on fiscal policy was the right direction, given that monetary policy had been doing the heavy lifting over the past few years and was running out of steam.

But focusing on the middle class? Not everyone was on our team.

Fast forward to this past September at the G20 Leaders Summit in Hangzhou, China, where the concept of growth that works for everyone—what some call "inclusive growth"—was on everyone's lips from President Xi to President Obama.

And, of course, a certain Prime Minister Trudeau has led the charge.

A year ago we put our finger on the reality that people around the globe are having a hard time seeing how economic growth will make their lives better. 

We made strengthening and growing the middle class our first step—our top priority.

We took some big, important steps to help families reduce their anxiety and regain the confidence they'll need to drive our economy forward.

We cut taxes for 9 million middle class Canadians.

We gave families $2,300 more, on average, tax-free, through the Canada Child Benefit.

We increased student grants by up to 50% for those who need it.

We increased Guaranteed Income Supplement top-ups for single impoverished seniors.

We reached an agreement with the provinces to strengthen the Canada Pension Plan.

We showed Canadians—especially the middle class—the benefits of our strong economy. And we showed we could invest in ourselves and do it responsibly.

So it's no surprise that Canada's approach is now often heralded abroad as the example to follow.

In the hallways of the G20 summit in Hangzhou, and most recently at the IMF and World Bank meetings in Washington almost one year later, there's been a sea change in attitude.

Not a meeting goes by without someone saying: "I like what Canada is doing."

The challenge, of course, becomes how to ensure this great momentum is sustained long term.

A big piece of that puzzle is ensuring that our plan rests on a solid foundation of financial stability and security.

I've spent most of my time here with you talking about financial security—and with good reason.

When people have more money, they make decisions on saving and investing in the things that matter to them most—they benefit directly, and our economy benefits.

Strengthening the Canada Pension Plan, for example, will give the next generation of Canadians the confidence to go about their lives knowing that their living standards will be more secure in retirement.

That's crucial.

But we can't talk about financial security without talking about stability.

Financial Stability

As Finance Minister, I take my broad responsibility for Canada's financial stability very seriously.

Luckily, Canada has what it takes to succeed.

But we must remain vigilant to maintain our strong foundation.

I've been on this issue from my first day as Finance Minister.

And this past Monday, the Governor of the Bank of Canada and I announced our intention to renew Canada's flexible inflation-target regime until 2021.

This decision was made based on the understanding that low and stable inflation is absolutely necessary to support and promote the economic and financial well-being of Canadians. 

It helps Canadians, including businesses, to make decisions about investment and spending and plan for the long term.

As we look to ensure financial stability in Canada, I'm pleased to have the benefit of good advice from top officials from several agencies—the Governor of the Bank of Canada, the Superintendent of Financial Institutions, the Canada Deposit Insurance Corporation and the head of Canada Mortgage and Housing Corporation, and my own Deputy Minister and the strong team of economists at the Department of Finance.

Work and guidance released by the IMF and the Financial Stability Board suggest that effective regimes to promote financial stability—also known as macroprudential governance—require, among other things, clear roles and responsibilities for policy tools to bolster financial stability.

I agree.

So let me be clear: At the end of the day, I am ultimately responsible for supporting financial security, and the stability of our financial system.

I think every day about the challenges facing many Canadian families and how important stability and security are to them when they get up in the morning to get the kids to school, go to the hockey arena, pay their bills, or sit back and watch their favourite TV show.

People go about their lives knowing that our foundation is solid.

Well, my job is to try to look around the next corner to protect Canadians.

And I have the authority over a key tool for maintaining financial stability in Canada: rules pertaining to mortgages for homes. 

You are no doubt familiar with some key actions we've taken recently—in fact, I suspect many of you are here today to find out a little more about measures to ensure a healthy, dynamic housing market here in Toronto and right across the country.

One of my first actions after taking office was to address pockets of risk in the Toronto and Vancouver markets by raising the minimum down payment for homes across Canada priced above $500,000.

And earlier this month, I introduced complementary measures designed to bring greater consistency to mortgage rules, reduce risk for taxpayers and ensure everyone is playing by the rules.

I will continue to act to ensure that household debt levels are sustainable, that lenders are acting prudently, and that increases in interest rates or a housing market downturn don't put at risk the economic growth we are working so hard to accelerate.

These are not easy decisions, but I know they are the right thing to do.

Another anecdote for you from my travels: During my most recent trip to Washington, I organized a lunch with a handful of key American economic leaders, all with a keen interest in Canada and our policies for inclusive growth.

Former Treasury Secretary Larry Summers—who, as many will know, has straddled Harvard as its President and the White House as a key economic leader for three decades—was there.

At lunch, Larry announced to me:

"You've dealt with what I believe to be the single biggest risk to the Canadian economy."

I don't think I need to tell most of you why.

High household debt leaves Canadians more vulnerable to an economic downturn.

History and substantial analysis tell us that during a downturn middle class and low income families are hit the hardest.

They are the ones who feel pinched at the end of the month when it comes time to pay their mortgage and their bills.

The ones who face the greatest financial impact on their families if house prices decline.

The ones who stand to lose their dreams.

By acting now, we are promoting long-term affordability.

Ensuring that housing markets remain healthy.

And allowing Canadians to sleep more soundly.

These timely and targeted actions to support financial stability enable the Bank of Canada to focus on its paramount goal of price stability, which supports the financial security of Canadians.

These outcomes support sustainable growth, and allow us to move forward our economic agenda of growth for the middle class, and more opportunities for all Canadians.

Conclusion

So it's been quite a year.

We began laying the groundwork for a stronger middle class and for higher economic growth from our very first days in government.

We are giving families more opportunities to prosper, so that they are better able to save for their children's educations, buy skates for their kids this winter and worry less about their savings and assets when they retire.

And we shored up the foundation on which it all rests.

Throughout my tenure as Finance Minister, I will strive to find a balance between the actions we take in the short term and the essential goal of keeping my eye on the long game.

As I mentioned, next Tuesday I'll be tabling our Government's Fall Economic Statement.

Our goal is simple: We want to ensure Canada is equipped to succeed in the global economy of tomorrow.

We've received bold ideas from my Advisory Council on Economic Growth that have moved the conversation one step further.

Next week, and in the coming months, we will provide more details on our efforts to continue to build Canada's economic future.

Your economic future.

Know that together we can build a better tomorrow—for all of us.

Thank you.