Thank you very much, Mr. Chair and committee members, for the opportunity to participate in your hearings on this legislation.

In my view, the 2024 federal budget provides a range of necessary and appropriate fiscal measures to assist Canadians in dealing with current cost of living challenges, to achieve a more equitable distribution of income and to support Canada's macroeconomy through the current challenges of inflation, interest rates and global uncertainty.

The biggest focus of this budget, of course, was addressing the housing crisis in Canada with a wide range of policies, including building new houses on federally owned land, fiscal support for new projects and even converting underused federal office buildings into apartments. These measures are critical to addressing the barriers to secure housing for many Canadians. They will also help to reduce inflation. Rising prices in the shelter component of Statistics Canada's CPI bundle have been the biggest single contributor to recent inflation. Making housing more affordable is a potent long-run anti-inflation measure.

The budget also contained a suite of measures aimed at addressing other aspects of the cost of living challenges facing Canadians, including funding for free school lunches, an excellent idea; the new pharmacare and dental care programs, negotiated with the NDP; and the first tranche of a new Canada disability benefit. These measures are important and valuable.

I will note that one vital social policy priority that was not addressed in this budget is the need for thoroughgoing and lasting reforms to our employment insurance system. The COVID pandemic exposed the gaping holes in Canada's EI system and necessitated the emergency benefits, like CERB, that were implemented during the lockdowns. It is now still vital to go back and truly fix EI so that it can be a proper pillar of income support by addressing failures in the current system of hours, qualification and benefit levels so that EI can serve its proper role as a support to family financial stability when someone is laid off and also as a macroeconomic stabilizer.

Much attention is always directed in these discussions to the budget deficit. The forecast deficit in this budget has hardly changed from last year's trajectory, with $40 billion forecast for the fiscal year that has just ended, 2023-24, and gradually declining after that. The deficit targets contained in previous budgets were maintained despite the budget's modest new spending on cost of living initiatives, defence and other budget items thanks to improved revenue streams.

Canada's deficit remains small relative to deficits of other countries, and particularly compared to the U.S., where deficits are large but the economy is performing much better than Canada's. That's something for us to think about. Both the deficit and debt in Canada are falling relative to GDP.

Indeed, the experience of the last three years has confirmed that the recent rise and now fall of inflation in Canada, like other industrial countries, was not caused by fiscal policy or deficits. There's no correlation internationally between the size of a country's deficit and its rate of inflation. Again, I point out that the U.S. federal deficit is six to eight times larger as a share of GDP than Canada's, and yet its inflation trajectory has been very similar to Canada's.

As Canadian households grapple with the effects of high interest rates and the overall economy continues to grow—very slowly, but growing—modestly stimulative and targeted fiscal measures, rather than fiscal austerity, can help sustain macroeconomic growth. Now, there's a common claim that a budget deficit runs counter to the goals of monetary tightening in trying to reduce inflation, and hence is contradictory, but that view is only valid if it is accepted that inflation is solely the result of a condition of excess aggregate demand.

That assumption was never valid in the wake of the COVID pandemic. The inflation we experienced resulted from supply chain disruptions, temporary shifts in consumer behaviour during and after the lockdowns, a global energy price shock, and, it must be noted, a large dose of excess profit-taking by corporations in Canada. They took advantage of the disruptions and uncertainty of the pandemic and its aftermath to boost prices well above costs of production and saw their profits rise in 2022, the peak of our inflation, to their largest share of GDP in history. None of those suggest a condition of excess demand, and none of those are resolved by a government running a surplus or cutting public spending.

Given a more nuanced and realistic understanding of recent inflation, using fiscal policy to support Canadians through these challenging adjustments is both important and macroeconomically sensible.

I'll leave it at that, sir.

Thank you again for your invitation to participate today.