Mr. Baker (Nepean-Carleton):

Yes, Mr. Speaker. That is what I said, on that condition.

Mr. Clark:

That is what he said.

Mr. Trudeau:

Getting tough there, Joe.

Mr. MacEachen:

Mr. Speaker, 1 thank the hon. member for Nepean-Carleton (Mr. Baker) for permitting me to continue my remarks beyond the 30 minute expiry limit, but I would point out, merely to show that I contest his view, that there are ample parliamentary precedents for the course of action which I am following tonight, and that indeed I have to go back no further than the precedent of his colleague in office to justify my course of action tonight.

Hear, hear!

Mr. Deputy Speaker:

Order, please. I believe there is unanimous consent for the minister to continue his remarks. 1 am not aware that there is a question of privilege before the House at this stage.

Mr. MacEachen:

Mr. Speaker, may I continue my comments on the expected growth in the Canadian economy?

The hon. member for York-Simcoe (Mr. Stevens) has suggested that the slow growth forecast is due to the accession of a Liberal government.

Hear, hear!

Mr. MacEachen:

The hon. member may have his own view on that, but 1 would like to remind him that the growth forecast which I am indicating tonight for the economy for 1980 is not much different. It is marginally lower than the forecast which was given to the House of Commons last December by his desk mate.

The impact of higher international and domestic interest rates, together with revisions to the United States outlook, especially in the housing sector on which Canadian exports depend heavily, have been the major factors leading to downward adjustment in most forecasts of the performance of the Canadian economy for 1980.

The unemployment rate is now expected to rise to an average of about 8 per cent. This figure is slightly lower than the forecast in the December budget, reflecting continued strength in employment growth over the past few months.

The consumer price index is projected to rise by 10 per cent. This, of course, is less than the forecast increase in the December budget because we are not subjecting Canadians to the heavy excise on gasoline.

Hear, hear!

Saddle our children with the problem.

Mr. MacEachen:

The increase in the price deflator for gross national expenditure is expected to be about 9.5 per cent. Taken together with an increase of one half of one per cent in real gross national expenditure, this will yield an increase in the nominal value of the GNE of around 10 per cent.

During 1980 the main areas of strength in aggregate demand will be in consumer expenditures and investment. The volume of consumer spending is projected to increase 2 per

April 21, 1980

cent. The cycle of investment expansion which began in 1979 is expected to continue through 1980 with a further increase of more than IV2 per cent in real terms. Other domestic sectors will show no change or will show a decline in 1980.

Government expenditures on goods and services will continue to be affected by policies of expenditure restraint. Residential construction is likely to decline as high interest rates and a large stock of completed but unoccupied new dwellings restrict the number of new starts. A major uncertainty in the outlook for 1980 is the likely pattern of inventories as businessmen shade down their sales expectation in response to lower output growth.

In sum, the world economy is going through a difficult period of adjustment as higher international oil prices are absorbed and as the always painful process of winding down inflation is pursued. As a result of certain important underlying strengths, the Canadian economy should be able to avoid a slowdown as severe as that which appears in store in the United States, but we cannot expect to insulate ourselves fully from that slowdown. This is especially the case given the substantial deficit which already exists on the current account of our balance of payments, and given the size of the federal government deficit which already exists.

Having provided this general overview in an effort to bring the House of Commons up to date on current economic indicators, I would like to say a word or two about the most immediate and visible problem that is confronting the Canadian economy in respect of high interest rates. I refer to the impact of high mortgage interest rates on the estimated 350,000 home owners who will be renegotiating the terms of their mortgage this year. Unquestionably, these people face substantial, unanticipated increases in their monthly mortgage payments.

In assessing the situation, however, it is important to bear a number of facts in mind. It is estimated that less than 10 per cent of these households will confront housing costs in excess of 30 per cent of their incomes upon renewal of their mortgages. This 30 per cent figure is frequently used by lenders and insurers in judging the mortgage payments a household can reasonably be expected to carry.

Given the growth in incomes, the majority of those renegotiating their mortgage will in fact face housing costs that, as a proportion of income, are lower than they were when the terms of the original mortgage were negotiated. Of the less than 10 per cent confronting shelter cost greater than 30 per cent, the majority will be able to rely on a number of means already available or being developed by private lending institutions to ease the transition to higher mortgage costs and help keep their cash outlays within reasonable limits.

I have already indicated in the House of Commons that it was the intention of the government to take steps which would assist those limited number of mortgage holders who are unable to carry the normal proportion of costs to income. My colleague, the minister responsible for CMHC, will be meeting

The Address-Mr. MacEachen

with representatives from the lending institutions to review the general situation. We believe that lending institutions which are involved in this particular sector of the economy are equally concerned in assisting home owners to meet this particular crisis. We know that at the present time certain of these institutions are making special adjustments in order to meet the current situation.

We hope that through a discussion between the minister responsible for CMHC and the lending institutions we may be able to identify further areas in which assistance can be developed. If these discussions demonstrate that new arrangements are required in the limited number of cases to which I have referred, then the government will be able and willing to take action to assist, particularly, to avoid the risk of foreclosure for any of those mortgage holders who are facing this current critical situation.

Hear, hear!

Oh, oh!

Mr. MacEachen:

Members opposite ought to get their economic policy together. They expressed indignation at mention of the deficit as if it ought not to exist at all. When an analysis reveals that maybe a big financial program is not necessary, hon. members also then express their indignation. One is related to the other. At some time they might be able in the course of this Parliament to develop some consistency.

I want to tell hon. members opposite that it is the judgment of this government that any broad measure of assistance aimed at providing relief to what is, in the vast majority of cases, a short-term cash flow problem, would raise serious questions of equity with respect to those Canadians who are hurt in other ways by high interest rates and inflation. If we move with a big expenditure program now which we cannot afford in this housing sector, then in terms of equity we would be obliged to move in other directions as well. It would be a costly undertaking on the part of the government which would result in a more difficult situation, and which would make more difficult the attainment of an over-all reduction in inflation and interest rates. The gradual reduction of inflation and interest rates is the only viable solution to this problem in the long term. In that connection, I am sure hon. members have noticed and have welcomed, just as I have, the increasing evidence of a downturn in general interest rates, both in the United States and Canada.

A quarter of a point.

Mr. MacEachen:

Yes. It is a development. The decrease in the bank rate and the subsequent decrease in the prime rate of the banks is a welcome development. A continuation in that trend is the only viable solution to this particular problem.

I wanted to give the House my assessment tonight very early in my tenure as Minister of Finance of the situation that exists in the world and in Canada. I do not think it escapes any of us that we are facing a difficult situation in Canada and in the world as a whole. I am confident, however, that Canada, as a

April 21, 1980

The Address-Mr. MacEachen united country with Canadians working together, can confront and overcome these difficulties. But obviously our capacity to do so, and the welfare of us all, will be gravely affected if we are unable to meet the immediate challenge to our unity arising from the referendum in Quebec. For myself, I wish to affirm my conviction that only our federal system of government can provide the assurance that the interests of Canadians in Quebec and in all regions of Canada will be served best.

Mr. Baker (Nepean-Carleton):

On a point of order, Mr. Speaker, having now heard the complete statement I wish to give notice that I will be raising a question of privilege tomorrow with respect to the statement and the process we have engaged in this evening.

Mr. Crosbie:

Mr. Speaker-

Mr. Deputy Speaker:

Is the hon. member rising on the same question of privilege? I assumed he was. I was about to recognize the hon. member for Winnipeg-St. James (Mr. Keeper) at this point.