As most of you know I was invited to attend the 2011 pre budget consultation committee chaired by Minister Flaherty in Regina. The meeting was made up 17 carefully selected Canadians, each of who represented a leadership position in their respective industries. The day consisted of:
· An overview by Minister Flaherty of Canada’s past performance and outlook for 2011 and beyond.
· A break out discussion into four groups to solicit ideas and suggestions on cost neutral or non-spending steps the government can take in the next federal budget to help create jobs and promote economic growth:
· Feedback on whether or not the government is on track for a balanced budget by 2015-2016, or is this too ambitious or too unrealistic.
· Suggestions on ways that the federal government can be more efficient and effective.
· Suggestions on what Canadian’s priorities should be for the short and long term to encourage private sector growth and leadership in the economy.
A plenary session followed with Minister Flaherty and Finance department. Each participant spoke about their specific industry and provided feedback and discussion.
Federal Finance Briefing on Canada’s Recent Economic Performance, presented by Deputy Minister Michael Horgan.
· With strong policy support, an economic recovery is continuing.
· Economic activity in Canada is back to pre-recession levels (The best performance in the G7).
· Canada’s solid economic recovery has supported a recovery in the labour market (since July 2009, employment has increased by more than 460,000 jobs, more than offsetting all of the jobs lost during the recession).
· Real GDP Growth is expected to remain moderate in the near term, Canada is expected to have the strongest average growth in the G7 over 2010 and 2011-01-20 (IMF forecast).
· Global recovery is expected to be modest led by emerging economies, particularly Asia.
· Canada has had the highest growth in real income per capita for G7 countries (1999-2009).
· Although we have many positives, global recovery remains fragile.
Risks to the Global Outlook
· Uncertain strength of private demand in advanced economies, particularly in the U.S.
· High sovereign debt levels in some European countries.
· Global imbalances and implications for the Canadian dollar.
Fiscal Situation and Outlook
· Canada is on track to return to a balanced budget by 2015-2016 (current federal deficit is $55 billion).
My comments on behalf of the mortgage industry
I articulated our views to the Minister privately, at the roundtable discussions, and then wrapped up with a very passionate overview of our Industry’s perspective, to the entire group. It created great discussion, feedback and support from many other participants including questions and dialogue from Minister Flaherty himself. My main points were:
· We as an industry are sincerely grateful and the Minister’s office along with Bank of Canada’s Governor Mark Carney, should be congratulated on their swift prudent actions including emergency mortgage pricing, when the global debt crisis began. Their actions were significant in helping Canadians avoid the housing collapse that our U.S. neighbours experienced.
· Although we support and encourage household fiscal responsibility, we think a sweeping policy change like the one we saw earlier this week, wasn’t necessary. Mortgage default in Canada is the lowest in the world. Rather than pairing back the amortization term from 35 years to 30, they should have made the borrower qualify at the payments based on a 30 year amortization, and kept the maximum amortization at 35. Qualification and purchasing power just dropped significantly, especially affecting first time homebuyers, making it more difficult for our most valuable assets, young adults and young families, from experiencing home ownership and participating in our real-estate sector.
· I spoke about the changes regarding refinancing up to 85 per cent loan to value. One of the most effective ways that we as mortgage professionals can eliminate high interest consumer debt and over extension is to retire high interest, unsecured debt by refinancing at today’s low interest rates, sometimes saving the consumer hundreds of dollars per month in throw away interest. What this policy is going to do, is force many homeowners who are experiencing job loss, sickness, separation, divorce, health challenges, or urgent unforeseen family crisis, into having to sell their homes to get access to their very own equity. Think about this, just under two years ago we could refinance up to 95 per cent on a $300,000 home. That’s a difference of $30,000.00, homeowners cannot get access to. Having access to that money, could be the difference between getting through the tough times, or spiralling into much more dire straits, having to quickly sell their home at a discount, and finding themselves in a much more serious situation.
· I spoke about the unlevel playing field between our Canadian insurers, specifically about the unlevel playing field enjoyed by CMHC. We discussed the need for the government to support our insurers equally. It benefits the consumer and supports consumer choice and fair play.
· My most passionate plea was for the government to have a very hard look at unsecured debt and specifically the credit card issuers. Canadian’s biggest financial struggles, their over extension and record debt levels are not due to their mortgages (again, we have the lowest mortgage default in the world). They are due to easy access to high interest credit cards, and other unsecured debt. How is it that my very own son, who is 19, attends university, does not have a job, was issued two separate credit cards, on his own? One of them had an initial credit limit of $500 and is now at $3500 in just over a year. The feedback from all the participants in the consultation was remarkable. Several very high profile participants expressed similar stories and recognized this as a very serious pressing issue for Canadians. I explained that we have very strict qualifications for mortgages, including TDS and GDS ratios to ensure that consumers have the financial wherewithal to make the payments, and similar qualifications based on the credit card limits should apply. The Minister took notes, asked for suggestions on how to implement and recognized it as a more important issue than he had initially considered. We did have discussions and I commended them on taking the first step, and a very valuable one at that, by putting the length required to pay off your credit card based on making the minimum payments.
The day was incredibly interesting, and I truly felt that these sessions were much more than a ceremonial photo opportunity and that the Minister’s office was truly listening, and valued the panel’s feedback. I will continue to stand up for what I believe in, and speak for what is right, not what is popular, politically correct, or the easiest. Our industry is under assault, and Canadians are the ones who are most affected. We need to bind together, regardless of our companies, our competitors and speak with a common voice and stand up so that we can continue delivering choice, value, options and trusted advice to Canadians.