
Positively Politics, Featuring the Honourable Scott Brison - Views from the North
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In this episode, the Honourable Scott Brison, BMO Vice-Chair and a former Member of Parliament, joins me to discuss Canada’s political backdrop. Scott outlines the current state of the government amid President Trump’s tariff threats, his experiences with some of Canada’s key political figures ahead of what could be a spring election, and what’s needed to improve persistently weak productivity.
Following the interview with Mr. Brison, I provide a quick take on my expectations for next week’s Bank of Canada policy announcement, and my favourite trade ideas.
As always, all feedback is welcome.
Episode Timecodes:
- 00:00 - Introduction
- 01:02 - Interview with the Honourable Scott Brison
- 42:39 - Preview of next week's Bank of Canada's policy decision
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About Views from the North
BMO’s Canadian Rates Strategist, Ben Reitzes hosts roundtable discussions offering perspectives from strategy, sales and trading on the Canadian rates market and the macroeconomy.
Ben Reitzes:
Welcome to Views from the North, a Canadian Rates and Macro podcast. This week's episode is titled Positively Politics, Featuring the Honorable Scott Brison. Before we move to my interview with Mr. Brison, just a note for the listeners following the interview, I'll be laying out my views on the Bank of Canada's upcoming meeting and you can listen to those post the interview.
I'm Ben Reitzes and you're listening to Views from the North. Each episode I'll be joined by members of BMO's FICC sales and trading team to bring you perspectives on the Canadian rates market and the macroeconomy. We strive to keep the show as interactive as possible by responding directly to questions submitted by our listeners and clients. We value your feedback, so please don't hesitate to reach out with any topics you'd like to hear about. I can be found on Bloomberg or via email at benjamin.reitzes@bmo.com. That's Benjamin. R-E-I-T-Z-E-S@bmo.com. Your input is valued and greatly appreciated.
I'd like to welcome Scott Brison to the podcast. The Honorable Mr. Brison joined BMO as a vice chair in 2019, was elected as a member of Parliament for Kings Hants Nova Scotia, seven consecutive times over 21 years through to 2019. During that time, he held key roles in government, most recently as President of the Treasury Board, Minister of Digital Government, Minister of Public Works and Government Services and Parliamentary Secretary to the Prime Minister with a special emphasis on Canada US relations. Mr. Brison was Dalhousie University's eighth chancellor. He serves on the boards of Canada China Business Council, CJPAC, the advisory board of the Canadian American Business Council, Highlander Foods and Power Sustainable Corporation. Scott, thank you for joining me.
Scott Brison:
Delighted, Ben, and looking forward to the conversation.
Ben Reitzes:
So I brought Scott on today to talk about Canadian politics. It is an interesting time in Canada, interesting time in North American relations with President Trump coming in. But we're going to start on the Canadian political side because I feel that dozens of questions about what exactly is going on here, what is coming next, what the process that's going on with Prime Minister Trudeau resigning and effectively what the timeline is for Canada, especially given the terror threats out there and how Canada can, will, and should respond. So, let's start at the top here. Given Trudeau's resignation and the fact that Parliament is prorogued until March 24th, what is the state of the government at present?
Scott Brison:
Well, Parliament has not been functioning very well for some time. Now, withstanding that the government of Canada continues to function, ministers and departments continue to implement public policy and run the affairs of state. So government is very much in operation in the same way government actually runs even during election periods. Now, the question that I think people have is, are they able to act decisively on issues in this period of time without parliamentary approval? And the answer is yes, they can. On global issues and issues of tariffs as an example, the government is able to make decisions and take action.
Ben Reitzes:
Okay. Well, I think everyone will be delighted to hear that, especially Canadians. So, those of you out there who think Canada's not functioning at present, that is clearly incorrect. What is the state of the legislation that hasn't been passed? So for example, a capital gains tax hike was put in the last budget, it never actually got passed. It was tabled but didn't quite get to the finish line, and the border measures recently announced as well. Do those need parliamentary assent to go forward or can they get maybe partially pushed ahead without Parliament approving?
Scott Brison:
Well, the border measures can move ahead. That is a function of the government and cabinet. Tax changes and fiscal changes require parliament. I think you'll see even in the liberal leadership, a healthy debate on tax policy and the capital gains tax changes proposed in the last budget. Those changes effectively died on the order paper when the government prorogued. I believe that that will be one of the areas of debate and discussion in the liberal leadership, but I believe that certainly at least one candidate for the liberal leadership will be taking a different position on that issue.
Ben Reitzes:
All right. Well, you're leading me down the path here. What's the process for the liberal party to choose a new leader, and what can you tell us are the differences between the front-runners at the moment being Chrystia Freeland, Mark Carney, and whoever else you want to deem as one of the front-runners?
Scott Brison:
Well, at this point in the liberal leadership, Mark Carney and Chrystia Freeland are considered front-runners. I do think that there are some other candidates in the race who are meritorious candidates, who are serious people and bring something important to the race and ought to be considered seriously as people with real ideas. I think Frank Bayless is somebody who is a business person also as a member of parliament. I worked with him when we were both in liberal caucus in Ottawa, and I was in cabinet, he was a member of Parliament. He has an impressive business track record, very impressive. Karina Gould, I worked with her in cabinet. She has been a sure-footed and capable and youthful and yet serious voice and cabinet in the House of Commons. So, I don't think we should discount anybody. They all bring something to the race. In terms of Chrystia Freeland and Mark Carney, I know them both extremely well.
I've known Mark for about 20 years when I was a cabinet minister in Paul Martin's government, he was too icy at the Department of Finance in Ottawa and we were undergoing some privatization efforts for the government of Canada real estate at the time. And he was also had been active and very involved in the Petro-Canada privatization and some of the tranches that were... I think he did the final tranche at that time and we hit it off. I've spent time with Mark and his wife, Diana, and their family and he's a really good person and he truly is a friend. I also have spent a lot of time with Chrystia over the years going back to 2013. I doorknocked with her when she first ran in Toronto Centre Rosedale in a by-election and they are both smart, strong communicators, people who are in public life by choice because they want to make a difference and I believe their motivation for being in public life is very good.
There are some key differences in, I think their perspective on the economy and the market-based economy, and there may be some areas where they agree as well. Inevitably there will be some common ground, but they're both people for whom I have respect.
And I think today when the state of politics is as dismal in some ways as it has become, I think it's a very good thing for Canada that the liberal party of Canada is still able to attract to its leadership race to people as capable and smart and decent as Mark Carney and Chrystia Freeland. So I think the liberal party has seen brighter days than right now. I have great respect for both of them stepping up and both of them, Chrystia in 2013 and Mark more recently leaving positions of extreme success in other realms. Chrystia is a journalist and author, Mark as a globally recognized central banker for Canada and the UK as a business person subsequently. He's choosing public life right now with the greatest sense of public service. And Mark, although he has had time in investment banking, most of his career has been in service to the people.
When he joined the Department of Finance in Canada, he was leaving Goldman Sachs at the time which he basically applied for a job. I think having read an ad in the Economist magazine. So, while Mark has not spent time in direct politics, he has spent most of his career actually serving the public either as a senior leader in the Department of Finance or as a central banker during some of the most challenging times of our age to be in central banking. He headed up the FSB, the Financial Stability Board at that time and garnered a lot of respect globally. So, he has been at the very top of business and his roles at Brookfield as an example, previously as an investment banker, he really has throughout his life really focused a lot on public good and serving in those capacities, including his work with the UN and climate change.
His father was a school teacher and his father actually ran for the liberals in 1979 in Edmonton and didn't win. Running as a liberal in Edmonton then would've been a challenge at the best of times and that was actually the election that The Right Honorable Joe Clark won. And so, his father wasn't successful in that campaign, but I do think some of that sense of public service and interest in politics, it goes quite deep with Mark. I've learned over 20 years that he not only has the right head for public policy, but he has the right heart for public service. He's truly a decent person.
Ben Reitzes:
What's the process for choosing a new leader for the liberal party? When does this all come to a head? Are they campaigning? How different is it for the US for all the listeners out there?
Scott Brison:
Well, this is a very condensed leadership selection process. The date for cutoff for people to actually be at a register as a member or supporter of the Liberal Party of Canada is January 29th, which is right around the corner. You have to be on that list in order to vote in the leadership, which is in early March. And then on March 24th, the opposition parties have promised a confidence vote in the House of Commons. So it's quite possible that the new leader will be selected in early March and we'll have a couple of weeks effectively to put their own brand on what the liberal party offers in the next election. That is really a tight timeline in the same way that I think in the US that Kamala Harris did not have a lot of time to pivot to presenting her own sort of vision.
That's something that the new leader of the liberal party needs to ensure that they use this brief period of time effectively to show Canadians that in fact the liberal party can be a vehicle for change. And this is a time when Canadians want change, and it's very hard for a member of the current cabinet or someone who has been a member of the cabinet in some ways to represent that change to Canadians. In Canada, Kim Campbell discovered that. Prior to that, John Turner discovered that, Gordon Brown in the UK following Tony Blair, you can't really run against the government you were part of. It's a really tough needle to thread, and I believe Mark brings a real advantage. Mark Carney brings a real advantage in that he was not part of Justin Trudeau's cabinet and government.
Ben Reitzes:
Have you had any run-ins with the other party leaders? I guess, most notably Conservative Leader Poilievre because he's well ahead in the polls at the moment and it does barring something drastic, it looks like they are more than likely to form the next government, but things do change, so that's where we stand at the moment. What have your experiences been with him?
Scott Brison:
Well, I've known him actually going back to about 1999, 2000 in that period of time. So I've known him for 20, 25 years when I was elected in 1997 as a Progressive Conservative with Jean Charest as my leader, and then in 2000 I was elected as a progressive conservative with Joe Clark as my leader. And then when the Canadian Alliance or Reform Party merged with the Progressive Conservative Party in 2003, I left that same week. What I would say, Pierre Poilievre was my shadow minister when I was in Paul Martin's cabinet or my critic, and I've known him a very long time. I would say this about him, he is a very capable retail politician. That being said, he's extremely good at the politics that I don't necessarily adhere to. I was very fortunate in my political career to have the benefit of leadership of people who had both great depth and intelligence, but also character and a sense of public good over partisan advantage all the time. And both Jean Charest and Joe Clark are quite exceptional citizens.
Look, Jean Chrétien was Prime Minister and as an opposition, being able to go to Jean Chrétien about issues in my writing. There was a certain respect for members of Parliament regardless of party and a decency about how we conducted ourselves. Paul Martin, he was the leader when I joined the party in 2003, and then I was actually elected as a liberal in 2004. I didn't go into his cabinet until I was elected as a liberal in my writing. But I think the politics has changed quite a bit. The rise of the Reform Party in Canada in some ways had its roots in sort of the Tea Party type of messaging in the US and parties that toy with populism to garner political support sometimes find that they lose control of things. I think in the US Republicans, we saw that and Paul Ryan and others who were part of that Tea Party were actually people who were very serious about things like tax reform and fiscal responsibility.
But once you unleash that populist tiger, it's like that limerick, "There once was a lady from Niger who smiled as she rode in a tiger, they came back from the ride with the lady inside, and the smile on the face of the tiger." Again, I certainly have respect for the capabilities of Pierre Poilievre as a retail politician and he seems to have an ability to identify the issues that are really important to Canadians right now, and to exploit those quite successfully in politics today. I don't know what his economics plans are. He's been against everything the government's done, but we'll see what the actual plans are, but I'm sure that will come out in time. But nobody should underestimate Pierre Poilievre's political skills. But again, his political skills are apply to a politics that I personally don't adhere to.
Ben Reitzes:
That's fair. I think the part of the change on the political side is societal. Nothing's quiet anymore. You can't have quiet meetings with anyone without somebody seeing and posting it on. You pick your favorite social media outlet, that's where it is, and then creates outrage from whomever, wherever someone gets angry. One, I don't know, a little more extreme part of maybe your party decides to get rid of you or something along those lines. And so I think that's unfortunate. I'm with you. I'm not a social media fan personally, but that's unfortunately the world that we currently inhabit. I don't know how we go back.
Scott Brison:
Well, social media is going to continue to grow as a force. I think there are politicians and political leaders in the world who are using it actually quite positively. Interestingly enough, Daniel Noboa the president of Ecuador, I've met him, I'm a bit of a fan of his and I hope he wins his election in February to his re-election. But you can use social media to communicate positive messages and engage people in an honest way. I think what a lot of politicians have chosen to use it to communicate misinformation sometimes and to gut your moments and that kind of thing, that's their choice. Just because it's working for them and that the political strategists have chosen to use social media as a force of negative attack style politics, does not mean that good people in public life can't use it to...
As far as X goes and platforms like that, they're really not as important as Facebook and Instagram or even LinkedIn today in terms of there is more thoughtful. I'm not saying that Instagram and Facebook are thoughtful, but they are where our families are and there where regular people are on there. And a challenge we have is we don't have a strong media today, a legitimate journalistic community, and it is really tough. I mean, Pierre Poilievre, I've got elected leader of the Conservative Party of Canada having refused to do most mainstream media outlet interviews including The Globe and Mail and Canada, and I believe CBC and others and he didn't have to. Now, 20 years ago that would never have happened. So things have changed. I worry that the fact-based digital content is under siege right now, but I think it's too important to give up on.
Ben Reitzes:
Sir-
Scott Brison:
Going back to, I think it was 1998, section 237 in US legislative or regulatory change that was pushed by the digital media companies at that time took away the right to sue a digital content vehicle for libel, and the best inoculation against libel is the truth. And that was not a good decision. But in the past, people regardless of social economic background or education tended to read newspapers. I grew up in rural Nova Scotia. My mother had her grade nine education, my father grade 11, they grew up during the Great Depression. They were smart people, they were business people, but they grew up very poor.
But I can tell you they read the newspaper every single day and my father for a long time, he lived in '96, read The Globe Mail and The Halifax Chronicle Herald. And a few days before he died in '96, he renewed his economist subscription. So regardless of your education or your socioeconomic background, part of citizenship was to actually follow issues. And today, I think we have a lot of very educated people with MBAs working in banks who really know their sectors and banks or law firms, or very successful people from a conventional standard, very educated, very prosperous, but I bet we have a lot of people in our midst. Again, educated, successful who don't-
Ben Reitzes:
Uninformed.
Scott Brison:
No, who don't have as part of their discipline to keep themselves informed. And I tell our young bankers, read The Economist every single week, and that's not the only thing, but at least if you do that you'll be able to talk to a client about more than their sector or their company or sports. Most CEOs are interested in broader issues, but more importantly than how it'll make them a better banker, it'll make them a better citizen. And the most important vocation for which we should be raising our young people is not lawyers, not banker, is not teacher or plumber. The most important vocation for which we need to be preparing our children is that of being a citizen. And there is scant effort by the education systems today to do that. I think it's on parents largely, but I think as a society we reprioritize citizenship so that people actually understand the part of their responsibility is to follow actively the issues as much as they would follow sports or the finance pages.
Ben Reitzes:
I mean, you mentioned the quality of the media is not what it once was and that does make it much harder. So you have to read between the lines at times depending on who you're reading and what you're reading. And I think that is challenging if you haven't been reading it for a very long time. So, I've been doing it long enough so that I can figure that out, but for most people it's not that easy.
Scott Brison:
And you'd agree, Ben, that there's a lot of young people who don't have that same muscle memory.
Ben Reitzes:
Oh! They shouldn't have it. They can't have it because they haven't read. One, they haven't read bipartisan media and two, they get most of their media online.
Scott Brison:
Well, and the problem with online media is the echo chamber effect of where a lot of us get our news through some form algorithm that understands what we like and what we don't like and it tends to reinforce much of what we're thinking. I lived in New York in my 20s and I used to subscribe to the National Review and the New Republic and The Economist, but I really like to understand perspectives. I think we have to take democracy very seriously today, and I think it's more fragile and more vulnerable than many people realize. And that worries me greatly. I never thought I would feel that way about our democracy, but it's really based on citizens and we as individual citizens, it's on us to fix it. And the more privileged you are in my view, the more responsibility you have to lean in on these issues.
Everyone's staying away from politics now saying it's a shitshow. I don't want to go too close to it. And then the next question, "Do you think it needs to be fixed? Oh yes, it's very important to be fixed." And you ask them, who's supposed to fix it? Is it the people who are cleaning our offices tonight who are raising families on multiple lower wage jobs and can barely put food on the table and pay the rent? Is it on them to lean in, or is on people who for whatever reason, find ourselves privileged that at this stage of our lives. So I think people who've had success in their own lives or people who have benefited from multi-generational privilege have a responsibility to take this seriously, and its democracy is not a spectator sport and it's on us to up our game.
Ben Reitzes:
Call to action. I'm going to change gears a little bit and bring it back to the economy. Donald Trump has threatened tariffs on us multiple times. What do you think Canada's best response is?
Scott Brison:
Well, I think first of all, I think it should be a unified response. The government of Canada right now still has the ability, the Trudeau government is very much still the government of Canada, notwithstanding parliament being prorogued. But with its positioning in the polls, I think at the provincial level it creates a bit of an incentive for provincial premiers to take their own approaches. And I'm not questioning their intentions, but it is in my view, helpful and important. If Canada speaks with one voice informed by the premiers with a prime minister who actively engages with premiers, takes their advice seriously, has relationships with the premiers and then speaks with one voice. That's not happening now, and part of that would be on the prime minister perhaps for not having cultivated those relationships. But I also think the premiers ought to be finding ways to be part of Team Canada. It's helpful if, with the premiers and the federal government working together, it can be a symphony. Right now, it's a bit of a cacophony, and speaking with disparate voices does not strengthen our bargaining power with the Trump administration.
Ben Reitzes:
Couldn't agree more. The overriding message is positivity from you, I think so far today.
Scott Brison:
My positivity is a problem for me. I tend to have faith in humanity. After 22 years in politics and seven elections, I have great faith in humanity and great faith in the people. I think politics today is being run largely by political strategists who go from one campaign to another, and they tend to be inherently very cynical people in terms of their view of the world and very few of them ever have the courage to put their own names on a ballot. 50 years ago, our best leaders were in government and public life. You go back in time, privileged people, successful people chose to serve, and we were the better for the... The Roosevelt family, Teddy Roosevelt and Franklin Roosevelt were in the White House for 19 of the first 50 years of the 20th century, from a privileged family. Franklin Roosevelt, had he not been there in the second World War, it is unlikely that the US would've joined the fight.
The survival of the free world was at stake. And he partnered with another child of privilege, Winston Churchill, who was actually a member of Parliament for 60 years. And one thing I do believe is that Mark Carney as leader can help inspire a lot of great leaders from other realms to put their names on ballots to become members of parliament and serve Canadians. And I want to get back to where people understand that for part of their life, if they have some of the right qualities for politics and some of the heart for it as much as the head, you need to have the heart to do good for people. And you need to care about other people's kids as you care for your own. You have to actively think about other people's children, not just your own. If you have some of that and the ability to connect with people, that might make you a super CEO, but you don't have to be a CEO your whole life and you can only eat so many steak dinners in the run of a day.
And money doesn't mean much to you or your family if your country is not performing well or worse being run into the ground either socially or economically by bad leadership. So, I can make the case to people and I would make the case to people if Mark Carney were to become or does become leader of the liberal party that people should consider running and getting off the benches. But regardless of party, I think we need better people in public life. So, I would encourage good people to run for all political parties, not just the one that I happen to be a member of. I've been elected for two political parties in Canada and I always believe your country comes first over partisanship. I would like to see more people with that perspective in all political parties.
Ben Reitzes:
One last question on the economy. Canadian productivity has been terrible, let's say, to put it kindly and that is kindly for my entire lifetime, decades, we've lagged the US. The divergence has gotten worse over the past decade. If you had no limits on what you could do, what policy changes would you enact?
Scott Brison:
Well, if you go back to public policy changes made by previous governments that really moved the needle, you go back to the Mulroney government with free trade tax reform, the GST, which was very unpopular but was important. Privatization, Petro-Canada, Air Canada, a lot of deregulation and regulatory competitiveness changes. And then following that, the Chrétien and Martin governments, if you look at the fiscal that they tackled the fiscal now. I actually believe that those two governments, one being a progressive conservative government, one being a liberal. If you want to know whether you can really make a difference in terms of the Canadian economy making long-term changes, the combination of their policies, I don't believe the liberals would've been successful in tackling the deficit if Mulroney had not done what he did at the time with big structural changes to the Canadian economy. And it takes time, and Mulroney paid and the progressive conservative party paid a really big political price for those changes, but they invested their political capital wisely in terms of public policy.
I think actually there has not been since 2006 a significant focus on visionary policy. Mr. Harper, of course, had to deal with the global financial crisis, but he was there for quite a long time. He cut the GST, which from a public policy perspective is dumb. It takes about 20 billion out of revenue every year and doesn't do anything for productivity or competitiveness, and reduces your capacity to do other things. In terms of what should be done now, I believe we need very significant tax reform in Canada. The last time we had a significant study and reform of the tax system goes back to 1971 with the Carter Commission. Everything has changed since then, and we need to really tackle tax reform with the objective being to build a fairer, simpler, more competitive Canadian tax system. And I don't think any of those are mutually exclusive.
I think regulatory reform is an area. When I was in cabinet, one of the areas I had in Treasury board was all the regulatory policy, the government of Canada, and there was an area I really tackled in terms of regulatory reform and cooperation with our trading partners, including the US. Donald Trump was president some of that, Trump 45 and Mick Mulvaney was my cabinet counterpart there. We actually made some real progress, but I think we should be doing really significant broad-based regulatory and tax reform, and that the regulatory reform ought to be done with a view to build a multilateral approach to common approaches and regulation with our trading partners.
I mean, during COVID, Health Canada worked quite closely with the FDA to all of our benefit, and I think it was through things like mutual recognition where they would recognize drugs or vaccines by the other and effectively fast-tracked approvals. Now, in many ways that makes a lot of sense because it doesn't reduce the rigor of the evaluation of the drug. What it does is eliminate some of the duplication. Health Canada and the FDA use basically identical methodologies for approval, but in each of their fiefdoms they do it separately. And those Canadians who look at say, "We don't want to get the US, the FDA to do this because the US regulatory, we can't trust them." In Canada, thalidomide was approved. It wasn't by the FDA. So, I mean-
Ben Reitzes:
Necessarily better.
Scott Brison:
Let's not be pious. Well, we should never assume that our largest trading partner is interested in poisoning their children any more than we are. And we should get serious about a regulatory cooperation with the US and with our trading partners. I think Canada because we've got an FTA with Europe and an FTA with North America, and we could actually lead on global regulatory policy, and it's an area where we should. But we shouldn't wait for all the ducks to be in a row multilaterally, we should start right in Canada, starting with eliminating interprovincial trade barriers. It's been talk talk talk for far too long and if you were to do that, you would add by some estimate a couple of points to GDP, Canadian Chamber of Commerce. The other thing is government itself in Canada is about 40% of GDP. So, if you were to improve the productivity of government by 10% and having been in government for a long time, I can tell you that's like shooting fish at a barrel.
If you're prepared to do what needs to be done, it's just 10%. Just say, instead of 4%, it's 2% that you're adding to. Just say 2% of GDP. That's a big, so the government sometimes hectors the private sector for not making enough investments. To me, the government has a responsibility to run government more efficiently because if they are suboptimally managing 40% of the economy, that is a weight on the overall economic performance of the country and on our GDP. So, I'd say government efficiency in Canada, we should have our own Doge in some ways and not be afraid, led by private sector people. I wouldn't necessarily choose someone quite like Elon Musk, but I could think of people like Michael McCain who knows the food sector and manufacturing very well. Nancy Southern understands energy very well. Linda Hasenfratz understands manufacturing and advanced manufacturing. You go Don Lindsay, former CEO of tech who understands the natural...
These are just names that pop in my mind as we're chatting here, but they're people who are not just really smart business people, they are really good citizens. So, you don't need a Doge necessarily of the tone and tenor of the US version, which has elements that I'm not entirely comfortable with. I'm being very diplomatic, but you can have a group of high-level capable private sector leaders or former leaders who are really great citizens and would put Canada first in whatever we did to lead efforts in Canada. But this is not a left-wing or right-wing issue. By the way, if tax dollars are being wasted by mismanagement, that is bad for social programs and it is bad for the market-based economy. So it's just good government need not be, in fact most of the time should not be rigidly ideological.
Ben Reitzes:
Okay. Mr. Brison, Scott, thank you very much for coming on the show today, and when the next political crisis or events come to Canada, I will give you a call.
Scott Brison:
Look forward to it, Ben.
Ben Reitzes:
Thanks for listening to my interview with Scott Brison. I'm going to add a little bit on the Bank of Canada this week since the interview was focused entirely on politics and we get the Bank of Canada's policy decision next week. Next week's Bank of Canada decision is going to be driven almost entirely by tariffs and the threat of tariffs, I guess, at this point since we don't know if and when they're actually coming. The Bank of Canada already had an easing bias after the December meeting. They maintained it. It was a so-called hawkish 50 basis point cut at the meeting in that they of signaled that it's a slower pace is coming in rate cuts, but they did maintain that easing bias. And the data since that meeting have been pretty mixed, I mean, hardly definitive either way, definitely nothing pushing for a rate cut and nothing to say for sure that they should pause.
But what we've seen is CPI that we got earlier this week on Tuesday, soft headline, no surprise there with the tax holiday, but the core measures were continued to be sticky. Really, you've had three straight months of pretty sticky core numbers that the trim and the median were sticky. And if you look at some of the other metrics, which is what a lot of the doves like to focus on, you're going to get very challenging year ago comparables. So the base effects coming in January, February, March, I believe April as well for example, for CPIX, which does exclude mortgage interest cost is much more challenging and you're likely to see that number potentially move back above 2%. And so there's nothing in the outlook that is pressing necessarily for a rate cut at the moment just looking at the data on its own. But it's really not about that at the moment, it's about the risk of tariffs.
If Canada gets tariffs, be they 5%, 10%, 25%, whatever the number is, it will be a negative for the economy, it will be a negative for growth and the Bank of Canada is more than likely to want to respond to that. And given they already have that easing bias, they already expect that more rate cuts are likely needed. With the risk out there of tariffs, I think it makes sense for them to be cutting another 25 basis points at the meeting next week. Is that a sure thing? No, but it does look probable. I think most are calling for that rate cut at the moment. The market's 80 to 85% price right now, so it does look probable. Looking at their forecast from October because we are going to get a new NPR with fresh forecasts. In October, they had QFOR growth, GDP growth to 2%.
It's looking like it's going to come around one and a half to 2% in that ballpark. So they won't be way off either way. They're on the high side of things, but I don't think it's a huge miss and we're only going to get that actually later. We won't really know, but I think that forecast won't change all that much and Q1 will be introduced as well. That's probably going to come somewhere around two and a half percent. Either side of that I think seems like a likely outcome with the GST holiday providing a boost to growth, the consumption, and you're going to get checks handed out by Ontario, that should help growth as well as we make our way through this quarter. Though we haven't gotten those checks yet and I'm quite looking forward to them myself. Otherwise, on the inflation side, they overestimated headline CPI, but they have underestimated core CPI.
So, I think the core numbers should matter more. I mean, the bank highlighted that the core measures are what they will be focused on through this GST holiday and they have missed on the downside. So that's not great news for an inflation targeting Central Bank. The flip side though is that the core measures aren't the be-all and end-all. And if you look at the breadth of inflation, it's case leveled out and is more or less in line with what you see historically. So, like the share of items above 3% and below 1% for that matter are close to in line with long-term averages, not when inflation is very low, but when inflation is close to the target at least. So, breadth looks pretty good at this point. So where does that leave the bank? I mean, assuming they cut 25 next week, where do you go from there?
Obviously, it depends heavily on the tariffs and if they come, expect the bank to be much more aggressive and rates to come down very, very quickly, very sharply and the currency to off accordingly, and Canadian rates to outperform accordingly, so on and so forth. But if there are no tariffs, and this is just a risk that hangs over Canada for a while, wouldn't shock me if the bank pretty much followed the Fed after this January meeting. And it's still an open question to me as to how weak they want the currency to get. They mentioned it a little bit more prominently in the last minutes, so it has gotten their attention, and I'm hopeful that we get one of the media outlets out there asking the bank about what the potential limits are for policy divergence because they've generally played that down. Governor Macklem has in past press conferences.
But that should be a question that gets raised, again, absent the tariffs, because if there are tariffs, obviously that divergence gets much more extreme. And I think that's the bank lowdown at the moment. That's how I view things. I don't know if things are going to change materially until we get a little more information on the political side. We need the election outcome in Canada, even though that's still many months away. We need tariff outcome to know how much of an impact, if any, that's going to have. And we need to see how the economy's evolving, whether the momentum that we saw in some of Q3 and to some extent Q4, though not quite as much is going to continue or maybe improve in the first quarter of the year thanks to those stimulus measures. And if anything else is coming on that front as well.
On the trade front, even with the tariffs, I think Canada still looks wildly expensive here. Again, we continue to having at least a piece of that short Canada-US trade on here. I mean, by piece 10 to 20% of total size at most. And I think hedging that with a curve steepener or five, 30s makes a good amount of sense here. And then it gives you the opportunity if there are tariffs, I would expect the Canada curve to bolster steep and sharply. So that provides a nice offset to Canada richening and Canada does richening aggressively, I think that is a fade over the long run. Even if we do get tariffs, I'd be surprised if this is a ten-year issue for Canada. And what it will do is it'll really push Canada to be better, I hope, and to make Canada push on the productivity side of things and provide tax code, do all that stuff that needs to happen after an election.
So, we'll see on that front. But those are the favorite trades at the moment. Still watching swap spreads pretty closely. They've backed up nicely here on the back of that foreign provincial issuance. The desk does not think there's legs to this movie. They think that we probably grind lower again and again. This still comes back to tariffs. Unfortunately, if they come and there's fiscal stimulus, that just means more bonds, that just puts more downward pressure on spreads over time. So something to keep an eye on there.
And last but not least, on the provincial front, again, tariffs matter a lot. It would be good for the fiscal situation for any of the provinces if we were to get tariffs. And so in that scenario, you probably do see spreads widen a bit, but for now, demand remains very strong. New issue books are very well subscribed and there's strong demand for provies at the moment. So, spreads are very well-supported. Unfortunately, that tariff overhang is still there. So for now, we wait and see, and I'm watching the headlines just like everybody else out there. And hopefully the next ones are more positive than negative. Good luck out there and thanks for listening. Thanks for listening to Views from the North, a Canadian rates and macro podcast. I hope you'll join me again for another episode.
Speaker 1:
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Positively Politics, Featuring the Honourable Scott Brison - Views from the North
Managing Director, Canadian Rates & Macro Strategist
Benjamin has been with the Bank of Montreal nearly two decades. He is re-sponsible for the Canadian macro-economic forecast, and plays a key role in forecasting int…
Vice-Chair, BMO Wealth Management
The Honourable Scott Brison joined BMO as Vice-Chair, Investment & Corporate Banking in 2019. As an elected Member of Parliament, Scott served the constituency …
Benjamin has been with the Bank of Montreal nearly two decades. He is re-sponsible for the Canadian macro-economic forecast, and plays a key role in forecasting int…
VIEW FULL PROFILEThe Honourable Scott Brison joined BMO as Vice-Chair, Investment & Corporate Banking in 2019. As an elected Member of Parliament, Scott served the constituency …
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In this episode, the Honourable Scott Brison, BMO Vice-Chair and a former Member of Parliament, joins me to discuss Canada’s political backdrop. Scott outlines the current state of the government amid President Trump’s tariff threats, his experiences with some of Canada’s key political figures ahead of what could be a spring election, and what’s needed to improve persistently weak productivity.
Following the interview with Mr. Brison, I provide a quick take on my expectations for next week’s Bank of Canada policy announcement, and my favourite trade ideas.
As always, all feedback is welcome.
Episode Timecodes:
- 00:00 - Introduction
- 01:02 - Interview with the Honourable Scott Brison
- 42:39 - Preview of next week's Bank of Canada's policy decision
Follow us on Apple Podcasts and Spotify or your preferred podcast provider.
About Views from the North
BMO’s Canadian Rates Strategist, Ben Reitzes hosts roundtable discussions offering perspectives from strategy, sales and trading on the Canadian rates market and the macroeconomy.
Ben Reitzes:
Welcome to Views from the North, a Canadian Rates and Macro podcast. This week's episode is titled Positively Politics, Featuring the Honorable Scott Brison. Before we move to my interview with Mr. Brison, just a note for the listeners following the interview, I'll be laying out my views on the Bank of Canada's upcoming meeting and you can listen to those post the interview.
I'm Ben Reitzes and you're listening to Views from the North. Each episode I'll be joined by members of BMO's FICC sales and trading team to bring you perspectives on the Canadian rates market and the macroeconomy. We strive to keep the show as interactive as possible by responding directly to questions submitted by our listeners and clients. We value your feedback, so please don't hesitate to reach out with any topics you'd like to hear about. I can be found on Bloomberg or via email at benjamin.reitzes@bmo.com. That's Benjamin. R-E-I-T-Z-E-S@bmo.com. Your input is valued and greatly appreciated.
I'd like to welcome Scott Brison to the podcast. The Honorable Mr. Brison joined BMO as a vice chair in 2019, was elected as a member of Parliament for Kings Hants Nova Scotia, seven consecutive times over 21 years through to 2019. During that time, he held key roles in government, most recently as President of the Treasury Board, Minister of Digital Government, Minister of Public Works and Government Services and Parliamentary Secretary to the Prime Minister with a special emphasis on Canada US relations. Mr. Brison was Dalhousie University's eighth chancellor. He serves on the boards of Canada China Business Council, CJPAC, the advisory board of the Canadian American Business Council, Highlander Foods and Power Sustainable Corporation. Scott, thank you for joining me.
Scott Brison:
Delighted, Ben, and looking forward to the conversation.
Ben Reitzes:
So I brought Scott on today to talk about Canadian politics. It is an interesting time in Canada, interesting time in North American relations with President Trump coming in. But we're going to start on the Canadian political side because I feel that dozens of questions about what exactly is going on here, what is coming next, what the process that's going on with Prime Minister Trudeau resigning and effectively what the timeline is for Canada, especially given the terror threats out there and how Canada can, will, and should respond. So, let's start at the top here. Given Trudeau's resignation and the fact that Parliament is prorogued until March 24th, what is the state of the government at present?
Scott Brison:
Well, Parliament has not been functioning very well for some time. Now, withstanding that the government of Canada continues to function, ministers and departments continue to implement public policy and run the affairs of state. So government is very much in operation in the same way government actually runs even during election periods. Now, the question that I think people have is, are they able to act decisively on issues in this period of time without parliamentary approval? And the answer is yes, they can. On global issues and issues of tariffs as an example, the government is able to make decisions and take action.
Ben Reitzes:
Okay. Well, I think everyone will be delighted to hear that, especially Canadians. So, those of you out there who think Canada's not functioning at present, that is clearly incorrect. What is the state of the legislation that hasn't been passed? So for example, a capital gains tax hike was put in the last budget, it never actually got passed. It was tabled but didn't quite get to the finish line, and the border measures recently announced as well. Do those need parliamentary assent to go forward or can they get maybe partially pushed ahead without Parliament approving?
Scott Brison:
Well, the border measures can move ahead. That is a function of the government and cabinet. Tax changes and fiscal changes require parliament. I think you'll see even in the liberal leadership, a healthy debate on tax policy and the capital gains tax changes proposed in the last budget. Those changes effectively died on the order paper when the government prorogued. I believe that that will be one of the areas of debate and discussion in the liberal leadership, but I believe that certainly at least one candidate for the liberal leadership will be taking a different position on that issue.
Ben Reitzes:
All right. Well, you're leading me down the path here. What's the process for the liberal party to choose a new leader, and what can you tell us are the differences between the front-runners at the moment being Chrystia Freeland, Mark Carney, and whoever else you want to deem as one of the front-runners?
Scott Brison:
Well, at this point in the liberal leadership, Mark Carney and Chrystia Freeland are considered front-runners. I do think that there are some other candidates in the race who are meritorious candidates, who are serious people and bring something important to the race and ought to be considered seriously as people with real ideas. I think Frank Bayless is somebody who is a business person also as a member of parliament. I worked with him when we were both in liberal caucus in Ottawa, and I was in cabinet, he was a member of Parliament. He has an impressive business track record, very impressive. Karina Gould, I worked with her in cabinet. She has been a sure-footed and capable and youthful and yet serious voice and cabinet in the House of Commons. So, I don't think we should discount anybody. They all bring something to the race. In terms of Chrystia Freeland and Mark Carney, I know them both extremely well.
I've known Mark for about 20 years when I was a cabinet minister in Paul Martin's government, he was too icy at the Department of Finance in Ottawa and we were undergoing some privatization efforts for the government of Canada real estate at the time. And he was also had been active and very involved in the Petro-Canada privatization and some of the tranches that were... I think he did the final tranche at that time and we hit it off. I've spent time with Mark and his wife, Diana, and their family and he's a really good person and he truly is a friend. I also have spent a lot of time with Chrystia over the years going back to 2013. I doorknocked with her when she first ran in Toronto Centre Rosedale in a by-election and they are both smart, strong communicators, people who are in public life by choice because they want to make a difference and I believe their motivation for being in public life is very good.
There are some key differences in, I think their perspective on the economy and the market-based economy, and there may be some areas where they agree as well. Inevitably there will be some common ground, but they're both people for whom I have respect.
And I think today when the state of politics is as dismal in some ways as it has become, I think it's a very good thing for Canada that the liberal party of Canada is still able to attract to its leadership race to people as capable and smart and decent as Mark Carney and Chrystia Freeland. So I think the liberal party has seen brighter days than right now. I have great respect for both of them stepping up and both of them, Chrystia in 2013 and Mark more recently leaving positions of extreme success in other realms. Chrystia is a journalist and author, Mark as a globally recognized central banker for Canada and the UK as a business person subsequently. He's choosing public life right now with the greatest sense of public service. And Mark, although he has had time in investment banking, most of his career has been in service to the people.
When he joined the Department of Finance in Canada, he was leaving Goldman Sachs at the time which he basically applied for a job. I think having read an ad in the Economist magazine. So, while Mark has not spent time in direct politics, he has spent most of his career actually serving the public either as a senior leader in the Department of Finance or as a central banker during some of the most challenging times of our age to be in central banking. He headed up the FSB, the Financial Stability Board at that time and garnered a lot of respect globally. So, he has been at the very top of business and his roles at Brookfield as an example, previously as an investment banker, he really has throughout his life really focused a lot on public good and serving in those capacities, including his work with the UN and climate change.
His father was a school teacher and his father actually ran for the liberals in 1979 in Edmonton and didn't win. Running as a liberal in Edmonton then would've been a challenge at the best of times and that was actually the election that The Right Honorable Joe Clark won. And so, his father wasn't successful in that campaign, but I do think some of that sense of public service and interest in politics, it goes quite deep with Mark. I've learned over 20 years that he not only has the right head for public policy, but he has the right heart for public service. He's truly a decent person.
Ben Reitzes:
What's the process for choosing a new leader for the liberal party? When does this all come to a head? Are they campaigning? How different is it for the US for all the listeners out there?
Scott Brison:
Well, this is a very condensed leadership selection process. The date for cutoff for people to actually be at a register as a member or supporter of the Liberal Party of Canada is January 29th, which is right around the corner. You have to be on that list in order to vote in the leadership, which is in early March. And then on March 24th, the opposition parties have promised a confidence vote in the House of Commons. So it's quite possible that the new leader will be selected in early March and we'll have a couple of weeks effectively to put their own brand on what the liberal party offers in the next election. That is really a tight timeline in the same way that I think in the US that Kamala Harris did not have a lot of time to pivot to presenting her own sort of vision.
That's something that the new leader of the liberal party needs to ensure that they use this brief period of time effectively to show Canadians that in fact the liberal party can be a vehicle for change. And this is a time when Canadians want change, and it's very hard for a member of the current cabinet or someone who has been a member of the cabinet in some ways to represent that change to Canadians. In Canada, Kim Campbell discovered that. Prior to that, John Turner discovered that, Gordon Brown in the UK following Tony Blair, you can't really run against the government you were part of. It's a really tough needle to thread, and I believe Mark brings a real advantage. Mark Carney brings a real advantage in that he was not part of Justin Trudeau's cabinet and government.
Ben Reitzes:
Have you had any run-ins with the other party leaders? I guess, most notably Conservative Leader Poilievre because he's well ahead in the polls at the moment and it does barring something drastic, it looks like they are more than likely to form the next government, but things do change, so that's where we stand at the moment. What have your experiences been with him?
Scott Brison:
Well, I've known him actually going back to about 1999, 2000 in that period of time. So I've known him for 20, 25 years when I was elected in 1997 as a Progressive Conservative with Jean Charest as my leader, and then in 2000 I was elected as a progressive conservative with Joe Clark as my leader. And then when the Canadian Alliance or Reform Party merged with the Progressive Conservative Party in 2003, I left that same week. What I would say, Pierre Poilievre was my shadow minister when I was in Paul Martin's cabinet or my critic, and I've known him a very long time. I would say this about him, he is a very capable retail politician. That being said, he's extremely good at the politics that I don't necessarily adhere to. I was very fortunate in my political career to have the benefit of leadership of people who had both great depth and intelligence, but also character and a sense of public good over partisan advantage all the time. And both Jean Charest and Joe Clark are quite exceptional citizens.
Look, Jean Chrétien was Prime Minister and as an opposition, being able to go to Jean Chrétien about issues in my writing. There was a certain respect for members of Parliament regardless of party and a decency about how we conducted ourselves. Paul Martin, he was the leader when I joined the party in 2003, and then I was actually elected as a liberal in 2004. I didn't go into his cabinet until I was elected as a liberal in my writing. But I think the politics has changed quite a bit. The rise of the Reform Party in Canada in some ways had its roots in sort of the Tea Party type of messaging in the US and parties that toy with populism to garner political support sometimes find that they lose control of things. I think in the US Republicans, we saw that and Paul Ryan and others who were part of that Tea Party were actually people who were very serious about things like tax reform and fiscal responsibility.
But once you unleash that populist tiger, it's like that limerick, "There once was a lady from Niger who smiled as she rode in a tiger, they came back from the ride with the lady inside, and the smile on the face of the tiger." Again, I certainly have respect for the capabilities of Pierre Poilievre as a retail politician and he seems to have an ability to identify the issues that are really important to Canadians right now, and to exploit those quite successfully in politics today. I don't know what his economics plans are. He's been against everything the government's done, but we'll see what the actual plans are, but I'm sure that will come out in time. But nobody should underestimate Pierre Poilievre's political skills. But again, his political skills are apply to a politics that I personally don't adhere to.
Ben Reitzes:
That's fair. I think the part of the change on the political side is societal. Nothing's quiet anymore. You can't have quiet meetings with anyone without somebody seeing and posting it on. You pick your favorite social media outlet, that's where it is, and then creates outrage from whomever, wherever someone gets angry. One, I don't know, a little more extreme part of maybe your party decides to get rid of you or something along those lines. And so I think that's unfortunate. I'm with you. I'm not a social media fan personally, but that's unfortunately the world that we currently inhabit. I don't know how we go back.
Scott Brison:
Well, social media is going to continue to grow as a force. I think there are politicians and political leaders in the world who are using it actually quite positively. Interestingly enough, Daniel Noboa the president of Ecuador, I've met him, I'm a bit of a fan of his and I hope he wins his election in February to his re-election. But you can use social media to communicate positive messages and engage people in an honest way. I think what a lot of politicians have chosen to use it to communicate misinformation sometimes and to gut your moments and that kind of thing, that's their choice. Just because it's working for them and that the political strategists have chosen to use social media as a force of negative attack style politics, does not mean that good people in public life can't use it to...
As far as X goes and platforms like that, they're really not as important as Facebook and Instagram or even LinkedIn today in terms of there is more thoughtful. I'm not saying that Instagram and Facebook are thoughtful, but they are where our families are and there where regular people are on there. And a challenge we have is we don't have a strong media today, a legitimate journalistic community, and it is really tough. I mean, Pierre Poilievre, I've got elected leader of the Conservative Party of Canada having refused to do most mainstream media outlet interviews including The Globe and Mail and Canada, and I believe CBC and others and he didn't have to. Now, 20 years ago that would never have happened. So things have changed. I worry that the fact-based digital content is under siege right now, but I think it's too important to give up on.
Ben Reitzes:
Sir-
Scott Brison:
Going back to, I think it was 1998, section 237 in US legislative or regulatory change that was pushed by the digital media companies at that time took away the right to sue a digital content vehicle for libel, and the best inoculation against libel is the truth. And that was not a good decision. But in the past, people regardless of social economic background or education tended to read newspapers. I grew up in rural Nova Scotia. My mother had her grade nine education, my father grade 11, they grew up during the Great Depression. They were smart people, they were business people, but they grew up very poor.
But I can tell you they read the newspaper every single day and my father for a long time, he lived in '96, read The Globe Mail and The Halifax Chronicle Herald. And a few days before he died in '96, he renewed his economist subscription. So regardless of your education or your socioeconomic background, part of citizenship was to actually follow issues. And today, I think we have a lot of very educated people with MBAs working in banks who really know their sectors and banks or law firms, or very successful people from a conventional standard, very educated, very prosperous, but I bet we have a lot of people in our midst. Again, educated, successful who don't-
Ben Reitzes:
Uninformed.
Scott Brison:
No, who don't have as part of their discipline to keep themselves informed. And I tell our young bankers, read The Economist every single week, and that's not the only thing, but at least if you do that you'll be able to talk to a client about more than their sector or their company or sports. Most CEOs are interested in broader issues, but more importantly than how it'll make them a better banker, it'll make them a better citizen. And the most important vocation for which we should be raising our young people is not lawyers, not banker, is not teacher or plumber. The most important vocation for which we need to be preparing our children is that of being a citizen. And there is scant effort by the education systems today to do that. I think it's on parents largely, but I think as a society we reprioritize citizenship so that people actually understand the part of their responsibility is to follow actively the issues as much as they would follow sports or the finance pages.
Ben Reitzes:
I mean, you mentioned the quality of the media is not what it once was and that does make it much harder. So you have to read between the lines at times depending on who you're reading and what you're reading. And I think that is challenging if you haven't been reading it for a very long time. So, I've been doing it long enough so that I can figure that out, but for most people it's not that easy.
Scott Brison:
And you'd agree, Ben, that there's a lot of young people who don't have that same muscle memory.
Ben Reitzes:
Oh! They shouldn't have it. They can't have it because they haven't read. One, they haven't read bipartisan media and two, they get most of their media online.
Scott Brison:
Well, and the problem with online media is the echo chamber effect of where a lot of us get our news through some form algorithm that understands what we like and what we don't like and it tends to reinforce much of what we're thinking. I lived in New York in my 20s and I used to subscribe to the National Review and the New Republic and The Economist, but I really like to understand perspectives. I think we have to take democracy very seriously today, and I think it's more fragile and more vulnerable than many people realize. And that worries me greatly. I never thought I would feel that way about our democracy, but it's really based on citizens and we as individual citizens, it's on us to fix it. And the more privileged you are in my view, the more responsibility you have to lean in on these issues.
Everyone's staying away from politics now saying it's a shitshow. I don't want to go too close to it. And then the next question, "Do you think it needs to be fixed? Oh yes, it's very important to be fixed." And you ask them, who's supposed to fix it? Is it the people who are cleaning our offices tonight who are raising families on multiple lower wage jobs and can barely put food on the table and pay the rent? Is it on them to lean in, or is on people who for whatever reason, find ourselves privileged that at this stage of our lives. So I think people who've had success in their own lives or people who have benefited from multi-generational privilege have a responsibility to take this seriously, and its democracy is not a spectator sport and it's on us to up our game.
Ben Reitzes:
Call to action. I'm going to change gears a little bit and bring it back to the economy. Donald Trump has threatened tariffs on us multiple times. What do you think Canada's best response is?
Scott Brison:
Well, I think first of all, I think it should be a unified response. The government of Canada right now still has the ability, the Trudeau government is very much still the government of Canada, notwithstanding parliament being prorogued. But with its positioning in the polls, I think at the provincial level it creates a bit of an incentive for provincial premiers to take their own approaches. And I'm not questioning their intentions, but it is in my view, helpful and important. If Canada speaks with one voice informed by the premiers with a prime minister who actively engages with premiers, takes their advice seriously, has relationships with the premiers and then speaks with one voice. That's not happening now, and part of that would be on the prime minister perhaps for not having cultivated those relationships. But I also think the premiers ought to be finding ways to be part of Team Canada. It's helpful if, with the premiers and the federal government working together, it can be a symphony. Right now, it's a bit of a cacophony, and speaking with disparate voices does not strengthen our bargaining power with the Trump administration.
Ben Reitzes:
Couldn't agree more. The overriding message is positivity from you, I think so far today.
Scott Brison:
My positivity is a problem for me. I tend to have faith in humanity. After 22 years in politics and seven elections, I have great faith in humanity and great faith in the people. I think politics today is being run largely by political strategists who go from one campaign to another, and they tend to be inherently very cynical people in terms of their view of the world and very few of them ever have the courage to put their own names on a ballot. 50 years ago, our best leaders were in government and public life. You go back in time, privileged people, successful people chose to serve, and we were the better for the... The Roosevelt family, Teddy Roosevelt and Franklin Roosevelt were in the White House for 19 of the first 50 years of the 20th century, from a privileged family. Franklin Roosevelt, had he not been there in the second World War, it is unlikely that the US would've joined the fight.
The survival of the free world was at stake. And he partnered with another child of privilege, Winston Churchill, who was actually a member of Parliament for 60 years. And one thing I do believe is that Mark Carney as leader can help inspire a lot of great leaders from other realms to put their names on ballots to become members of parliament and serve Canadians. And I want to get back to where people understand that for part of their life, if they have some of the right qualities for politics and some of the heart for it as much as the head, you need to have the heart to do good for people. And you need to care about other people's kids as you care for your own. You have to actively think about other people's children, not just your own. If you have some of that and the ability to connect with people, that might make you a super CEO, but you don't have to be a CEO your whole life and you can only eat so many steak dinners in the run of a day.
And money doesn't mean much to you or your family if your country is not performing well or worse being run into the ground either socially or economically by bad leadership. So, I can make the case to people and I would make the case to people if Mark Carney were to become or does become leader of the liberal party that people should consider running and getting off the benches. But regardless of party, I think we need better people in public life. So, I would encourage good people to run for all political parties, not just the one that I happen to be a member of. I've been elected for two political parties in Canada and I always believe your country comes first over partisanship. I would like to see more people with that perspective in all political parties.
Ben Reitzes:
One last question on the economy. Canadian productivity has been terrible, let's say, to put it kindly and that is kindly for my entire lifetime, decades, we've lagged the US. The divergence has gotten worse over the past decade. If you had no limits on what you could do, what policy changes would you enact?
Scott Brison:
Well, if you go back to public policy changes made by previous governments that really moved the needle, you go back to the Mulroney government with free trade tax reform, the GST, which was very unpopular but was important. Privatization, Petro-Canada, Air Canada, a lot of deregulation and regulatory competitiveness changes. And then following that, the Chrétien and Martin governments, if you look at the fiscal that they tackled the fiscal now. I actually believe that those two governments, one being a progressive conservative government, one being a liberal. If you want to know whether you can really make a difference in terms of the Canadian economy making long-term changes, the combination of their policies, I don't believe the liberals would've been successful in tackling the deficit if Mulroney had not done what he did at the time with big structural changes to the Canadian economy. And it takes time, and Mulroney paid and the progressive conservative party paid a really big political price for those changes, but they invested their political capital wisely in terms of public policy.
I think actually there has not been since 2006 a significant focus on visionary policy. Mr. Harper, of course, had to deal with the global financial crisis, but he was there for quite a long time. He cut the GST, which from a public policy perspective is dumb. It takes about 20 billion out of revenue every year and doesn't do anything for productivity or competitiveness, and reduces your capacity to do other things. In terms of what should be done now, I believe we need very significant tax reform in Canada. The last time we had a significant study and reform of the tax system goes back to 1971 with the Carter Commission. Everything has changed since then, and we need to really tackle tax reform with the objective being to build a fairer, simpler, more competitive Canadian tax system. And I don't think any of those are mutually exclusive.
I think regulatory reform is an area. When I was in cabinet, one of the areas I had in Treasury board was all the regulatory policy, the government of Canada, and there was an area I really tackled in terms of regulatory reform and cooperation with our trading partners, including the US. Donald Trump was president some of that, Trump 45 and Mick Mulvaney was my cabinet counterpart there. We actually made some real progress, but I think we should be doing really significant broad-based regulatory and tax reform, and that the regulatory reform ought to be done with a view to build a multilateral approach to common approaches and regulation with our trading partners.
I mean, during COVID, Health Canada worked quite closely with the FDA to all of our benefit, and I think it was through things like mutual recognition where they would recognize drugs or vaccines by the other and effectively fast-tracked approvals. Now, in many ways that makes a lot of sense because it doesn't reduce the rigor of the evaluation of the drug. What it does is eliminate some of the duplication. Health Canada and the FDA use basically identical methodologies for approval, but in each of their fiefdoms they do it separately. And those Canadians who look at say, "We don't want to get the US, the FDA to do this because the US regulatory, we can't trust them." In Canada, thalidomide was approved. It wasn't by the FDA. So, I mean-
Ben Reitzes:
Necessarily better.
Scott Brison:
Let's not be pious. Well, we should never assume that our largest trading partner is interested in poisoning their children any more than we are. And we should get serious about a regulatory cooperation with the US and with our trading partners. I think Canada because we've got an FTA with Europe and an FTA with North America, and we could actually lead on global regulatory policy, and it's an area where we should. But we shouldn't wait for all the ducks to be in a row multilaterally, we should start right in Canada, starting with eliminating interprovincial trade barriers. It's been talk talk talk for far too long and if you were to do that, you would add by some estimate a couple of points to GDP, Canadian Chamber of Commerce. The other thing is government itself in Canada is about 40% of GDP. So, if you were to improve the productivity of government by 10% and having been in government for a long time, I can tell you that's like shooting fish at a barrel.
If you're prepared to do what needs to be done, it's just 10%. Just say, instead of 4%, it's 2% that you're adding to. Just say 2% of GDP. That's a big, so the government sometimes hectors the private sector for not making enough investments. To me, the government has a responsibility to run government more efficiently because if they are suboptimally managing 40% of the economy, that is a weight on the overall economic performance of the country and on our GDP. So, I'd say government efficiency in Canada, we should have our own Doge in some ways and not be afraid, led by private sector people. I wouldn't necessarily choose someone quite like Elon Musk, but I could think of people like Michael McCain who knows the food sector and manufacturing very well. Nancy Southern understands energy very well. Linda Hasenfratz understands manufacturing and advanced manufacturing. You go Don Lindsay, former CEO of tech who understands the natural...
These are just names that pop in my mind as we're chatting here, but they're people who are not just really smart business people, they are really good citizens. So, you don't need a Doge necessarily of the tone and tenor of the US version, which has elements that I'm not entirely comfortable with. I'm being very diplomatic, but you can have a group of high-level capable private sector leaders or former leaders who are really great citizens and would put Canada first in whatever we did to lead efforts in Canada. But this is not a left-wing or right-wing issue. By the way, if tax dollars are being wasted by mismanagement, that is bad for social programs and it is bad for the market-based economy. So it's just good government need not be, in fact most of the time should not be rigidly ideological.
Ben Reitzes:
Okay. Mr. Brison, Scott, thank you very much for coming on the show today, and when the next political crisis or events come to Canada, I will give you a call.
Scott Brison:
Look forward to it, Ben.
Ben Reitzes:
Thanks for listening to my interview with Scott Brison. I'm going to add a little bit on the Bank of Canada this week since the interview was focused entirely on politics and we get the Bank of Canada's policy decision next week. Next week's Bank of Canada decision is going to be driven almost entirely by tariffs and the threat of tariffs, I guess, at this point since we don't know if and when they're actually coming. The Bank of Canada already had an easing bias after the December meeting. They maintained it. It was a so-called hawkish 50 basis point cut at the meeting in that they of signaled that it's a slower pace is coming in rate cuts, but they did maintain that easing bias. And the data since that meeting have been pretty mixed, I mean, hardly definitive either way, definitely nothing pushing for a rate cut and nothing to say for sure that they should pause.
But what we've seen is CPI that we got earlier this week on Tuesday, soft headline, no surprise there with the tax holiday, but the core measures were continued to be sticky. Really, you've had three straight months of pretty sticky core numbers that the trim and the median were sticky. And if you look at some of the other metrics, which is what a lot of the doves like to focus on, you're going to get very challenging year ago comparables. So the base effects coming in January, February, March, I believe April as well for example, for CPIX, which does exclude mortgage interest cost is much more challenging and you're likely to see that number potentially move back above 2%. And so there's nothing in the outlook that is pressing necessarily for a rate cut at the moment just looking at the data on its own. But it's really not about that at the moment, it's about the risk of tariffs.
If Canada gets tariffs, be they 5%, 10%, 25%, whatever the number is, it will be a negative for the economy, it will be a negative for growth and the Bank of Canada is more than likely to want to respond to that. And given they already have that easing bias, they already expect that more rate cuts are likely needed. With the risk out there of tariffs, I think it makes sense for them to be cutting another 25 basis points at the meeting next week. Is that a sure thing? No, but it does look probable. I think most are calling for that rate cut at the moment. The market's 80 to 85% price right now, so it does look probable. Looking at their forecast from October because we are going to get a new NPR with fresh forecasts. In October, they had QFOR growth, GDP growth to 2%.
It's looking like it's going to come around one and a half to 2% in that ballpark. So they won't be way off either way. They're on the high side of things, but I don't think it's a huge miss and we're only going to get that actually later. We won't really know, but I think that forecast won't change all that much and Q1 will be introduced as well. That's probably going to come somewhere around two and a half percent. Either side of that I think seems like a likely outcome with the GST holiday providing a boost to growth, the consumption, and you're going to get checks handed out by Ontario, that should help growth as well as we make our way through this quarter. Though we haven't gotten those checks yet and I'm quite looking forward to them myself. Otherwise, on the inflation side, they overestimated headline CPI, but they have underestimated core CPI.
So, I think the core numbers should matter more. I mean, the bank highlighted that the core measures are what they will be focused on through this GST holiday and they have missed on the downside. So that's not great news for an inflation targeting Central Bank. The flip side though is that the core measures aren't the be-all and end-all. And if you look at the breadth of inflation, it's case leveled out and is more or less in line with what you see historically. So, like the share of items above 3% and below 1% for that matter are close to in line with long-term averages, not when inflation is very low, but when inflation is close to the target at least. So, breadth looks pretty good at this point. So where does that leave the bank? I mean, assuming they cut 25 next week, where do you go from there?
Obviously, it depends heavily on the tariffs and if they come, expect the bank to be much more aggressive and rates to come down very, very quickly, very sharply and the currency to off accordingly, and Canadian rates to outperform accordingly, so on and so forth. But if there are no tariffs, and this is just a risk that hangs over Canada for a while, wouldn't shock me if the bank pretty much followed the Fed after this January meeting. And it's still an open question to me as to how weak they want the currency to get. They mentioned it a little bit more prominently in the last minutes, so it has gotten their attention, and I'm hopeful that we get one of the media outlets out there asking the bank about what the potential limits are for policy divergence because they've generally played that down. Governor Macklem has in past press conferences.
But that should be a question that gets raised, again, absent the tariffs, because if there are tariffs, obviously that divergence gets much more extreme. And I think that's the bank lowdown at the moment. That's how I view things. I don't know if things are going to change materially until we get a little more information on the political side. We need the election outcome in Canada, even though that's still many months away. We need tariff outcome to know how much of an impact, if any, that's going to have. And we need to see how the economy's evolving, whether the momentum that we saw in some of Q3 and to some extent Q4, though not quite as much is going to continue or maybe improve in the first quarter of the year thanks to those stimulus measures. And if anything else is coming on that front as well.
On the trade front, even with the tariffs, I think Canada still looks wildly expensive here. Again, we continue to having at least a piece of that short Canada-US trade on here. I mean, by piece 10 to 20% of total size at most. And I think hedging that with a curve steepener or five, 30s makes a good amount of sense here. And then it gives you the opportunity if there are tariffs, I would expect the Canada curve to bolster steep and sharply. So that provides a nice offset to Canada richening and Canada does richening aggressively, I think that is a fade over the long run. Even if we do get tariffs, I'd be surprised if this is a ten-year issue for Canada. And what it will do is it'll really push Canada to be better, I hope, and to make Canada push on the productivity side of things and provide tax code, do all that stuff that needs to happen after an election.
So, we'll see on that front. But those are the favorite trades at the moment. Still watching swap spreads pretty closely. They've backed up nicely here on the back of that foreign provincial issuance. The desk does not think there's legs to this movie. They think that we probably grind lower again and again. This still comes back to tariffs. Unfortunately, if they come and there's fiscal stimulus, that just means more bonds, that just puts more downward pressure on spreads over time. So something to keep an eye on there.
And last but not least, on the provincial front, again, tariffs matter a lot. It would be good for the fiscal situation for any of the provinces if we were to get tariffs. And so in that scenario, you probably do see spreads widen a bit, but for now, demand remains very strong. New issue books are very well subscribed and there's strong demand for provies at the moment. So, spreads are very well-supported. Unfortunately, that tariff overhang is still there. So for now, we wait and see, and I'm watching the headlines just like everybody else out there. And hopefully the next ones are more positive than negative. Good luck out there and thanks for listening. Thanks for listening to Views from the North, a Canadian rates and macro podcast. I hope you'll join me again for another episode.
Speaker 1:
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