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Governor Poloz Speaks on Financial Vulnerabilities and Risks to the Economy – Bank of Canada

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In his final speech of 2018, Governor Stephen S. Poloz discusses the vulnerabilities and risks in Canada’s financial system as well as Canadian and global economic developments. He explains how all this was taken into account in the December interest rate decision.

Interest Rate Decision

Governing Council decided to maintain the interest rate at 1.75 per cent.

Financial Vulnerabilities Matter

After the global financial crisis, Canada needed low interest rates to boost the economy. It took 10 years for the economy to recover—longer than expected.

During that decade, extraordinarily low interest rates encouraged borrowing and spending. The inevitable result has been strong demand for housing, rising house prices and an accumulation of household debt of historic proportions.

The buildup of household debt and imbalances in the housing market has made our financial system more vulnerable to economic shocks.

Positive Signs on Household Debt and House Prices

With the economy healthier, we have raised interest rates five times over the past year and a half.

Governments have also put in place new rules to make borrowing safer. Most new mortgages are tested to ensure borrowers can handle an increase in interest rates.

As a result, borrowing isn’t growing as fast, and the quality of new borrowing is getting better. We know that one way to prevent prices from skyrocketing is to increase the supply of houses and apartments on the market.

We are also making progress in understanding the links between the financial sector and the economy. New data, tools and improved models allow us to capture the rise in financial vulnerabilities and the downside risks to economic growth associated with them.

The overall level of risk to the Canadian financial system remains about the same as it was six months ago, when we published our Financial System Review. New mortgage borrowing is more sound, and house price growth has decelerated. Nevertheless, the stock of household debt will stay high for years, and house prices remain elevated in certain markets.

Stephen S. Poloz

Find out why it’s important for the financial system to be healthy in The Economy, Plain and Simple.

Weighing the Risks

In setting the policy interest rate, we need to weigh the risks to growth and inflation from financial vulnerabilities along with the risks from the broader economy.

Since October, concerns of a global economic slowdown have grown. The trade tensions between the United States and China are the main risk. It is a two-sided risk: tensions could get worse and affect Canada, or they could improve, which would be good for global growth and our economy.

Recent data on the Canadian economy have been disappointing. We have seen

  • weaker business investment, but we expect it to pick up;
  • a slower, but more stable, housing sector; and
  • a large drop in the price of oil.

This decline in oil prices is leading to a painful adjustment in Alberta and will have a meaningful impact on the Canadian economy.

  • Global oil prices have declined due to lower global demand and higher supply (mostly from the United States).
  • Discounts in the price of oil from Western Canada have grown because of transportation bottlenecks, refinery shutdowns and inventory buildups.
  • More rail and pipeline capacity and output reductions will help in the long term.

These developments have come at a time when the unemployment rate is at a 40-year low and inflation is close to target, consistent with an economy that has been operating close to its capacity.

Weighing all of these developments, we continue to judge that the policy interest rate will need to rise into a neutral range—somewhere in the neighbourhood of 2.5 to 3.5 per cent—in order to achieve the inflation target. The pace at which this process occurs, of course, will remain decidedly data dependent.

Stephen S. Poloz

Updated Forecasts Coming in January

We will update our outlook for the economy and inflation in the Monetary Policy Report on January 9, 2019.

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Read Governor Poloz’s full speech.

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Europe could 'infect us': Richard Fisher on risks to the economy – CNBC

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Richard Fisher is a senior advisor at Barclays and was president of the Federal Reserve Bank of Dallas from 2005 to 2015.

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He says the economy “is having the longest period of expansion since the Civil War” and expects that to continue — for now.

But he also sees potential challenges ahead. Fisher says a “hyper-leveraged government” issuing even more U.S. Treasury bonds next year, the Fed raising rates, and potential dangers from bad credit in the European Union could cause a slowdown.

Watch the video above for more on the economy from Richard Fisher.

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Ontario's deficit to rise to $12.3B this year, fiscal watchdog says – CBC.ca

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Ontario's financial watchdog says the province's deficit will rise to $12.3 billion this fiscal year, half a billion more than he predicted before the spring election.

Financial Accountability Officer Peter Weltman says policy decisions such as cancelling the cap-and-trade program and reversing several tax increases, combined with a weaker economic forecast, contributed to the change.

In his fall economic and budget outlook, Weltman says that without further policy changes, the deficit is expected to exceed $16 billion by 2022-23.

He says that while the government's fall economic statement did not include a budget forecast beyond this year, balancing the books in one mandate would require "significant changes" to policy that could have wide-ranging impacts on Ontario households and businesses.

The FAO's spring report, issued just weeks before the provincial election, said the province's deficit would jump to $11.8 billion in 2018 as a result of higher spending in the budget presented by the then-governing Liberals, as well as weak revenue gains.

The Liberals had projected a deficit of $6.7 billion, a figure that was also called into question by Ontario's auditor general.

The Tories have since accepted the auditor general's accounting but said a commission of inquiry and financial review convened to examine government spending found the province's deficit will grow to $15 billion this year.

They said this fall that various savings measures had brought that number down to $14.5 billion.

The FAO says its projections do not include any election promises that the government has yet to act on or announce.

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Justin Trudeau defends his record on trade, economy in The National interview – CBC News

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I sat down with the Prime Minister at the Queen Elizabeth hotel in Montreal last Thursday.

It was before the First Ministers meeting, a meeting that proved to be a lot of talk about tension, but not a whole lot of consequences to all that talk.

It's not one of those year-end interviews; it's an interview I have been trying to get for some time now. He's busy, that's understandable.

But as we are now less than one year away from an election, sitting down with the current prime minister and his rivals for that job seems important. The goal of the interview was not to have Trudeau react to news of the day, but rather to reflect a bit on decisions he has made and defend them and explain them.

You can judge how good a job he does in answering those questions.

We will do other interviews with other leaders in the weeks to come to help Canadians understand what these leaders and their parties stand for and, when the time comes, how to decide who best represents your values and priorities


RB: Good to see you.

PMJT: Good to be here Rosie.

RB: How you doing?

PMJT: Very well.

RB: Good. I'm going to start with where you were around this time last week, at the G20 and the signing of the new NAFTA, that's what I call it anyway.  I know you might argue that tariffs and trade deal are not the same thing, that they're two separate things, but it seems to me that you had some leverage there with the United States, and you won't get it again. So why did you sign it even with those tariffs still in place?

PMJT: Well, I think first of all, making sure we're securing access to our most important trading partner for businesses, for workers, for our Canadian economy was essential, and the alternative to not signing would have put what we have achieved in terms of signing a really important trade deal with the U.S. at a time of tremendous protectionism and uncertainty. I mean investors and businesses are extremely happy that we have settled the question of NAFTA.

RB:  Sure.

PMJT: The question of leverage is one to reflect on. I mean we obviously want to get rid of those steel and aluminum tariffs, we need to, we're going to continue to stand up for our workers, but we also see the path towards ratification as a place where there are continued conversations from members of Congress, from business or associations in the United States, from governors who also want to see these tariffs gone, and we're going to keep working on that.

RB:  So that's the leverage then, trying to press on people around him or people in Washington?

PMJT: Every step of the way there continued to be levers to pull on and we're going to continue to do what Canadians expect us to do which is look at every opportunity to stand up for our interests.

Watch Trudeau discuss tariffs:

In a wide-ranging interview with The National's Rosemary Barton that airs Sunday, Prime Minister Justin Trudeau talks about the steel and aluminum tariffs that were slapped on Canada by the United States — and his game-plan to have them removed. 0:39

RB:  When you were having that press conference beside the president and you said at one point: 'Donald, all the more reason to get rid of these tariffs,' did you give him a head's up that you were going to do that or did you just feel you needed to admonish him publicly like that.

PMJT: No, I spoke with him just before and I'd spoken with him a few days before, impressed upon him how important it was for us to uh get rid of, uh get rid of these tariffs between our two countries.  It doesn't make sense to be moving forward on free trade and still have tariffs, particularly ones that are on a national security justification that makes no sense when it comes to Canada.

RB:  OK, but that's what we did, we moved ahead with free trade and left the tariffs in place. So what is the path forward to getting rid of them?

PMJT: To continue to engage with the broad range of partners across the United States, for members of congress, to business leaders, to workers groups who know that these tariffs, like any tariffs, hurt consumers and workers on both sides of the border.

RB:  There was a point there once it was done, after it was done, where the U.S. ambassador said we'd probably send someone with a bag over their head to a signing ceremony.  Why did you feel the need to play along with that given that it was so difficult, personal at times, why did you give the president that moment to vaunt the trade deal?

PMJT: Oh, Canadians don't want me to make this personal, Canadians want me to make sure that I'm doing what's right for Canada and it is right for Canada to move forward with a secured NAFTA — that is what I've heard from Canadians right across the country.  That's what people of all political backgrounds and all industries have been working on together. Our united approach on NAFTA made a huge difference around the bargaining table and we got a better deal than we otherwise would have.

Watch the full interview with Justin Trudeau:

RB:  Yeah but you didn't have to stand next to him to sign it. It was going to happen whether you stood there or not, so…

PMJT: Actually no, there needed to be a signing ceremony and we were glad to be able to say 'look, we worked very hard on this, there's still more work to do on tariffs, obviously we need to stand up for our steel and aluminum workers, but we have secured free trade with the United States and that is a big thing, not a small thing.'

RB:  You have said that the president is unpredictable, you've said that he doesn't play by the rules, can you give me an example of how that has affected your job as prime minister, having someone who is so unpredictable?

PMJT: Well I think as Canadians have seen, we've continued to stay constructive in our relationship with the United States.  It means that we certainly don't react or overreact when we get a surprise in a tweet or a statement. We continue to say, look, the relationship is bigger than that between any two individuals at the heads of the country, and we're going to continue to focus on that relationship, and that's between Canadians and Americans.  That approach has stood us in good stead.

RB:  But it certainly has made your job more challenging.

PMJT: Being prime minister of Canada is a challenging job at anytime, and there's always personalities, and challenges on the global stage one has to deal with.  I've gotten used to having to adjust to surprises on the world stage, not just from the United States. That comes with the territory.

RB:  Has it gotten easier with the president?

PMJT: I think certainly we have a level of understanding of each other that has grown through having worked together, through having got to a resolution on this big file of modernizing NAFTA.  So yes there's a little more understanding of what our personalities are and how we can work together.

RB:  But you're not going to hang out with him?

PMJT: Canadians expect me to be professional around this and I will continue to.

RB:  I wanna move to another thing that happened at the G20 when you took some time to meet with the Saudi prince. The Saudi Crown Prince, MBS. You raised the issue of Raif Badawi, his sister, Jamal Khashoggi, and the war in Yemen. How does a leader respond to another leader coming up to him and saying: 'listen, we have some problems here, I need  you to do,' whatever you asked him for. How does he respond to that?

PMJT: Well I think that very much depends on the way things are phrased, and my frame, in all cases on the world stage, is Canada wants to be helpful in moving us towards a better place as a planet and highlighting our concerns around the humanitarian crisis in Yemen involves an offer of: 'look Canada wants to be helpful,' whether it's through the UN, with our allies. There are people suffering and dying, we want to be helpful.  

So it's 'look, we need to see a ceasefire, we certainly want to work with you in the international community to get to that ceasefire and to be able to flow humanitarian aid.' It's never a situation of you know, imagining that we can stand there and tell another country what to do, or how to do it.  It's saying, 'look, it would be great if you were to do this and we could be helpful in moving forward in a constructive way.' I think that's what Canadians try to do on the world stage at all levels.

RB: I can see how that conversation would happen on Yemen, less obvious how it would happen on Jamal Khashoggi.

PMJT: OK.

In this Oct. 24, 2018, file photo, Saudi Crown Prince Mohammed bin Salman attends the second day of the Future Investment Initiative conference, in Riyadh, Saudi Arabia. Prince Mohammed held talks with Justin Trudeau at the recent G20 summit in Argentina. (Amr Nabil/Associated Press)

RB: How do you say to the crown prince 'we're pretty sure you were involved in the killing of an innocent journalist.'

PMJT: Well we say we need better answers on that. We need better accountability. The killing of a journalist is something that is extremely serious to Canadians, to me.  But I'm getting a lot of questions from Canadians, who are rightly, like citizens around the world, really preoccupied, outraged at what happened. We need, as a global community, to provide better answers to citizens.

RB:  His response to you, saying that, with you knowing full well what you know about the intelligence behind it?

PMJT: His response is: 'look, we're happy to continue to work and get more information and more proof, and if you have proof or information, continue to provide it. That's exactly what we're doing.'

RB:  Do you roll your eyes at that point?

PMJT: Being a leader on the world stage involves having an ability to engage with all types of people without letting personal feelings overtake one's involuntary movements.

RB:  Have you heard the tape, or have you been briefed on what that tape is?

PMJT: I have been briefed on what the tape is.

RB:  And what was that like?

PMJT: Obviously it's something that intelligence communities have taken and listened to and worked with and is part of our reflection on getting real answers.

RB:  Could you characterize it for me?

PMJT: I'm not going to characterize that, no.

RB:  Horrific?

PMJT: I'm not going to characterize it.

RB:  You also made it clear to the crown prince that Canada stands up for human rights.  How can you say that to him, knowing that we are still selling those light armoured vehicles?  Is there not a contradiction in that?

PMJT: This is a question that comes up not just in regards to Saudi Arabia, but in regards to a broader array of countries that have different levels of defensive human rights than Canadians have and Canadians expect. Whether it's China, whether it's Russia, whether it's Saudi Arabia, whether it's other countries around the world that aren't as far along in terms of defensive LGBT rights, or others.

We try to look for constructive ways to have relationships that lead us to being able to be very frank on human rights, on where we disagree, where we feel we could perhaps be helpful in improving things, while at the same time look for a way where you're not shaking your fist at someone and saying: 'you've gotta change,' in an expectation that that alone will have them change.

RB:  No, not that alone, but Germany did it.  Germany said: 'we're not willing to do this anymore.'

PMJT: We are engaged very much with the issue behind the scenes, looking at export permits and looking about ways forward.

RB:  Is the contract impossible to break?

PMJT: There are reflections ongoing around that.

RB:  What does that mean?

PMJT: That means we are in discussions on what to do with our continued economic relations with Saudi Arabia.

RB:  Just so I'm clear though, the contract could be broken. It's possible.

PMJT: As I highlighted, the contract has particular provisions, both for confidentiality, and around significant penalties. It was a contract that was signed by the previous government and we are looking at it obviously.

RB:  OK.  Let's turn to what's about to happen this week, the first minister's meeting. You're about to go into this meeting with a bunch of people that you probably don't know as well, that I wouldn't characterize as allies of yours in particular.  You've got four provinces who have not complied with the carbon tax, now you're imposing it on them.

It does seem to be, as well, more coordinated, actively working against you on the carbon tax.  How much more difficult is it, then, for you to sell that to Canadians knowing that there's these other people out there saying it's the wrong thing to do.

PMJT: One of the questions people have, have asked me are: Given the context, and yes, the real disagreements around the first minister's table that are likely to come up, am I wishing I'd taken a page out of Stephen Harper's book and decided to do away entirely with first minister's meetings?  And the answer of course is no. I think it's really important to sit down and be able to look people in the eyes and talk in a constructive way about how we serve the citizens that we all are here to serve.

Scott McBride, of Nanaimo, B.C., holds a caricature of Prime Minister Justin Trudeau during a protest against the Kinder Morgan Trans Mountain pipeline expansion in Burnaby, B.C., on Saturday March 10, 2018. Critics say Trudeau has done a poor job in supporting the oil industry. (Darryl Dyck/Canadian Press)

There are going to be things that we agree on, there are going to be things we disagree on, and having these conversations, even though some will be more difficult than others, and some years will be more difficult than others, continues to be something that I think Canadians rightly expect from their prime minister.  I'm glad that this is our fourth year doing this, and I'm going to continue to sit down and meet with the premiers every single year because it's really important in terms of our, our federation.

RB:  I get that, that wasn't the question though.  The question was: is it harder to sell the carbon tax when you have premiers saying that it is the wrong thing to do?

PMJT: I think the fact that there are a bunch of Conservatives out there who have decided that pollution should be free is not that difficult to counter.  I think Canadians understand that we have to fight climate change, prepare our economies for the future, and make sure that we're supporting Canadians through this transition.  That's exactly what we're doing, that's exactly what our plan is.

We're putting a price on pollution, cause we want less pollution and the fact that conservatives in this country don't want to move forward, on either fighting climate change or helping people ensure that we can get the good jobs in the future, is a conversation I'm willing to have anytime. The political machinations around it that conservatives from Andrew Scheer, to Doug Ford, to others are trying, are really off base with where the conversations I've had with Canadians are.

RB:  I do think Canadians are worried about climate change as well.  I'm not sure, though, that they're willing to give up the comforts of their life for climate change. which is sort of what you're suggesting, is it not?

PMJT: No, but that's exactly why what we're doing in moving forward with putting a price on pollution also involves making sure that ordinary families in the provinces where the federal government has to bring in a price on pollution, cause the Conservative government won't do it, that those families are actually better off, better supported.  What we're doing with the climate action incentive is making sure that a family in Ontario, that will have extra costs because of putting a price on pollution, will be more than equivalently compensated for it.

RB: What is your hope in terms of how those people change their behaviour and do you have a sense of how quickly that would happen?

PMJT: Well I think we know that when you put a price on something you don't want…

RB: A tax.

PMJT: Like pollution.

RB: A tax.

PMJT: Well we're putting a price on pollution, right.

RB: It's a tax, but OK.

PMJT: And we're making sure, we'll act, actually the money is going straight back to the jurisdiction. This isn't going into federal coffers. This isn't something we're going to spend on something else. We're actually giving that money back to citizens in the province in which it was raised, because we know that if you make pollution free people are going to give out more of it.

That's quite frankly what the Conservatives wanna do. They wanna make pollution free again, to use a handy phrase. We say no, if you wanna pollute, there should be a cost associated with it.

RB:  And yet we saw a political, I think he's a political ally of yours, Emmanuel Macron, faced this very question over the past couple of weeks.  He put a surtax on fuel, riots in the street, and he had to back down. What lesson did you learn from watching that?

PMJT: He didn't ensure the second part of it, you put a price on pollution cause we want less pollution, but you also make sure that ordinary Canadians are going to be able to afford this transition towards a lower carbon economy.

RB:  So it's the rebate that makes the difference?

PMJT: The rebate, the support for families, because people are worried about the future, they are worried about climate change, they're also worried about their kids' jobs and their own retirement. Making sure that we are supporting families through this transition time is a fundamental responsibility for every government.  That's at the core of our approach, that's not what we can see of the Conservatives' approach, and that's not what other countries have done.

RB:  So when Conservatives, and other people, when they talk about commuters particularly, people who live in the suburbs around Toronto who have to drive a lot, have to bring their kids places, all that kind of stuff, they are the people who will be burdened the most.  Do you think that the rebate means that it'll be completely different, that they don't have to worry, or do you expect that people will feel a squeeze when it starts to happen as it begins to ramp up?

PMJT: No, the average family will be better off with the rebate under what we're doing.  But that's not all we're doing, obviously. We've invested massively in public transit, we're investing in cleaner energy sources, in renewable energies, in clean tech, and we're making historic investments in making sure that the jobs in innovation, as we move towards a lower carbon economy, are front and centre.

RB:  And yet the United Nations says most of the large emitting countries, including Canada, are not on track to meet the Paris targets, no G20 country is in fact.  So you're doing this, and it's having not the impact that the United Nations would like to see. They are calling for more urgency. So how do you respond in the face of that?  Do you speed up what you're doing? Do you change what you're doing?

PMJT:  Countries around the world are looking, with a lot of interest, at how Canada is moving forward on putting a price on pollution and supporting ordinary citizens through this transition. This is a model that a lot of people are very, very interested in because it is a model that is going to set us on a path to reach our Paris targets.  

RB:  Well, the UN says no. The UN says it's not going to happen.

PMJT: We are going to be able to reach those commitments.

RB:  How?

PMJT: By having a price on pollution. People will look for ways to innovate, to pollute less and the positive virtuous cycle that comes through this, as people make better inventions and innovations, we actually develop a path forward in a meaningful way that will effectively reduce our climate change emissions and improve outcomes.

RB:  So you will reach the Paris targets?

PMJT: We're going to reach our Paris targets, yes.

RB:  You mentioned the Conservatives in provinces. There does seem to be sort of a growing movement in provinces, that happens a lot as you know, and when liberals are in power federally.  The movement seems to be embodied, at least, in part by Doug Ford. So I wonder what you think is so appealing to him about voters, and, whether they are the same people who are interested in you.

PMJT: I think there's, there's no question that Ontarians, like all Canadians, are worried about growth in the economy, worried about their jobs, worried about the changes they're seeing in the economies around them, around globalization, and wanting to make sure that there are answers for how they fit into that.  That's something that I share as a preoccupation with all premiers, including premier Ford. So we're going to work together in trying to figure out ways to grow the economy, to help citizens, to move forward in positive ways.

RB:  Yeah, but you couldn't say that you share the same values.

PMJT: No, but we share similar preoccupations about how we're going to help Ontarians, and that's why I'm looking forward to sitting down with him to talk about how we move forward in the ways that we agree.

Ontario Premier Doug Ford reads his notes during the first ministers meeting in Montreal. (Paul Chiasson/Canadian Press)

RB:  On Sunday the Alberta premier announced a reduction on oil production to deal with these historic low prices [for oil] in Alberta.  She's also buying rail cars to try and find more ways out. You have said it's a crisis. How can you not offer help if it's a crisis?

PMJT: Oh we have absolutely offered help and we've…

RB:  Like what?

PMJT: We recognize, first of all, that Alberta and Albertans are going through a terrible moment right now.  This price differential is hitting harder than just about anything has been over the past years, and they need help. the first and foremost thing they need is to be able to get our oil resources to new markets other than the United States.  The fact that Canada, Canadian oil is for the most part prisoner to the U.S. market, means that we are taking a massive discount.

If we are going to move forward in a transition towards a lower carbon economy, we're going to need to be able to pay for that transition, and taking billions of dollars of discount every year does not make any sense. So that's why we are so committed to moving forward to getting our resources to markets the right way, markets other than the United States, like the Trans Mountain pipeline expansion.  But we're following the court's rulings on how to do that.

The problem is, for ten years we had a government that ignored the courts, ignored  Indigenous communities, ignored environmental science and didn't listen to Canadians' preoccupations about that, and we lost ten years of building these projects.

Watch as Trudeau discusses the oil industry:

In an exclusive interview with The National, Prime Minister Justin Trudeau says he is willing to consider helping Alberta Premier Rachel Notley fund the purchase of rail cars to increase the volume of oil her province can ship to international markets. Trudeau's comments comes as tensions have increased between the Prime Minister's Office and the premiers, who are in Montreal to meet with Trudeau for the first ministers meeting. 4:28

RB: So that's your long-term solution. But the premier is concerned about the short-term and that's why she's doing these things right now. What have you offered to her?  What can you do for the, you know, tens of thousands of people laid off in that sector now? Is there anything you can do?

PMJT: We are absolutely looking at the tools we have around EI. We're looking at the tools we have around income support. We've done a number of things around that, around situations in the past and we're going to continue to do that.  I'm also willing, of course, to sit down with premier Notley and hear about how the federal government can be a partner in solving this in real ways.

RB:  But she's told you she wanted you to buy rail cars, for instance.

PMJT: You know, that's something we're happy to look at. If that's a proposal that she thinks is going to make a significant difference, then we're happy to look at how it works.  I mean we're there to be a partner to help.

RB:  Is the answer, though, not really, we've already bought you a pipeline, what more do you want?

PMJT: Well no we still have a lot of work to do to get the Line Three. Well actually, the Line Three expansion is going to come in the third quarter, or fourth quarter next year. That'll bring a certain amount of relief and the moving forward in the right way on the Trans Mountain will also remove pressures. But you know, we are, working forward towards what is the fundamental problem, which is we only have one market for Alberta and for our prairie oil.

Alberta Premier Rachel Notley speaks to cabinet members about an 8.7-per-cent oil production cut to help deal with low prices, in Edmonton on Dec. 3, 2018. (Jason Franson/Canadian Press)

RB:  For TMX you're obviously going back, as the federal court said, you should do right now, re-consulting with First Nations, having a better dialogue. What are you willing to do, though, to get it built; change the route, better accommodate some of those first nations communities?  Are you willing to consider those things?

PMJT: Absolutely, that's at the heart of what the Federal Court of Appeal's ruling was. We're a country of respect for the rule of law, respect for the constitution, and the court gave us a blueprint and said, you need to do a better job of consulting with Indigenous communities, and you need to do a better job on some of the environmental science in regards to marine safety and that's exactly what we're doing.  

We have a country that has vast natural resources, but also citizens who are quite rightly preoccupied with the impact of our resource development on themselves, on their environment, on their kids' future. Getting those right in a thoughtful way is exactly what the court is laying out a blueprint for and what we're going to follow.

RB: But because you've bought it already, with my tax dollars, and everybody's tax dollars, it has to go ahead. It has to go ahead in some form and by some route, does it not?

PMJT: Well we bought a existing pipeline and the option to move it forward and we are going to follow what the court laid out as the way to do this the right way, and to come to the right decision for whether or not it's in Canada's national interest and that's what we're doing.

RB:  But you believe that it is?

PMJT: I have said consistently we need to get our resources to new markets, but we need to do it in the right way. The problem that we had for a decade under the previous government is they weren't preoccupied with doing things in the right way. They just wanted to try and get things done, and what that led to was not getting things done at all.  

Right now, the Trans Mountain pipeline expansion for example, goes hand in hand with putting a price on pollution and actually reaching our Paris targets. Because we know that as we get our oil resources to new markets we bring in more wealth that can pay for that transition and the innovation, while at the same time, Alberta has chosen to put an absolute cap on oil sands emissions which will allow us to reach those Paris targets.

RB:  When GM announced its future shutdown of the Oshawa auto plant, you said you're going to help to get those workers back on their feet.  But it occurs to me, you know, for that decision, for the people being laid off in Alberta, there's only so much you can do really. So what would you say to those people who are concerned that their jobs are sort of evolving away, that the jobs are not maybe the jobs of the future.

PMJT: Well.

RB:  What could you do for them?

PMJT:  Well, first of all, support for those families and the people going through a, a terribly worrisome time, a terribly difficult time. Oshawa has an extraordinary long hundred-year-history with that plant and it is a devastating piece of news that GM has put forward and we're continuing to work both with GM and with folks to try and see if there isn't a path forward. But certainly, support for those families is top of mind. We also understand that yes, there are going to be changes in the workforce, there are changes in consumption habits, there are changes in the global economy that come with more automation, different supply chains around the world, AI.

I know there will always be a role for manufacturing in Canada, for high value manufacturing in Canada, whether it's new technologies that are coming in, or improvements on old technologies.  That focus is something we're continuing to invest in and that's why our investments in skills, in university, in stem research, in bringing women into the workforce, these are the kinds of things that we're trying to help Canadians in that transition.

RB: I get that, and that you're trying to think about jobs for the future, but GM doesn't wanna stay here so what does that tell you?

PMJT: Actually GM has invested significant amounts in, for example, in an engineering research facility in Markham where they are working on jobs of the future, they are looking at more electric cars and self-driving cars. And Canada is a part of how they think about the future.

RB:  So then why don't you just say to them take that giant plant you have and make cars of the future. Why won't they consider…

PMJT: That's part of the conversation ongoing.  Obviously President Trump and I commiserated about this in that the U.S. is losing four or five plants. We're losing one plant and the Oshawa plant is actually one of the, was always, one of the top performing plants in the world for GM.

So there are real questions about what we can do to try and make sure that we're giving every possible support to those workers.

The relationship between Trudeau and U.S. President Donald Trump has sometimes been testy. (Justin Tang/Canadian Press)

RB:  Why do you double down on deficit spending when the economy is doing so well?  It doesn't make a lot of sense to people.

PMJT: Over the ten years of the previous government, we faced stubbornly low growth and low employment numbers, and we made a very deliberate decision in 2015.  We were the only party to say investing in Canadians, investing in infrastructure, investing in our communities, putting more money in the pockets of the middle class, and those working hard to join it, like with the Canada child benefit, is the way to grow the economy.

There were a lot of people that were skeptical. But what we've actually seen is that money for the Canada Child Benefit, for the increase in the Guaranteed Income Supplement for our most vulnerable seniors, investing in infrastructure that's making a difference in communities, that drawing in investment, making strategic investments in businesses, lowering the barriers to small businesses success, our approach has actually delivered the lowest unemployment rate in 40 years…

RB:  Yes.

PMJT: Has delivered five or six hundred thousand new jobs created over the past three years, and we had the fastest growth in the G7 last year.  Our approach to invest, in order to grow the economy, is working and we're going to continue to do that in responsible ways. Every year, our debt as a proportion of our GDP continues to decline. We're the lowest ratio in the G7.  We're doing very well.

RB:  So you're OK with that broken promise though?

PMJT: We are on a trajectory that demonstrates decreasing deficits and growing economies.

RB:  But is that because politicians thinking on issues evolves, that you had a different thought about what the economy could be versus what you wanted to do with it when you got in office, or is that just because you said, this actually isn't that important the deficit?

PMJT: No, we've always said that fiscal responsibility is extraordinarily important and that's something that we've demonstrated with the declining share of our debt as a piece of our GDP.

RB:  I know, I guess I'm just trying to understand how you went from saying we're going to have this, we're going to return to balance, then to no longer talking about that.  Like what was the thinking for you, where you said to yourself that shouldn't be my focus anymore, we shouldn't be preoccupied with that.

PMJT: The fact that our approach is working, that people are getting, you know, new and better jobs, that our economy is growing, that unemployment is low that Canadians are more confident, not just in their futures, but their kids' futures, means that our approach continues to work, and maintaining that fiscal responsibility, and that fiscal discipline is part and parcel of what we always do.

RB:  OK so that's a reasonable answer, but how should Canadians interpret that then? That it's OK to break a promise if you can show that what you've chosen is a better option?

PMJT: Well I think people understand that circumstances change and, for example, all the cuts that the Conservatives made in that last year of their government, cuts to veteran services, cuts to border security, cuts to a significant range of programs, that weakened Canadians, and showed a phony balance and, just in time for the election, that immediately snapped back into a huge deficit, regardless of what we were going to do, people understand that they want a government that is going to adjust to what the needs of the time are. We are very much realizing that our plan of investing in Canadians, of investing in infrastructure, and in their communities, is working to grow our economy and we're going to keep doing it.

RB:  Did that trip to India do more harm than good?

PMJT: There was a number of things that came out that were very positive about that trip.

RB:  Like what?

PMJT: In terms of investments, in terms of jobs, we're talking about a billion dollars in two-way investment, we're talking about thousands and thousands of jobs across this country created. We saw positive connections between our diaspora communities, but yeah, if I had to redo that trip I would do it very differently.

RB:  Would you wear the outfits?

PMJT: No, I probably would not.  I think that was a clear. I mean I had more suits on that trip than I had outfits, but the pictures of the outfits dominated and certainly it was a lesson learned.

RB:  And the whole attempted murderer showing up at a dinner, I know the report has come out and you're not willing to say much about what was redacted, but it seems to me you at least have a lesson here about how you do these things.

PMJT: Absolutely.  On every trip there are lessons to learn, ways to improve how we do things.  I mean one of the lessons on this is just how important it is that we have a national security committee of parliamentarians that actually come together, all parties together, and weigh in on these issues.

And the professionalism with which they dug into some very complex issues, and the solutions they put forward are significant aide to our government and to all governments moving forward.

RB:  You've said that Canadians should expect the next election to be the nastiest yet. What are you going to do to prevent that?

PMJT: I'm going to continue to demonstrate that positive politics that bring people together, that not engaging in personal attacks, not trying to dumb down and simplify politics so it fits on a bumper sticker or an easy slogan, instead treat Canadians as intelligent, rational citizens who want to be part of the difficult reflections on how we move forward.  The challenge with populism, as we've seen it rise over the past three years particularly, is that it sort of takes citizens for fools.

It says, while we can scare them by you know, going into our darkest fears and making political hay out of it, I'm always going to look for ways to bring people together, to involve them in the solutions, and demonstrate that Canadians deserve better than politicians who play the fear and division card every time they can.

RB:  Do you practice what you preach?

PMJT: I certainly try to, yeah.

RB:  You try to?

PMJT: Yeah absolutely.

RB:  Would you admit that there are times when you don't?

PMJT: I will admit that I have occasioned to be critical in ways.  I always look for ways to be very fierce about distinctions in policy and calling out the politics of division and fear whenever I see it.  I won't make apologies for that, cause I'm going to fight for the democratic principles that we have, and the values of an informed populous.

RB:  I'm thinking back to a moment at the beginning of October when we were talking about the Terri-Lynne McClintic issue with the healing lodge, and inside the House of Commons you called the Conservatives ambulance chasing politicians — and it wasn't just in the heat of the moment.

PMJT: No.

RB:  Cause then you came right back out and you said it again.  How do you feel about that comment now? Does it reflect who you are as a politician?

PMJT: I think it does because I won't make any apologies for calling out people who use the basest kinds of politics and fears to torque a situation.  I mean they…

RB:  But how did they do that?

PMJT: Know, knowing…

RB:  You've changed the policy.

PMJT: Knowing what we know now.

RB:  You've changed the policy subsequent to that.

PMJT: Oh yes we did.

RB:  Yeah.

PMJT: But they didn't recognize that they had done exactly the same thing 14 times while they were in office.  And the fact that Terri-Lynne McClintic was transferred to a medium security institution under the Conservative government, and she remained in a medium security institution throughout the time that they were criticizing me, showed that they were willing to exploit a horrific tragedy to a family, to a little girl, to try and score cheap political points.

RB:  Or they were trying to call attention to an issue that needed to be changed that you subsequently changed…

PMJT: That they consistently ignored, and we didn't change it by suddenly giving the politicians power to classify a criminal.  We asked…

RB:  No, I understand that.

PMJT: We asked the institution to review its policies to make sure they were right.  That was a change that they very much could have made when, if they were so outraged about it, while they were busy doing it.

But they chose to play a level of politics, when they themselves had engaged in exactly that behaviour, in a way that is cynical that I will not apologize for calling out the politics of cynicism, of fear, of division, of anger, of hatred.

RB:  Yeah but that's not what you did, you called them a name back, ambulance chasing politicians. I just wonder whether you think you should have said something different now.

PMJT: I think it's extremely important to point out when people are playing the basest kinds of politics. And the fact that I am calling out Conservatives on the way they play politics with horrific tragedies to do fundraising, and to try and score cheap points.  I'm willing to do it.

RB:  After you made the decision to change the healing lodge.

PMJT: Listen, their decision to move forward and to make this an issue on the back of a terrible tragedy was something that would require to call them out.

RB: But you changed the policy, like, it worked.

PMJT: What worked was we actually asked Corrections Canada to review their entire policy. We didn't change that one case. We didn't weigh in the way politics…

RB:  No, I understand but it forced you to look at the policy and in that way the opposition was doing its job. Whether you like the language they used is beside the point.

PMJT: I think there's two things.

First of all, yes, it is an opposition's job and responsibility to challenge, to call out, to say you should do things differently, you can do things differently.

RB:  Sure.

PMJT: That's really important.  But if they do it by exacerbating the polarization, the anger, the fear within electorate, we start to walk down a very, very dangerous path.  And I am always going to be very firm and unequivocal about calling out nastiness and negativity to that level in politics.

And if you take…

RB:  Yes.

PMJT: The comment I made and put it up against the kind of ugly rhetoric that they put forward, you'll see that my comment was actually very mild.  But you know, as we often see, there is a habit amongst those particular practitioners of negative politics to have very thin skins when things are turned around on them.

RB:  Have you learned anything about your temperament in this job? I have some observations, but I'll let you go first.

PMJT: Yeah. I'm extremely passionate about standing for what I believe to be the truth and believe in my values.  And I get offended when people rely on falsehoods, and I get irritated when people try and play fast and loose with facts, or ignore facts entirely.  I think that is weakening not just to our governance, but to our institutions and to our democracy.

RB:  You're scrappy.

PMJT:  I can be.

RB:  Would you say?

PMJT: Yeah.

RB:  Yeah.

PMJT: I'm not going to, you know, sit by meekly as people weaken our institutions and our democracy.

RB:  And what is the difference between being scrappy and being full of sunny ways?  Because that's not something you say very much anymore and maybe it's just a reality of governing.  I don't particularly love the expression anyway, but is there a difference between that, or can you be scrappy and still positive?

PMJT: I think, absolutely.

RB:  Yeah.

PMJT: I think I can and I think I do.  I mean, I always look for ways to bring people together.  I look for ways to solve solutions. I look for ways [to] solve problems, I look for ways to listen to people and make sure we are consulting and engaging in thoughtful ways.  Now it usually requires me to give a longer answer to a complex question than someone who's just looking for an easy populist answer, but I'm always going to be ready to argue a given point.

RB: Do you think though that you're a better politician than the Conservatives?  I mean it seems that to me that you're sort of putting yourself on a different level than them and I wonder if that's not a little dismissive of the people who believe the things they're saying, because there's a lot of them.

PMJT: I'm always willing to have a debate on the facts, to look at counter-proposals.  But what we're not seeing from the opposition, whether it's on climate or even on economic policy is much of a plan, or an explanation of how they would do things differently. So we're not actually debating on the substance of what we're doing, they tend to go to name calling and a challenge around, you know, personal attacks rather than actually debating the substance of what we're putting forward.

RB:  Do you think are a patient person?

PMJT: It depends on the context.  If I'm spending time with a Canadian who has questions about what we're doing, I have a tremendous amount of patience.  If I'm in a situation where I'm engaging with someone who should know better and chooses to believe that the earth is flat, or that climate change is not man made, then I will be a little more impatient because I feel that is a choice that they're making that is impacting negatively on our ability to come together and actually solve the big problems we're facing.

RB:  So you probably don't have good chats with the president then?

PMJT: No, I've had excellent conversations with…

RB: You must be impatient with him though.

PMJT: I've had good conversations with the president.

RB: Do you think that sometimes you are perceived as trivial or superficial?  I'll give you examples. The outfits in India certainly gave that perception. The tweet on the weekend to Trevor Noah about the $50 million dollars.

PMJT:  Yeah but see, but that's an interesting one, because of course when you make a spending decision like that, there's weeks of reflection on whether or not this is the right thing to do.  Because our political opponents don't particularly like the way we announced it, they find themselves opposed to investing money in some of the most vulnerable kids around the world.

RB: No, I don't know that they're opposed to that.  I think they're opposed to the trivial nature in which it was announced.  Like why do you have to…

PMJT: Would they prefer I have a big novelty cheque like the Conservatives used to do?  

RB:  No, but tagging a celebrity, what's the benefit of that as prime minister?

PMJT: Well one of the challenges is if we were to put out a press conference in the Ottawa press theatre that says 'we're sending $50 million dollars to education cannot wait to invest in the most impoverished and vulnerable kids in the world,' that might not have actually reached as much of an audience as for example than [a] celebrity engaged down in South Africa.

RB: Yeah, I would argue you stepped on your own message though by doing that.

PMJT: Well, I think a lot more people know that Canada is actually stepping up and helping vulnerable people around the world.  And there are always lessons to be learned about this, but I'm not going to make apologies for actually doing it and for making sure that we're looking for different ways of communicating that message.

RB: OK, so I'll leave this part on this.  Do you ever worry that brand Trudeau… I was in New York last week and I wandered into a store and there was cups with your name on it, and socks, and all sorts of things.  It was very strange to be in New York and all that stuff is there.

I'm sure it's stranger for you. Do you ever worry that brand Trudeau sort of overtakes what you're trying to say and do, which I think to you is more important?

PMJT: I think what we're seeing around interest in Canada on the world stage doesn't have as much to do with me as it does to do with what Canadians have been doing on the world stage for years and for generations.  Yes, there's a moment where for all sorts of different reasons, including, you know, social media skills, that Canada is being noticed a little bit more, but the fact that is a positive aspirational impact on so many people around the world…

Prime Minister Justin Trudeau sports fancy socks during his interview with Rosemary Barton on Dec. 6, 2018. (Evan Mitsui/CBC)

RB:  But it's your face attached to it.

PMJT: Is due to our values.

RB:  It's not the, the flag, or it's not, you know, anybody else.

PMJT:  You know, there's a mix of things associated with it and if we can do a better job of highlighting what Canada is doing on the world stage, and how what we're doing at home with things like the, the Canada Child Benefit that's making such a big difference. then people will look and say, 'OK, they've got a solution to some of the really sticky problems that we're facing all around the world.'

RB: Thank you, thank you for your time.

PMJT: Thank you very much Rosie.

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