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1997-084
Renewing the Commitment - Fall 1997 CSB launch and update
Notes for an address by the Honourable Jim Peterson Secretary of State for International Financial Institutions
Toronto, Ontario
September 29, 1997
Delivered text is official version.
Thank you, Tony (Valeri). And thank you, ladies and gentlemen, for joining us at this breakfast event to launch the 1997 series of Canada Savings Bonds.
It's just been a few months since I became Secretary of State for Finance. So in many ways, I'm still the new kid on the Bay Street block (although I see many familiar faces from my term as chairman of the Parliamentary Finance Committee).
But like 7 million Canadians, I'm no stranger to Canada Savings Bonds. They've been part of my and my family's savings strategy since I was a youngster.
And as a government, we're committed to ensuring that CSBs continue to be a safe, secure and flexible component for Canadians' savings and investment portfolios in the exciting century that lies ahead.
Put bluntly, CSBs are good public policy:
- As a service to Canadians saving for their future;
- As a means to strengthen our economic sovereignty; and
- As a measure of our continuing commitment to good fiscal management.
Last week, the Speech from the Throne made clear that we will balance the budget no later than fiscal 1998-99. That's an historic milestone to help our nation launch a new millennium.
But it is just a milestone, not the end of the journey.
Even with the deficit turn-around – and we're not there yet -- we will still be left with the legacy of a $600-billion debt. That's the equivalent of about 75 per cent of our entire yearly economic output. And the interest charges on this debt – about $46 billion this year, even with our low interest-rate environment – remain the largest single expenditure we have.
That's money that can't go for the goals we have set out, for the stable and secure future Canadians deserve. Money that otherwise could address the social and economic needs of Canadians, and help reduce taxes and pay down the debt.
That is why managing the debt effectively is an issue of major importance to our government, on behalf of all Canadians.
As the Speech from the Throne said, "the Government will continue to be vigilant and responsible about keeping the financial affairs of the country in order."
It is in keeping with this commitment that we have set out a clear, concrete strategy for debt management – a strategy that carefully balances cost, risk and market considerations.
Last March, we announced that we would continue to emphasize reducing exposure to unexpected changes to interest rates by increasing the share of fixed-rate debt in our debt structure. And we set out a clear target: of 65-per cent of fixed-rate debt.
We also confirmed our commitment to maintaining orderly, liquid and efficient markets. One of my first acts as Secretary of State was to announce a number of changes affecting Treasury Bills. We did this to help maintain liquid markets for our securities, taking into account our declining borrowing requirements – as the deficit shrinks – and the shift to a higher portion of fixed-rate debt in the federal "portfolio."
But what I want to emphasize today is that our strategy of good fiscal management also means that "retail debt" – government securities like Canada Savings Bonds that are held by individual Canadians – continues to be an active part of our program.
In other words, even though we're eliminating the need for the government to borrow new money on financial markets, Canadian consumers will still be able to buy our retail debt products – including Canada Savings Bonds
This retail portion of the debt constitutes about 20 per cent of the total – with CSBs representing about a third of the retail share (or over $30 billion).
And I should point out that our attention to retail debt is not just a Canadian phenomenon. Among the OECD industrialized nations, at least 12 have agencies similar to our Canada Investment and Savings – including G-7 members such as the United States, the U.K., France, Italy and Germany.
For Canada, the rationale for retail debt and CSBs is clear and compelling. As (Finance Minister) Paul Martin said at last year's CSB launch:
"Canadians who hold government securities are not speculators. They bring to their investment an intimate understanding of, and unshaken commitment to, Canada's strength and potential.
"This is why the share of our debt held by individual Canadians represents a special ‘anchor' in an often turbulent global environment. It means reducing our reliance on foreign investors, and our vulnerability to sudden shifts on volatile money markets."
A ‘special anchor.' I agree with that powerful summary of the benefit CSBs provide Canada. Because, as Minister Martin said, financial markets can indeed be volatile. We've seen that in the Mexican peso crisis two years back. And it's reflected again today in the currency market difficulties affecting the Southeast Asian sphere.
To me, it's just common sense that one of the buffers – or anchors – that can provide a stabilizing influence, is to have a portion of your debt that is broadly held . This diversification means you are not so vulnerable to the decisions of a small group of institutions or investors; that you have the balancing force of domestic investors, Canadians who can bring consistent, long-term perspective to the marketplace.
And a key part of that perspective is the desire by so many Canadians to play their part in meeting our continuing fiscal challenge. As chairman of the Finance Committee, that's a message I heard loud and clear as I met with and talked to people across the country.
They want to invest in our country – and in their own future. They want to have a role in managing the burden of debt, so we can pass on a stronger, more prosperous Canada to our children.
And this leads me to yet another reason why I see CSBs as an important part of good public policy. The payroll savings plan is a unique opportunity for younger workers to invest in their own future on an ongoing basis.
So our commitment to Canada Savings Bonds is constant and concrete. But we also recognize that, in today's fast-paced financial marketplace, past-practice is no guarantee of tomorrow's success. Sticking with the status-quo has become a virtual formula for failure.
Instead, we have opted for innovation – so that Canada Savings Bonds could win a fair share of the opportunities made possible by new technology and the changing needs of investors and savers.
Here, too, we are not unique. In fact, we are actually playing catch-up, compared to the retail debt offerings available in some other nations. In the U.K., for example, the government offers 10 different debt vehicles.
So, to set our process on track, we started by establishing Canada Investment and Savings – and charging Jackie Orange and her team with the task of revitalizing the sale of federal securities to individual investors.
And they have responded with new products and strategies that are proving their worth – as seen in last year's strong CSB sales.
Today Jackie will have more news to share – and I'll leave it to her, as Canada Investment and Savings' president, to share the details.
But there is one area where I do want to pre-empt her a bit. And that's to offer my own thanks – and that of Paul Martin – to the private sector partners who are such a vital part of the CSB program.
In last week's Throne Speech, a core message was partnership and collaboration.
It pointed to a fundamental truth: that our opportunity for success as a nation will be defined by how well we can work together.
Last year's success of the CSB program was, in its own way, proof of the power that real partnership can deliver: our partnership with over 15,000 employers, who support the Payroll Savings Plan, and our partnership with financial institutions, who are the front-line of CSB cash sales.
I am glad to see that representatives of both groups are here with us this morning, so I can share the "thank you" that you have earned.
Ladies and gentlemen, I'm glad to have had this opportunity to briefly set out the wider public policy "context" for Canada Investment and Savings, and for the upcoming Canada Savings Bond campaign. But it's time to go beyond context and – as a recent movie character suggested – "show you the money!"
So, to talk about the new initiatives and opportunities that Canada Investment and Savings is pursuing – why this year's campaign is truly on "solid ground" -- it's my pleasure to turn the podium over to Jackie Orange, the agency's chief operating officer. Jackie …
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| Last Updated: 2005-01-04 |
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