Canada can avoid chronic slow growth, but it needs to boost productivity, Bank of Canada’s Wilkins says
OTTAWA — Canada is well-positioned to secure prosperity and avoid a long period of slow growth, a senior Bank of Canada official said on Wednesday, provided the right steps are taken to spur productivity.
In a speech to a business audience in Toronto, Bank of Canada Senior Deputy Governor Carolyn Wilkins made no mention of future rate moves and said monetary policy can only go so far in ensuring economic prosperity.
“Canada and other advanced economies will need to do more to support prosperity and avoid suffering from chronically slow growth and weak demand in the future,” she said.
Last month, the Bank of Canada held its overnight interest rate steady, which it has done for more than a year even as several of its counterparts have eased, but left the door open to a possible rate cut if a recent slowdown in domestic growth persists.
Since then, data has shown the Canadian economy surprisingly grew in November, its trade deficit in December narrowed, and manufacturing activity expanded in January for the fifth straight month.
The Canadian dollar pared its decline, touching $1.3283 or 75.28 US cents after Wilkins comments.
Canada, Wilkins said, is not experiencing secular stagnation, where advanced economies suffer chronically slow growth and weak demand.
Canada and other advanced economies will need to do more to support prosperity and avoid suffering from chronically slow growth and weak demand in the future
Although longer term forces, like an aging population and anemic productivity gains are weighing on trend growth, she said immigration and a well-anchored inflation around the Bank’s 2 per cent target is helping to offset some of the impact.
Today’s low neutral interest rate environment, Wilkins said, means central banks have less room to stimulate the economy by cutting interest rates.
Policy makers and private industry, she said, have several possible avenues that could be considered in order to boost productivity including creating new markets, reducing inter-provincial trade barriers, and investments in research, new technologies, skills training and more.
However, Wilkins, who is seen by some market players as a leading candidate to replace Governor Stephen Poloz who will retire in June, said it was not a central banker’s place to be prescriptive.