It’s often said that parting is such sweet sorrow. Bank of Canada Governor Mark Carney gave his long anticipated parting speech yesterday. It was his final scheduled public appearance before taking over at the helm at the Bank of England, the second largest in the world. Although Carney is leaving before his seven-year term is up, he helped lead Canada through the worst recession since the Great Depression; incoming governor Stephen Poloz certainly has some big shoes to fill. In his last address, Carney wasn’t shy about the challenges facing Canada on the way back to economic prosperity.
Beware a Decade of Stagnation
If the financial crash of 2008 has taught us anything, it’s that the world’s economies are closely intertwined. While the subprime mortgage fiasco played out on Wall Street, Europe was plunged into a recession with no end in sight. Although our biggest trading partner remains the United States, Europe’s recession has a ripple effect on the Canadian economy as well.
“Without sustained and significant reforms, a decade of stagnation threatens,” Carney warned in his address. “Europe can draw lessons from Japan on the dangers of half measures.” Europe is at a standstill right now, deciding whether stimulus or austerity is the solution to its economic woes.
Canada Must Take a Stance
According to Carney, Canada has two options: we can hunker down and wait for the drawn out repair process to take effect in the remaining G7 economies, or shift the focus to building on our own economic strengths and moving forward in a new global economy. Canada has often been criticized for its reliance on the U.S. economy, and Carney has been a longtime proponent of economic diversification. According to him, if Canada wants to escape its trap of anemic, sub-two per cent GDP growth, it needs to form new trade agreements with faster growing economics likes China and Asia, which represent one half of the world’s imports growth.
We Still Have a Long Way to Go
Although the Canadian economy has recovered somewhat to pre-recession levels, Carney says there is still far to go. Although we were not as hard hit as other G7 countries, we could have better weathered the strorm. Carney points to the lagging export sector, as exports are $130 billion less than they should be following prior postwar recessions. Canada has been hurt by its strong currency; although a strong Loonie is favourable for Canadians travelling aboard, it has an adverse effect on our export sector.
Despite sub-two per cent GDP growth, though, the Canadian economy hasn’t been all doom and gloom. In addition to performing relatively well compared to other G7 countries. Carney noted that Canada’s GDP levels returned to pre-recession conditions at the start of 2011.
An Improving Job Market
The Canadian job market is showing promise of recovery. Carney noted there are 480,000 more Canadians working than when the economic crash first happened six years ago. Alberta and the oil sands continue to be the engine behind Canada’s economic growth. “Canadians are going where the jobs are,” Carney said. “Last year, there was a net inflow of more than 40,000 people into Alberta from the rest of Canada, a level of mobility that approaches its previous peak.” However, with the price of oil falling, it remains to be seen how Alberta will fare over the next decade.
A Strong Bank Base
Carney concluded his speech by praising Canada’s rock solid banking sector and emphasizing the importance of businesses investing in their workforce. “In a rapidly shifting world, only sustained education, ingenuity and investment can maintain competitiveness,” he said. “This means we must continuously invest in our workforce. With technology and trade transforming the workplace, the need to improve skills across the spectrum of work has never been greater.”