The newly-elected Liberal government’s top priority should be
raising Canada’s productivity
, according to former Bank of Canada governor
David Dodge
.
“Growth is the key thing for this government,” he said in a
recent interview
with the Financial Post’s Larysa Harapyn. But it won’t come easy.
Dodge said that Canada has gone through the last 15 years with essentially no increase in productivity or in the average income of workers.
“The key objective is to reverse that, and reverse that at a time that will be very difficult,” he said.
Canada is currently facing more barriers to its exports due to
United States President Donald Trump
‘s on-again, off-again
tariffs
. But it must not let that stop it from making investments that will allow it to grow, Dodge said.
The threat of a looming recession is another challenge facing Canada’s economy.
“Whether it ends up being a recession or whether it ends just being a period of ultra-low growth in the world … that makes the job of raising productivity here in Canada even more important,” Dodge said.
And it’s not just Trump’s tariffs that will slow down Canada’s economic growth, but a range of his other policies, according to Dodge.
“[Trump] has a real impact on the global economic growth, on economic growth in the United States and inevitably then, on us,” he said.
The slowing economy will also have an impact on the
Bank of Canada
‘s monetary policy, but Dodge expects only a small reduction in
interest rates
over the next 12 months.
“We’re already in the neutral range on interest rates,” he said. “The Bank of Canada will cope.”
Now the economy is in the hands of the government, Dodge said.
“The big levers of macroeconomic policy are with the government, not with the bank,” he said.
Dodge said that one way to raise productivity is by encouraging innovation, particularly in technology and energy.
“Tech is the route to higher productivity,” he said. “That is absolutely critical.”
The government’s role in that is to build infrastructure for businesses to facilitate raising productivity and making investment more profitable, he said.
“We have the talent and we have the resources,” Dodge said. “The issue is to ensure that governments — federal, provincial and local — don’t create barriers to making those investments.”
Dodge added that Canadians will also have to restrain their consumption in order to release the resources for the investment needed to raise productivity and incomes.
“That’s the road ahead,” he said. “It’s not a very pleasant road because in the end, we’re going to collectively, as a nation, have to save more, we’re going to have to invest more.”
• Email: novid@postmedia.com
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