Thank you for the question.
First, I would emphasize that productivity isn't worse than it was in the 1930s. We would be living in huts if that were the case. What I said was that GDP growth over the last decade has been the worst since the 1930s.
It's still true, what Rogers said, and I'm glad Rogers made the point. I don't think people realize how extraordinary it is for a deputy governor of the Bank of Canada to declare our productivity an emergency. Productivity is not something the Bank of Canada directly has a responsibility for. Their only mandates are to keep inflation at its target and to maintain financial stability. Obviously, the bank feels very strongly that our low productivity is a threat to keeping inflation under control.
I'll elaborate on that. For example, wage growth is 4% these days. Yesterday, in its monetary policy report, the Bank of Canada discussed how wage increases of 4% can only be non-inflationary and can only be consistent with a 2% target if you have productivity growth. We have that in the U.S. I think the U.S. demonstrates the benefits of a society where you have strong productivity growth due to high rates of investments. You can have high rates of income increases and maintain low inflation.
Obviously, the carbon tax is one variable that's going to complicate achieving low inflation. If you have energy prices rising, that means there's going to be more pressure in other sectors of the economy to lower inflation. That's one reason why.... If you compare the behaviour of the Canadian and U.S. economies these days, the U.S. economy is ripping. It's growing, if anything, much too fast. Its GDP growth is solid. It has added 300,000 jobs in the most recent month. The only question in the U.S. these days is whether the Federal Reserve board will have to postpone cutting interest rates because of it.
If you look at Canada, our GDP growth over the last couple of quarters has essentially been zero. It would be a decline on a per capita basis. We added no jobs in the most recent month, while the U.S. was adding 300,000. You can see right away that our stock market is lagging substantially behind the U.S. market. A lot of this reflects.... Again you have to look at the fact that over the last decade, the U.S. increased business investment over 30% and ours dropped over 20%. That 50% gap is extraordinary. We have never seen something like that. This is why the Bank of Canada is saying, “break the glass”.