Thank you very much.
Hello. Thank you for having me here today.
I'll begin with where we are. To be blunt, Canada's productivity record is not great. This is not news to anybody here. This poor performance is not something we can blame on one or two sectors of the economy, or on any particular region. It's a widespread problem across the economy and across the country. We're also getting worse. Over the past five decades, Canada's productivity has deteriorated more than that of other G7 countries, and our performance is particularly bad when compared to our nearest neighbour.
Why does this matter? Productivity allows the economy to grow when resources are limited. It supports higher wages without fuelling inflation. When productivity is rising, everyone benefits from a higher standard of living.
However, as the deputy governor, Nicolas Vincent, said in a speech just last week, Canada right now is “caught in a vicious circle”. Because productivity is lagging, businesses can't increase wages as much as they otherwise would. Slower wage growth means weaker consumption. He said, “faced with [tepid] demand...businesses are...less [likely] to invest in new equipment or technology”. He also said that sagging wages also make it “harder [for employers] to keep our best workers in Canada and to attract...talent from [abroad].”
As the senior deputy governor, Carolyn Rogers, said, we are facing a productivity “emergency”.
While we may all want a quick fix, the reality is that it won't be easy. We need to create the conditions that spur business investment. We need to encourage risk-taking, innovation and growth.
We must ensure that our workers have the skills they need to create maximum value.
I will conclude with an obvious point: The Bank of Canada has no direct influence on productivity, but it can play a role in encouraging public dialogue on the issue.
Canada has not always lagged in productivity. In the 1960s and the 1970s, we were a leader.
We don't need to stay in this productivity purgatory. If businesses, governments and Canadians all pull in the same direction, we can escape the vicious circle that Vincent mentioned and reclaim our productivity edge.
The other crucial role the bank plays is keeping inflation low, stable and predictable. There's a lot of uncertainty out there right now. When businesses are confident that inflation will remain low and stable, it makes it easier for them to invest in new technologies, in factory expansions or in the training that could ultimately improve their productivity.
Thank you.