Stephen Poloz Former BoC governor warns on low business investment, lost productivity in 2024

Stephen Poloz Former BoC governor warns on low business investment, lost productivity in 2024 – Stephen Poloz is concerned about investment levels in Canada’s private sector, which he says has been dampened by higher government spending and volatility in U.S. trade relations.

The previous Bank of Canada governor spoke at an Economic Club of Canada event in downtown Toronto today alongside former federal finance minister John Manley.

Poloz says certain moves by the federal government are contributing to lower business investment rates and productivity growth in the private sector. (Read More: LOAN PANDA Understanding of Financial Planning in 2024: Causes and Solutions to Financial Pressure in Malaysia)

“We got to the point where there was not as big a windfall to cover all of the things that they wanted to do this time. And so they needed to raise some kind of a tax,” he said.

“Every economist will tell you, all things equal, raising the capital gains inclusion rate, it’s not the best time in the context for investments But the only good news about this is they did that instead of ignoring their own fiscal parameters or their own fiscal buffer.”

Over the past few years, the federal government has been implementing what it calls fiscal guardrails in its budgets to help guide its approach to its finances, set limits on deficits and avoid fuelling inflation.

“If they’ve given up on the fiscal guardrails we take a much bigger macro risk,” Poloz said.

Trade relations with the U.S. that have become frosty at times in recent years have also dampened investment, he said. (Read More : Adoption of New Business Models on 2024: Navigating Innovation for Success

After Donald Trump was elected president, his move to scrap the North American Free Trade Agreement and eventually renegotiate it as the U.S.-Mexico-Canada Agreement hurt investment in Canada, said Poloz.

“If you go back and look at the charts, that’s when you see the fall off in investment,” he said, adding that companies decided to invest more defensively in the U.S.

Poloz said he thinks Canada isn’t “paying enough attention to trade,” in particular to its relations with the U.S.

“That’s where I think we’re failing,” he said.

Meanwhile, Manley says productivity would improve with more investment, but that Canada is failing to help its companies reach a scale where they can be highly productive.

“You need to build an investment climate where businesses are confident where they want to invest, where they feel that Canada has a comparative advantage that will benefit them if they make the investments and have access to markets,” he said.

The remarks come at a time of mounting concern over the country’s productivity levels.

In March, a senior Bank of Canada official said the need to improve productivity has reached an “emergency level” with inflation becoming a bigger threat to the economy.

This report by The Canadian Press was first published May 30, 2024.

Conclusion article Stephen Poloz Former BoC governor warns on low business investment, lost productivity in 2024

Stephen Poloz, former Governor of the Bank of Canada, expressed concerns about low business investment and productivity in Canada, influenced by increased government spending and uncertainty in trade relations with the U.S. He noted that federal fiscal measures are hindering investment, while fluctuating trade relations with the U.S. after Donald Trump’s election also had a negative impact. Former Finance Minister John Manley added that Canada needs to create a better investment climate to boost productivity. These concerns arise amid growing attention to low productivity and inflation risks in Canada.

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