Canada’s economy is moving toward self-generating, self-sustaining growth.
As a result, business investment will become increasingly solid as companies become more confident, says Bank of Canada Governor Stephen S. Poloz.
“Evidence suggests we are now close to the tipping point from improving confidence into expanding capacity,” he told members of the Vancouver Board of Trade today. “Stronger investment means more new jobs will be created. It means more capital and better tools for workers, which will increase labour productivity.”
Poloz discussed three economic questions: how the country will return to natural economic growth; what the economy will look like once it’s there; and what indicators will signal that the economy is on the right path.
Read: Taper time at the Fed
“I anticipate that the Canadian economy will normalize and growth will become natural, in contrast to the economic activity of the past six years, which has been fuelled by policy, including record-low interest rates,” he explained.
He re-stated the Bank of Canada’s commitment to conduct monetary policy to achieve its 2% inflation target.
“As global demand improves and investment growth strengthens, we should see higher potential output growth — that is, an increase in the speed at which the Canadian economy can grow without causing inflationary pressures,” he said. “The message here is that the economy should be able to support stronger activity without stoking inflation as investment ticks upward. Such an endogenous response of potential to stronger demand would be natural, given the slack that we see in our labour market.”
Read his full remarks here.