‘Now’s the time to build,’ Carney says; Surprise upsides to an expensive dollar – by James Munson (iPolitics.ca – Septmeber 21, 2012)


iPolitics James Munson interviewed Bank of Canada Governor Mark Carney to get his thoughts on Canada’s role in the global commodities supercycle this past Friday. In Part 1, he explained his view that the resource boom is “unambiguously good” for Canada. In Part 2, Carney explained the supercycle as part of a larger global economic restructuring. Today, in Part 3, he describes the policy and investments options Canada has at its disposal to best take advantage of high commodity prices.

High commodity prices may hurt manufacturers, but they could provide ways to revive the sector and even reasons to go green, said Mark Carney.

The resource boom, sometimes called a commodities supercycle, stems from the rise of emerging economies as the main drivers of global growth and is “unambiguously good” for the country, said the governor of the Bank of Canada in an interview with iPolitics last week.

But while the benefits for the country’s miners and petroleum producers are obvious, Carney’s feel-good conclusion takes into account other opportunities for Canada stemming from the economic momentum of places like China.

“Just because it’s good doesn’t mean it could not be a whole lot better,” said Carney in the interview. “And that gets into questions of how do we maximize the returns, how do we deal with this world that has really been transformed?”

“There’s a real role for policy to ensure that good is better,” he said later. “And now that’s where the Bank of Canada stops and others take over because it’s not our responsibility.”

Carney is, in fact, quite limited in the kind of recommendations he can make as policy makers wrestled with the impacts of the supercycle.

But once you look at his analysis of the resource boom’s causes and impacts on the Canadian economy, spelled out in a speech he gave in Calgary on September 7, you begin to see that “unambiguously good” doesn’t just mean pumping for more oil and digging more mines.

Where Carney is coming from

The Bank of Canada has numerous roles in the economy: manage inflation, distribute and control bank notes and keep the financial system stable.

One element of conducting monetary policy is analyzing the forces impacting the Canadian economy, said Carney, and forecasting what’s most like to happen and explaining risks on the horizon.

“All that is in our policy,” he said.

But beyond painting an accurate picture of the economic reality Canada finds itself in, and from the same position, as observer, point out where risks and benefits will lie in the future, there’s little more the bank can do.

“When you get to the broader suite of measures that governments – and potentially companies, but essentially governments – can do to address or maximize the returns for all Canadians of some section of the Canadian economy, we have to be very careful in being prescriptive,” says Carney. “These are not our responsibilities.”

Importing tech will be cheaper

In his Calgary speech, Carney explained that the resource boom is part of a global economic restructuring where the commodity-intensive growth in emerging economies will keep resource prices high and will reconfigure where Canadian businesses can find lucrative markets.

In adjusting to this new normal, where commodity prices will keep the dollar high and manufacturers will face new pressures, that same sector will have at least one way to create opportunity, said Carney.

For the rest of this article, please go to the iPolitics.ca website: http://www.ipolitics.ca/2012/09/21/nows-the-time-to-build-carney-says-the-surprise-upsides-to-a-resource-boom/