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After months of hyperventilating media reports on Canada’s slide into recession and a looming national economic crisis over falling oil prices, along comes Bank of Canada Governor Stephen Poloz to calm the frothing waters.
The idea that Canada is undergoing a destructive economic mega-shift away from oil and natural resources has been one of the driving metaphors of the current election campaign. To avoid sliding helplessly beyond recession into some dark unknown future, Canada supposedly needs a retooled national policy “vision” from government — new strategies, bold investment initiatives, revamped incentives, grand innovation programs.
No such policy imperatives appeared in Poloz’s speech to the Calgary Economic Club Monday. On the contrary, the central bank governor declared Canada to be a resource-rich economy that will continue to thrive on its natural endowments. “While an abundance of raw materials may complicate the management of companies and the conduct of economic policy, it is far better for a country to have resources than not to have them.” They represent, he said, a “store of value and a source of future riches.”
More importantly, perhaps, Poloz appeared to be cautioning against the grand policy paradigm shifts advocated by some. It’s up to business leaders to manage risks and “be ready to react to market signals and seize opportunities.” As for “policy makers,” Poloz said they can help by “encouraging economic flexibility.” This means, he said, “allowing the necessary adjustments to take place and not frustrating flows of investment or labour from one region to another.”
That advice — let market forces do their job — flies in the face of much of the fuzzy rhetoric and some of the initiatives percolating through Canada’s policy wonkland and much of the media.
There was also not a word from Poloz on the recession and economic slowdown, perhaps because the recession may never have happened and the minor slowdown has already passed. A new report from RBC Economics says Canada’s economy “contracted mildly” during the first half of 2015, but the decline was marginal and concentrated mostly in the energy sector. RBC chief economist Craig Wright said the “flurry of recession talk” was “misplaced.”
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