Edmonton Journal

Change fiscal policy balance, Dodge says


OTTAWA — Former Bank of Canada Governor David Dodge said provincial and federal government­s should run budget deficits to fund infrastruc­ture projects, which would lift the economy and take pressure off the central bank to keep interest rates low.

Such investment­s would provide a productivi­ty boost to a nation that will struggle as an aging population shrinks the workforce, Dodge said Wednesday in Ottawa. Low interest rates aimed at boosting private investment are also leading to undesirabl­e gains in consumer spending and housing, he said.

“We have got the balance of policy wrong, given where we know we are going,” Dodge said. “You want, as a government, to do what you can to actually encourage, support the public infrastruc­ture investment to build that capital, and you want interest rates up a bit to moderate current consumptio­n.”

The comments run counter to Finance Minister Joe Oliver’s April 21 fiscal plan that ended seven years of deficits, and measures by Ontario and Quebec provincial government­s to curb their shortfalls.

Dodge, who was a top finance department official before leading the Bank of Canada from 2001 to 2008, said federal and provincial government­s have room for deficits if used for investment­s such as roads or communicat­ions networks.

“The better balance would be for government to do more on its side, and allow us to not have this distortion of asset prices that we get from this extraordin­arily low interest-rate environmen­t.”

 ??  ?? David Dodge
David Dodge

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