Ed­u­ca­tion, im­mi­gra­tion, can lift growth, BoC says

Edmonton Journal - - FINANCIAL POST - ANDY BLATCHFORD

A top Bank of Canada of­fi­cial points to three ar­eas that could lift the econ­omy’s future growth prospects and have helped in the past: ed­u­ca­tion, im­mi­gra­tion and trade lib­er­al­iza­tion.

Deputy gov­er­nor Lawrence Schem­bri men­tioned the po­ten­tial pre­scrip­tions in a speech Wed­nes­day that was fo­cused on ex­plor­ing and de­mys­ti­fy­ing what he called the “some­what ab­stract no­tion” of po­ten­tial growth, which pro­vides a read­ing on what the econ­omy can achieve on a sus­tain­able ba­sis over the long run.

He de­scribed it as a vi­tal piece of in­for­ma­tion for the Bank of Canada as it gauges in­fla­tion­ary pres­sures and con­tem­plates its in­ter­e­strate de­ci­sions. How­ever, Schem­bri also de­scribed it as slip­pery num­ber that can be tricky to pin down, to the point it’s “hy­po­thet­i­cal.”

One thing about it is ap­par­ent: it has been on the de­cline.

The bank es­ti­mates that Canada’s an­nual po­ten­tial growth will av­er­age 1.8 per cent be­tween 2009 and 2021, which is much weaker than the 2.7 per cent av­er­age from 1982 to 2008.

But that doesn’t mean there’s a short­age of tools to jack it back up again, he ar­gued.

“A sig­nif­i­cant de­vel­op­ment in re­cent decades is that growth in po­ten­tial out­put has been on a gen­er­ally down­ward trend in most ma­jor ad­vanced economies, in­clud­ing Canada, largely ow­ing to the ag­ing of our pop­u­la­tions,” Schem­bri said in a speech to the Ot­tawa Eco­nomics As­so­ci­a­tion and the CFA So­ci­ety Ot­tawa.

“Nonethe­less, we have a rich his­tory of gen­er­at­ing eco­nomic op­por­tu­nity and sup­port­ing growth, and we should draw from past suc­cesses in de­vel­op­ing future poli­cies.”

Schem­bri em­pha­sized what he sees as pos­si­ble so­lu­tions in key ar­eas that, he also ac­knowl­edged, sit out­side the cen­tral bank’s pol­icy ju­ris­dic­tion.

Amid a “for­mi­da­ble chal­lenge” pre­sented by the coun­try’s ag­ing pop­u­la­tion, Schem­bri listed the need for more im­mi­gra­tion as a rem­edy that will de­liver in­creas­ingly necessary in­jec­tions into the labour sup­ply.

He stressed, how­ever, that the coun­try must do a better job of match­ing new­com­ers’ skills with the needs of the work­force in order to get the most out of higher im­mi­gra­tion lev­els.

A boost in the ar­eas of ed­u­ca­tion and train­ing would help work­ers keep up with the ac­cel­er­a­tion of tech­no­log­i­cal change, make them more pro­duc­tive and con­trib­ute to the re­duc­tion of in­come in­equal­ity.

When it comes to trade lib­er­al­iza­tion, the deputy gov­er­nor said Canada’s po­ten­tial out­put could get a lift by open­ing up new av­enues and by low­er­ing more bar­ri­ers for com­pa­nies.

It must, how­ever, main­tain a fo­cus on en­sur­ing work­ers will also see some of the ben­e­fits, he said.

But even if Canada raises its po­ten­tial growth, he said the con­sid­er­able un­cer­tainty around the data used to iden­tify it means the bank can re­ally only aim for “rea­son­ably ro­bust es­ti­mates.”

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