Canada needs to take steps to address its poor productivity performance, says the former governor of the Bank of Canada.
The country has been at the low end of the pack of advanced nations on that crucial metric for the past 20 years.
“In fact, a recent OECD (Organization for Economic Co-operation and Development) study shows us second from the last in terms of our productivity performance,” Stephen Poloz said during a webinar hosted by the Forum for International Trade Training.
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Poor productivity drags down Canada’s export potential, which is the “lifeblood” of the economy.
“It’s absolutely crucial for Canada because we just simply are not a big enough country,” said Poloz, who is now a special adviser at the business law firm Osler, Hoskin & Harcourt LLP.
If Canadians want to maintain their exceptional quality of life, they need to figure out how to increase productivity and trade flows in and out of this country.
“The living standard can’t be maintained with things like fiscal policy or good monetary policy,” he said.
“Those are just ingredients that can help around the edges.”
There has to be productivity improvements. The root causes of Canada’s poor performance are myriad and complex, but Poloz offered up a good starting point.
“We tend to get in our own way,” he said.
Government regulations need to be streamlined between the different provinces and between the provinces and the federal government.
Poloz would also like to see changes in government processes. For instance, it takes way too long to get permits in place to complete a project.
“That’s just productivity going down the drain,” he said.
He thinks governments need new rules establishing a set amount of time for the permitting process that can’t be exceeded.
Canada also needs to improve its corporate tax system, which is far too complicated, and it should provide more clarity on its net zero emissions by 2050 initiative.
He said companies are reluctant to invest because they wonder if there are sweeping changes coming that will put them out of business by 2050.
“(These) are problems that are fixable, it seems to me.”
The fixes don’t require any expenditures, just changes in rules and procedures, he added.
He thinks the time is right for governments to take these steps because companies are in desperate need of relief after enduring years of COVID-19 turbulence.
“I do think that there is a stronger incentive to clean up some of the regulatory issues, the red tapey type of issues that are slowing us down,” said Poloz.
In the meantime, he advised Canadian businesses to buckle up because there are “tectonic forces” in the global economy that will make for a wild ride in the years ahead.
“Does the future look like it will calm down? My answer would be no, I don’t think so,” he said.
“I believe the underlying fundamentals for volatility are going to get worse, not better.”
One of his biggest fears is the growing populist movement spurred by income disparity.
“It only takes a little bit of politics to mess up a great economic forecast,” said Poloz.
Contact sean.pratt@producer.com
