Canada’s Economic Future at Risk: Bank of Canada Sounds Alarm on Slumping Productivity

The Bank of Canada is ringing alarm bells over Canada’s slumping productivity in a new speech by Senior Deputy Governor Carolyn Rogers. She warns the nation faces a “productivity emergency” that imperils future economic expansion and living standards if not addressed. Canada has fallen to just 71% of U.S. output per hour worked, down from 88% in 1984, posing inflation risks, says Rogers.

Urgent action is required to boost business investment, which has lagged for decades in Canada relative to other G7 nations, according to the Bank of Canada. Rogers notes capital spending per worker by Canadian firms is well below U.S. levels and has fallen further the past 10 years. Without stronger investment, Canada cannot achieve the productivity gains essential for healthy, sustainable economic growth.

Calling For Reforms

The Bank of Canada is calling on policymakers to implement reforms increasing competition across sectors and better matching workers’ skills with available jobs. Rogers also stresses the need for regulatory certainty to encourage risk-taking and innovation. “Increasing productivity is a way to protect our economy from future bouts of inflation without having to rely so much on the cure of higher interest rates,” she asserts.

If Canada hopes to safeguard living standards against threats like climate change impacts, demographic shifts and global economic tensions, it must address weak productivity with urgency, the Bank of Canada warns. As Rogers states, a more productive economy can achieve stronger, more inclusive growth while facing less inflation pressure. The question is whether Canada will heed this productivity SOS from its central bank.