BoC governor says 500k could join workforce
The governor of the Bank of Canada told an audience at Queen’s University Tuesday that the economy can see prolonged expansion without rising inflation.
That’s because companies can expand to meet demand by tapping new entrants to the workforce including youth, women, indigenous peoples, Canadians with disabilities and recent immigrants to Canada.
“Growing their sales further means increasing investment, leading to the creation of new jobs and increased aggregate supply,” Stephen Poloz said. “Obviously, this is a phase worth nurturing.”
He added that the additional workforce could be 500,000 people which would permanently enable to economy to grow without putting upward pressure on inflation.
While noting that technology will disrupt some industries, the governor said that it would also create new jobs in new and existing sectors.
By following the BoC’s risk-management approach to monetary policy, the central bank can facilitate creation of new potential output, Mr Poloz said.
“If the economy builds more supply than usual, that will put downside risk on inflation; if less, that will create upside risk to inflation, and it is our job to balance those risks,” Governor Poloz said. “We cannot know in advance how far the capacity-building process can go, but we have an obligation to allow it to occur.”
The global economy is forecast to grow by 3.9% this year and next, up from 3.7% in 2017. The US could see 2.9% in 2018 and 2.8% in 2019 following a 2.3% rise in 2017.
Australia will see a 3% growth rate in 2018 and 2019 while major Eurozone economies will be in line with Canada’s growth. The UK will slow to 1.3% this year and 1.1% next year, the OECD forecasts.
“Growth is steady or improving in most G20 countries and the expansion is continuing,” said OECD Acting Chief Economist Alvaro Pereira.
“In this environment, an escalation of trade tensions would be damaging for growth and jobs. Countries should rely on collective solutions like the Global Forum on Steel Excess Capacity to address specific issues. Safeguarding the rules-based international trading system is key,” Mr Pereira said.
