Uncertainty, as well as an unfamiliar process of repairing policy in other markets, remain the largest obstacles to the recovery of a delicate global economy, said Mark Carney, Governor of the Bank of Canada.
Carney was the keynote speaker Monday at the Vancouver Island Economic Alliance’s annual summit. He spoke before more than 500 Island civic, business, and First Nation leaders at the Vancouver Island Conference Centre on the recovery of the world’s economy.
The interconnectedness of the global economy, said Carney, is both a blessing and a curse in a fragile economic climate.
“To the benefit of billions of people, goods, capital and ideas flow across the border as never before,” said Carney. “Unfortunately, so too does angst.”
While Canadian economic policy remains sound, external variables like the existential crisis of the euro, slowing economic growth in China, and an uncertain approach by the U.S. to its ailing economy have created strong headwinds for Canada, though confidence here exceeds that of most other countries.
“There is a synchronous slowdown underway in the global economy. This past weekend in Tokyo, when the International Monetary Fund marked down its growth forecast, no region or major economy was spared,” he said. “Further, the IMF warned that the downside risks have risen.”
Despite that, Carney added that while Canada’s economy is being negatively affected by global uncertainty, confidence here remains strong, and the Bank of Canada considers other markets to set its own monetary policy to provide as much certainty as possible for Canadians.
“While we obviously cannot determine events over which we have no control, we can be transparent about what we expect and how we would react to different scenarios,” he said, noting that Canada’s monetary policy is clear and credible, and that our financial system has proven to be the most credible in the world during the global recession. “The Bank will take whatever action is appropriate to achieve the two per cent Consumer Price Index inflation target over the medium term. That certainty is our contribution to ensuring that Canadians can invest and plan with confidence.”
Sasha Angus, CEO of the Nanaimo Economic Corporation, expressed concern over the high Canadian dollar and its effect on local tourism. Carney replied by stating that while a strong dollar does result in economic headwinds for sectors like tourism and manufacturing, those are consequences to a well-functioning financial system compared to others around the world.
Ron Cantelon, Parksville Liberal MLA, asked Carney if he saw improvement in the future of the forest industry in B.C.
“The U.S. housing market has to stabilize first,” said Carney.
Canada’s housing market, Carney said, has become stretched and will not likely be as strong as an economic driver as it has been in recent years.
He also noted a strong dollar helps Canadian businesses and industry import equipment and tools at a lesser cost. Two weeks ago, Nanaimo city council gave approval for city staff to purchase a new $606,000 fire engine from a Wisconsin-based company largely because of a strong dollar, which helped the city save more than $10,000 alone on the exchange rate.
He also noted that with government economic stimulus programs largely coming to an end, the Bank of Canada has implemented policy to provide incentives and certainty for Canadian business and industry to spend instead of sitting on a large cash flow, which provides little upside because of low interest rates.
Carney added that one thing Canadian businesses can rely on is a strong financial system if times once again get rough. “We will continue to invest in our greatest resource, which is our people,” he said.
Carney, whose mom was in attendance at his only official appearance in British Columbia in 2012, was provided with a gift basket from Nanaimo’s St. Jean’s Cannery for his efforts.