What the BoC’s ‘productivity emergency’ will mean for you | Power Play with Vassy Kapelos

That was the senior Deputy Governor of the Bank of Canada sounding off on lagging productivity in this country describing it as you heard as an emergency Carolyn Rogers told a business audience in Halifax this week that not only is our economy’s performance on the productivity front in much worse shape

Than the us but it also has a material impact on inflation and the bank’s efforts to tame it to unpack the deputy Governor’s warning I’m joined tonight by Pedro an Tunis he’s the chief Economist at the conference Board of Canada hi Pedro great to see you thanks for making the time it’s a

Pleasure before we get into uh exactly how it was characterized by uh Miss Rogers I wanted to ask you for people watching who don’t converse daily on productivity which is most of most people watching including myself like how would you best Define productivity in layman’s terms yeah I I I think well

Now one word it’s it’s Prosperity essentially when we’re talking about GDP per hour work that’s typically what you know Economist or jargon is is telling us about productivity what it is is essentially the the the income generated by economic activity divided by essentially worker hours how much effort

We put in per person hour worked uh and how much incomes that that’s driving so that’s really important because income is essentially our wages it’s our profits uh and it’s also what government’s tax to provide our our social uh programs and other services uh so I would just say you know essentially

Productivity is the driver of our prosper it of our purchasing power and our ability to afford programs do you agree with the deputy Governor’s assessment that it’s in an emergency State at this moment yeah well I think we’ve been hammering on this for a long time and it’s getting worse and

Worse is the problem and especially in the last year where we’ve seen the US economy really forging ahead whereas in Canada if you look at what’s happened in Canada especially in the last year we’ve seen essentially the economy stalled and we’re continuing to higher so we’re not getting really any additional GDP or

Output or income uh for those uh additional worker hours put into the economy so our productivity has really plummeted in the last year and you know so this I think there’s some parts that are cyclical to this there’s other parts and I I think the Deputy Governor really

Made the point that are are really easy to track it’s just our investment our ability to attract you know private investment in productive Capital so so think of machinery and equipment uh you know the the the deputy government made a point of comparing uh somebody with a

Shovel versus with a snowblower or with a truck uh you know very different output per person hour worked in those situations so that’s a really important piece as well so what’s the culprit like why is it that we aren’t investing in those typ why why are we buying the

Shovels and and not the other stuff is it the decision is it decisions on the part of business not to make those types of Investments is it a Reliance on other things that supplant that what do you believe is the culprit well I think again if we go back kind of longer term

To some of the uh kind of the trend issues you know we hear it from businesses it’s nothing new here uh it’s our ability to uh be competitive on for example the tax bill uh you know we had corporate taxes that were you know in

Line with the US prior to the uh tra uh the tax cuts in 2017 that President Trump put in place uh that’s no longer the case we’re no longer competitive on tax for instance uh when we look at uh you know essentially uh the ease of uh

Getting a projects approved and the ease and certainty of having an investment come to fruition I think that’s a major problem in Canada uh and that continues to hinder us and then there’s competitiveness issues not sorry not competitiveness issues but uh you know uh protectionist issues coming from

South of the Border so you know when we’re tearing up NAFTA that is very scary for Canadian businesses who need access to us consumers so all of these these are just a few of the pieces I think that we know are hindering investment in Canada and if you look

More recently now well guess what the econom is in a slump profits are down um you know and we’re seeing uh you know essentially business investment continuing to fray in comparison to the Us and other jur jurisdictions yeah the Deputy Governor pointed out you know relatively speaking Canadian productivity back in 1984 uh

The economy was producing 88% of the value generated by the US economy per hour by 2022 it had fallen to just over 71% relative to the United States we’re just a few weeks out from the federal budget is there anything that can be done from a federal policy perspective I

I and I don’t want to instigate that or insinuate rather that it’s you know going to be a quick fix given the the that this has been a problem for so many decades but what would like get the ball rolling in the right direction in your view if you could isolate one

Thing well um I I mean I think uh I think taxx reform tax competitiveness I don’t think it’s going to happen in this budget but I think that’s something we need to think about again uh you know we’re going the route of subsidies and I don’t know that you know this is uh

Rather than being an even Keel on the subsidies a Level Playing Field we know we’ve targeted certain industries and I worry about government’s picking winners specifically so you know I would rather see something that’s more broad that helps uh you know competitiveness and and that’s one thing that the governor

The Governor talked about uh at length uh and of course another piece around competitiveness is one that we’ve uh long known about and that is you know being able to size up businesses because of access uh just in Canada so interprovincial trade barriers that’s been you know 20 30 years that we’ve

Been discussing this but that’s another one that keeps coming up and and I think is was hinted at this uh in that speech yeah interesting the US is subsidizing you know their with their own Ira so much of the industry there yet they remain pretty competitive that’s that’s a conversation for another

Day I hope I can pick your brain on another instance Mr antunes Pedro I appreciate the time it’d be a pleasure thanks

Conference Board of Canada’s Chief Economist Pedro Antunes explains the BoC’s alert on productivity and what it means for consumers.

Subscribe to CTV News to watch more videos:

Connect with CTV News:
For live updates and latest headlines visit:
For breaking news, fast, download the CTV News App:
Must-watch stories and full programs at

CTV News on TikTok:
CTV News on X (formerly Twitter):
CTV News on Reddit:
CTV News on LinkedIn:

—
CTV News is Canada’s most-watched news organization both locally and nationally, and has a network of national, international, and local news operations.

Reference