MNI 5 THINGS: BOC's Poloz: Biz Invest Should Take Lead in Econ>

By Courtney Tower

     OTTAWA (MNI) - Bank of Canada Governor Stephen Poloz made the 

following points Tuesday in a speech to the Smith School of Business at 

Queen's University, Kingston, Ontario: 

     - Poloz said Canada's economy is in what he calls "a sweet spot" of 

growth "where investment usually takes over as the lead engine of 

growth." Note the word "usually." What Poloz did not say was that 

business investment is being held back, the Bank said only last week, by 

pressing uncertainties over United States trade policies. 

     - Canadian firms are operating at or near capacity. Poloz cites the 

formation of new companies as key to building new capacity. Canada is 

beginning to do that, Poloz said without providing any data, and is 

finally seeing "some encouraging signs" of new company formation. That 

would provide new demand for jobs and skills in what is now a very tight 

labour market. 

     - Poloz sees "some" labor market slack remaining in the economy 

despite the lowest unemployment rate since the 1970 but says more 

workers will have to be found. Tapping  three areas better than at 

present - youth, women, indigenous, and disabled Canadians - could add 

half a million workers to the labor force. That would increase Canada's 

potential output by up to 1.5% a year plus new investment and 

productivity gains, he said. 

     - Poloz repeated Bank looking at "heightened uncertainty about 

future U.S. trade policies" as well as changes in wage behavior, the 

dynamics of inflation, and the impact of somewhat-rising interest rates 

"given high levels of household debt." The BOC would watch as well the 

"uncertain processes" of expected new business investment. 

     - Poloz repeated that while interest rates are likely to rise, it 

cannot adopt a "mechanical approach" and remains data dependent. He 

reaffirmed the BOC will remain cautious. 

                         ** MNI OTTAWA ** 

--MNI Ottawa Bureau; yali.ndiaye@marketnews.com

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