MNI POLICY: BOC's Wilkins: Global Debt Threatens Growth>

By Courtney Tower

     OTTAWA (MNI) - Following are the key points from a speech by Bank 

of Canada Senior Deputy Governor Carolyn Wilkins on Thursday, to the 

University of British Columbia School of Economics and CFA Society 

Vancouver, in Vancouver, British Columbia: 

     - Wilkins said elevated and rising global debt was a headwind to 

growth that "makes us vulnerable to another period of financial 

instability." Rising debt, she added, is "the global development that 

concerns me the most." 

     - More needs to be done to reduce the downside risks facing 

economies, and at the top of that is for the United States-China to 

resolve their trade war. Wilkins took direct aim at the "misguided" 

policy of imposing tariff and other barriers to trade. However, she 

expects global expansion to continue Imposing tariffs to bring down 

trade deficits and bring back exported jobs "may be seductive but it's 

misguided," Wilkins said. "Tariffs lower GDP for everyone because they 

harm investment and productivity," she added. "That's why it would be 

good for everyone if the United States and China resolved their 

dispute." She also called for an end to United States tariffs on steel 

and aluminum affecting Canadian industries, and ratification of the 

Canada-United States-Mexico agreement. 

     - Although the global financial system "is in a better place" than 

a decade ago, uncertainties such as trade tensions "could throw us off 

track." She added: "When downturns occur, high leverage is usually an 

amplifying factor." Top of her list of things needing to be done to 

reduce downside risks is "a long-lasting resolution to the current trade 

war." This conflict, she said, "is threatening growth around the world 

right now." Among other things would be to extend the stress tests that 

banks must take to non-bank financial institutions, including asset 

managers. 

     - On the domestic front, Wilkins made no reference to Bank of 

Canada monetary policy following the more dovish turn taken in the March 

6 policy statement. The BOC then said the first half of this year will 

show weaker growth than had been expected, which Wilkins repeated 

Thursday. She still expects Canadian GDP growth to pick up "later this 

year." 

     - Wilkins did repeat that household debt in Canada, at about 178% 

of disposable income, was the Bank's chief concern for vulnerability to 

the financial system. She said, though, that it seems to be stabilizing, 

and that chartered banks in Canada can handle economic shocks that might 

occur from falling house prices. 

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

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