December 14, 2023
A pair of former Bank of Canada governors believe Canada can expect a soft landing after the current economic downturn. David Dodge, who served as the Bank of Canada’s governor from 2001 to 2008, told BNN Bloomberg that he thinks Canada’s economy will rebound from its period of weakness.
“Our view is that we will continue to weaken through the second quarter, maybe even into the third quarter, but then we’ll recover quite strongly as we get through 2025,” Dodge, who is now senior advisor at Bennett Jones, said in a Tuesday television interview.
Meanwhile, Stephen Poloz, a special advisor with Osler who served as Bank of Canada governor from 2013 to 2020, was not as bullish as Dodge, but told he BNN Bloomberg he also expects a relatively soft landing ahead for Canada after this rough patch.
“We definitely have a rougher ride with Canadian households than we have for U.S. households,”
Stephen Poloz
“We also have a lot going on for companies. We have a lot of debt in our companies and as they roll over they’re also finding that same squeeze. So as we go forward, I think we’re on that cusp of a recession, we’re in recession-light conditions, but on the aggregate, I think it may end up looking OK.”
INTEREST RATE PATH
Poloz said he believes Bank of Canada is done raising interest rates in its bid to tame inflation, but he did not speculate on when Canadians might see some relief in the form of rate cuts.
“I don’t really think it matters all that much,” he said. “It matters to folks on a desk or putting their position against the decision itself, but nobody pays the overnight rate at the central bank. What matters more is the rates that people pay and they’re headed down already.”
Statistics Canada recently reported that inflation in October slowed to 3.1 per cent, the slowest since June, in a sign that heightened interest rates had begun to take hold in the economy. Dodge said a change in tax structure may help speed up the process of getting the economy back on track.
“If governments, both federal and provincial, were to put less emphasis on raising revenues through income tax and more on raising revenue through consumption taxes, we ought to have a stronger economy,” he said. Dodge added that it’s now up to governments and businesses to agree on how to move forward.
“What is absolutely critical is that businesses and governments work together to map out that framework and to coordinate how they deal with this transition, which is going to require very significant public and private investment make it,” he said.
