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Bank governor credits Liberal stimulus with stronger economy

imageOTTAWA – Bank of Canada Governor Stephen Poloz is crediting the Liberal government’s Canada Child Benefit program with the country’s strengthening economy, calling it “highly stimulative.” The federal government introduced the amended formula for providing money to parents of children under 18 years old as its first order of business in 2015. It wasn’t promoted as a stimulus measure, but as part of a package to help middle-class families. Poloz credited the child benefit cheques with improving the economy. “It’s important to bear in mind that the government’s efforts at stimulus are embedded in our view of the economy,” “For instance, the changes to the [Canada] child benefit program has been highly stimulative. You can see that in the consumption figures. So we would not be where we are if that had not occurred. We would be waiting longer for the output gap to close than later this year as we suggested.” Poloz announced the Bank of Canada was raising its benchmark lending rate slightly from 0.5 per cent to 0.75 per cent. It’s the first rate increase in almost seven years. Trade protectionism ‘most important risk’ The government has promised $180 billion in infrastructure spending over 12 years, in part to stimulate the economy. But that funding has been slow to get out the door. Poloz says the stimulus needs to continue, and noted the infrastructure spending is a particular type of stimulus that adds to productivity. “This we expect over time to actually add to Canada’s trend growth rate… That’s got its own positives which are separate from stimulus,” he said. With NAFTA renegotiations looming next month, Poloz says the potential for increased trade protectionism is the biggest risk to Canada. “Trade is the lifeblood of the Canadian economy. If you’re in a business that relies on NAFTA to do your transactions and that could change, well that matters a lot and that’s why you’re hesitating to invest, it’s why you’re not growing your business or adding new jobs,” he said. “Those things will only turn positive when that uncertainty is lifted. So we need to know, well, what’s going to happen to NAFTA one way or the other. The uncertainty is what is holding things back, not necessarily the details.” Poloz says he looks forward to more clarity on the trade file. “Because for sure even though investment is doing better right now, it’s doing less well than it would without that uncertainty… When it’s truly firing on all the cylinders, it’ll be when every company can see clear daylight ahead.”

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