Producing growth with less inflation

Governor Tiff Macklem discusses how—by investing in technology and people—businesses can help the economy grow more with less inflation.

Watch Governor Macklem speak to the Canadian Chamber of Commerce by webcast. Read the full speech.

Business investment lifts living standards

The Bank of Canada forecasts strong economic growth over the next couple of years.

But with a tight labour market, we’ll need higher productivity—the amount of output produced for each hour worked—to continue to grow while keeping inflation in check.

One way that businesses can help increase productivity is by investing in new technology that makes their operations and workers more efficient. And higher productivity can raise wages and living standards.

Productivity growth is vital to non-inflationary growth and rising standards of living. At a time when inflation is already well above our target, this is more vital than ever.”

Business investment should start picking up

Business investment has been an important reason why Canada is weathering the COVID‑19 pandemic reasonably well.

To adapt to the pandemic, many people started shopping online more and millions of people shifted to working from home. At the same time, investments in digital technology kept many businesses—and the economy—going. While the economy shrank in 2020, the tech sector grew and created many new jobs.

That investment needs to both continue and spill over to other sectors. Overall, business investment in Canada has been weaker than in the United States throughout the pandemic—as it has been for years.

But the Bank sees Canadian business investment improving.

Corporate balance sheets are in good shape, many companies are bumping up against the limits of their capacity, and demand is expected to be strong both in Canada and for our exports to the United States.

An opportunity exists to build a bridge between the short-term changes Canadians have made to cope with COVID-19 and the sustained investments that will grow our economy and improve our quality of life.”

Seizing opportunity promises long-term benefits

On top of digital investments, Canada has other strengths that can help businesses boost productivity and raise living standards.

Our workforce is highly educated and diverse, and we have high levels of immigration. Businesses can build on those advantages—and on flexible work arrangements. This will draw more people into the labour market, such as those in remote locations or with life demands that can make it challenging to work standard hours or come into an office.

Businesses also have a key role to play in training and preparing workers for new technologies. And workers must be prepared to keep their skills fresh. Universities and colleges can help here, while governments can help businesses and workers alike by creating a healthy climate for investment.

Watch Governor Macklem answer questions from the media after his speech.

The Bank has a role to play too

The Bank’s main responsibility is to deliver low, stable and predictable inflation so Canadians can plan and invest with confidence.

Right now, inflation is too high. As we said in January, bringing it back down to our 2% target requires a rising path for interest rates. Businesses can expect that we will continue to act deliberately and communicate clearly—and that we will use our tools to control inflation.

Canadians count on the Bank of Canada to control inflation. And they count on businesses to invest in capital and people to grow our economy.”