Prosperity through productivity

Senior Deputy Governor Carolyn Rogers discusses how productivity growth can boost Canada’s prosperity and resilience, especially in a shock-prone world. Focusing on Canada’s banking sector, she explains how competition can improve productivity. But, she warns, it comes with trade-offs that must be managed carefully.

Productivity is a pressing issue

Productivity is not just an abstract economic concept—it’s central to Canadians’ quality of life, economic growth and financial resilience. Recent changes in US trade policy have created new challenges for Canada, making the need to improve productivity even more urgent.

Although inflation is under control, the cost of living remains challenging, especially for lower-income and younger Canadians. Productivity growth can help make life affordable.

The role—and risks—of competition

Competition is a powerful tool for improving productivity because it encourages innovation and improves efficiency. But it comes with complex policy trade-offs. Too little competition leads to stagnation, while too much can result in instability.

Policy-makers must balance these trade-offs using laws, regulations and incentives, and they must adapt policies as technology and market conditions change.

Banking reforms should drive productivity gains

Upcoming reforms to Canada’s financial sector, including Real-Time Rail and open banking, are designed to increase competition and boost productivity in a sector that affects the entire economy.

• Real-Time Rail will modernize Canada’s payments system—the highway that moves payments around the economy. It will allow instant money transfers and give non-bank players direct access to the payments infrastructure. This will make payments more efficient and add competition to Canada’s concentrated banking sector.
• Open banking will give Canadians control over their financial data. It will make it easier to compare banks and switch providers. The goal is to encourage innovation and make the banking sector more responsive to the needs of customers.