Call him Coach Carney.
Bank of Canada Governor Mark Carney’s interviews with the British Broadcasting Corp. and CTV News highlight how the central bank has done about all it can to boost Canada’s economy. If the country aspires to economic growth in excess of 2 per cent, then politicians and business executives will have to make it happen.
The Bank of Canada can lower interest rates, but it can’t take advantage of them by investing in infrastructure or starting new companies. Mr. Carney was clear that he has no intention of joining other central banks in cutting interest rates; in fact, he’s inclined to raise Canada’s benchmark rate as soon as the European debt crisis recedes.
“Interest rates are 1 per cent in Canada; that’s very low,” Mr. Carney said on the BBC show HARDtalk. “We have a financial system that’s firing on all cylinders and so we will have to adjust – we will adjust if it’s appropriate.”
Of course, it could be a while before the threat of a euro collapse no longer hangs over global financial markets. Mr. Carney seems intent on using that time to coax, cajole and bully Canada’s economic actors into becoming more competitive players in the international economy.
In his interview with CTV, Mr. Carney said Canadians quit worrying about the European debt crisis because it’s out of their control. Canada has relatively little exposure to Europe, and the country’s banks are solid enough to withstand a worst-case scenario. Canadians, he said, need to focus on “how we’re going to grow our economy, which is largely going to be investing, in productive capital, not in houses or condos, and in growing our economic relationships with major emerging markets. That’s how we are going to grow our economy over a five-, ten-year period.”
The message isn’t new – Mr. Carney has been warning about a housing bubble for more than a year, and he flagged how poorly Canada has done in exporting to the fastest growing economies in a speech in April. But the delivery has changed. When previously Mr. Carney was seeking to explain, he now seems to be trying to motivate.
“We can’t solve the euro crisis for the Europeans. We can’t fix the U.S. fiscal situation. What we can change is how productive our businesses are. We can change the markets into which we sell. Both of those will take time; Olympian type efforts. You’ve got to get up every day like [Canadian silver medalist] Adam Van Koeverden has and does and train and work and keep your eyes fixed on that goal and not be distracted, as difficult as that is, on events in Europe.”
Governor Carney makes a point of avoiding anything that could be construed as investment advice. In his interview with CTV, Coach Carney was rather critical of Team Canada, suggesting the country is squandering the economy’s relative strength by plowing so much wealth into housing.
Mr. Carney explained that inbound capital flows are stronger because international investors see Canada as a safe place to park their money. But Canada isn’t taking advantage of that windfall, he said.
“Our challenge as a country is how do we use that capital that comes in? We can use it to grow our economy, invest in new productive assets in industries, or we can build houses,” he said. “Our view is we should do the former.”