Bank of Canada Governor Mark CarneySean Kilpatrick
A powerful restructuring of the global economy has begun but "historic" efforts will be needed to support it, Bank of Canada Governor Mark Carney warned Monday.
The central bank chief said in a speech in Victoria that Canadian businesses need to support the recovery or risk having it disappear.
Governments and central bankers have done about all they can to rescue the economy, globally and domestically, from disaster.
In effect, he said, governments around the world put in place "war-time spending on a peaceful calamity" that likely averted a depression.
But he warned that although it has worked in the short term - most economies have begun to grow again - the recovery faces a long and arduous road back, and it will need the private sector to sustain it.
"Canada is entering this period with many strengths, but the efforts required of us will be historic," he said in a speech to the Greater Victoria Chamber of Commerce.
"Our businesses will need to develop new markets as the traditional advantage of relatively open access to U.S. markets becomes less valuable."
In July, Mr. Carney was among the first to publicly declare the recession over, after three straight quarters of economic shrinkage in Canada. And he remains among the most optimistic of forecasters in projecting growth at 3 per cent next year.
Mr. Carney warned again Monday that the continuing strength of the dollar could hold back a strong recovery from the recession.
"The recent rise in the dollar is, in part, a reflection of the same factors that are leading to a recovery in Canada, notably the rebound in commodity prices," the central bank chief said. "It is also a result of a more generalized weakening of the U.S. dollar, as global financial conditions normalize."
Mr. Carney cited several positive factors around the world but warned that "a persistently strong Canadian dollar would reduce real growth and delay the return of inflation to target."
He described, however, recent events as a "watershed."
"A powerful and sustained restructuring of the global economy has begun," Mr. Carney said. "Canada is entering this period with many strengths, but the efforts required of us will be historic. Our businesses will need to develop new markets as the traditional advantage of relatively open access to U.S. markets becomes less valuable."
Mr. Carney added that as an exporting country, Canada will also be hurt by sluggish global growth going forward as the U.S. and other economies try and repair the damage from years of excess.
As well, he said, although the G20 group of countries have committed to a road map for repairing the world's financial systems, that will take some time and will restrain industrialized countries.
In this context, he said, Canada's economy will need to lean more heavily on its domestic sector than normal.
For that to happen, he said "consumer spending will require household decisions that are based on confidence rather than relief ... and firms will need to act with confidence as well" by resuming hiring and capital spending.