Business investment in Canada is weak. The 2017 federal budget highlighted how it is lagging the rest of the economy. Bank of Canada Governor Stephen Poloz and his colleagues have expressed concerns. A few weeks ago, Deputy Governor Larry Schembri emphasized the importance of business spending on new plant, equipment and intellectual property for growth in the short run, and for the capital stock that raises living standards over time. Weak investment is a problem now and for the future.
We estimate that Canadian businesses will spend about $11,700 per worker on new, non-residential capital this year, far below a peak of $15,100 in 2014. The fall-off means the average Canadian worker will have less infrastructure,…
The Bank of Canada announced on Wednesday, in a familiar refrain, that it is maintaining its target for the overnight rate. However, the announcement and accompanying news conference signalled a definite change of tone. Barring major negative surprises, it took the possibility of a rate cut off the table. With inflation at target, should the positive economic news continue, a rate hike before 2018 is a real possibility. Two questions arise: first, what might cause this earlier rate hike, and second, is it necessarily a good thing?
Positive economic news that leads to an improvement in the real economy, and thereby an increase in inflation would be a good problem for the Bank of Canada. However, there are at least two…
Canada is about to embark on one of the largest infrastructure investment programs in recent history, and Ottawa is poised to set up the Canada Infrastructure Bank to attract institutional investment. An infrastructure bank is a great start, but governments at all levels have more to do to enable private investment in the program.
While Canadian governments worry about their limited ability to rack up debt to finance infrastructure investment, major Canadian institutional investors are investing in such programs abroad. They invest abroad because Canadian governments have opened few opportunities for institutional infrastructure investment here.
It’s important to remember the benefits of using private investment in place…
