DOCSLIB.ORG

Why Canada Needs a Macroprudential Policy Framework

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Why Canada Needs a Macroprudential Policy Framework Institut C.D. HOWE Institute commentary NO. 429 Securing Monetary and Financial Stability: Why Canada Needs a Macroprudential Policy Framework A newly created Macroprudential Policy Framework with clear objectives, tools and lines of responsibility could offer greater assurance of financial stability, while leaving the Bank of Canada to focus primarily on inflation and output stabilization. Paul Jenkins and David Longworth The Institute’s Commitment to Quality About The C.D. Howe Institute publications undergo rigorous external review Authors by academics and independent experts drawn from the public and private sectors. Paul Jenkins is a former Senior Deputy The Institute’s peer review process ensures the quality, integrity and Governor at the Bank objectivity of its policy research. The Institute will not publish any of Canada. He is a Senior study that, in its view, fails to meet the standards of the review process. Distinguished Fellow at The Institute requires that its authors publicly disclose any actual or Carleton University, a potential conflicts of interest of which they are aware. CIGI Distinguished Fellow; and Senior Fellow In its mission to educate and foster debate on essential public policy at the C.D. Howe Institute. issues, the C.D. Howe Institute provides nonpartisan policy advice to interested parties on a non-exclusive basis. The Institute will not David Longworth endorse any political party, elected official, candidate for elected office, is a former Deputy Governor of the Bank of Canada. He is or interest group. Adjunct Research Professor, Carleton University; Associate As a registered Canadian charity, the C.D. Howe Institute as a matter Director, Risk Policy and of course accepts donations from individuals, private and public Regulation Diploma Program, organizations, charitable foundations and others, by way of general Queen’s University; and project support. The Institute will not accept any donation that and Research Fellow, stipulates a predetermined result or policy stance or otherwise inhibits C.D. Howe Institute. its independence, or that of its staff and authors, in pursuing scholarly activities or disseminating research results. HOW .D E I Commentary No. 429 C N T S U T I T June 2015 T I U T S Monetary Policy T E N I E s e s s u e q n i t t i i l a o l p Finn Poschmann P s ol le i r cy u I s n es Vice-President, Policy Analysis tel bl lig nsa ence spe | Conseils indi $12.00 isbn 978-0-88806-951-1 issn 0824-8001 (print); issn 1703-0765 (online) The Study In Brief Canada’s inflation-target agreement between the government and the Bank of Canada is up for renewal by 31 December 2016. In the aftermath of the 2008-2009 global financial crisis, one of the critical issues for consideration is the integration of price and financial stability in the conduct of policy. ThisCommentary addresses the importance for the conduct of monetary policy of having a separate coherent framework for macroprudential policy – designed to prevent the build-up of systemic, or system-wide, financial risks. A key lesson of the financial crisis was the insufficient attention being paid to these risks and their consequences for the economy. The importance of this issue can be seen in two ways. The first relates to the interactions between monetary and macroprudential policy tools in light of concerns about rising levels of household debt. At various times, there will be situations when only one policy tool is needed, when both policies need to be used in the same direction, or when the two policies need to work in opposite directions. The second relates to the Bank’s current “risk management approach” to monetary policy. In the absence of a government framework for the active use of macroprudential tools, this approach implies that monetary policy becomes a more important line of defence against systemic risks than it needs to be, with the risk of sub-optimal monetary policy outcomes. Our conclusions are threefold: • Canada’s 2 percent inflation target and policy framework has served the economy well, most importantly in anchoring inflation expectations; • over the past two years, Canadian monetary policy would have been better placed to combat low inflation and excess capacity had macroprudential policies been openly geared to reducing the systemic risks associated with rising household indebtedness and housing prices; and • drawing on best practices, the government needs to elevate macroprudential policies by establishing clear objectives, tools and lines of responsibility and accountability. The payoff for Canadians cannot be overstated: greater assurance of both financial stability, as a result of assigned responsibility for macroprudential policy, and monetary stability, as a result of the Bank of Canada’s continued primary focus on inflation and output stabilization. C.D. Howe Institute Commentary© is a periodic analysis of, and commentary on, current public policy issues. Barry Norris and James Fleming edited the manuscript; Yang Zhao prepared it for publication. As with all Institute publications, the views expressed here are those of the authors and do not necessarily reflect the opinions of the Institute’s members or Board of Directors. Quotation with appropriate credit is permissible. To order this publication please contact: the C.D. Howe Institute, 67 Yonge St., Suite 300, Toronto, Ontario M5E 1J8. The full text of this publication is also available on the Institute’s website at www.cdhowe.org. 2 The integration of financial stability considerations into the conduct of monetary policy has become an important issue in all countries. In Canada, how best to integrate price stability and financial stability is one of the central issues the Bank of Canada has identified in the lead-up to the 2016 renewal of the inflation-target agreement with the federal government (Côté 2014). Inflation targeting was introduced in Canada in borrowers and financial institutions; (ii) regulatory 1991. After nearly 20 years of high and variable oversight of financial institutions; and (iii) inflation, with the Consumer Price Index (CPI) macroprudential policy. rising at an annual average rate of over 7 percent, This Commentary addresses why it is important the government and the Bank of Canada jointly for the conduct of monetary policy to have announced an explicit target path for reducing a complementary, coherent framework for inflation to levels considered to be consistent with macroprudential policy. We address two aspects overall price stability. Since then, Canada has had of this issue that have immediate and practical an explicit inflation target that has been extended implications for Canadian monetary policy. The first or renewed five times (Appendix A provides a brief relates to the interactions and spillover effects of history of the inflation-target renewal process).1 monetary and macroprudential policy. At the time of the 2011 renewal, the Bank of Depending on economic and financial Canada, as it did in 2006, recognized the need for conditions, there will be situations when only one flexibility in the conduct of monetary policy to policy tool is needed, when both policies need to play a role in support of financial stability. This be used in the same direction or when the two flexibility has been expressed in terms of the polices work in opposite directions. This means period over which the inflation target is achieved, policymakers need to understand not just the use of potentially involving a longer period to support each policy, but also what guides its use. Moreover, financial stability objectives. Nonetheless, monetary much of the impact of policies works through policy is seen as “the fourth line of defence” (Poloz expectations, which are heavily influenced by the 2014, 7) behind (i) the behaviour of individual guiding frameworks. The authors ouldw like to thank Finn Poschmann and Bill Robson at the C.D. Howe Institute, John Murray, Gordon Thiessen and several anonymous reviewers for their comments on earlier drafts of this Commentary. Any remaining errors remain the authors’ responsibility. 1 One of the distinguishing features of the renewal process has been the consistency in agreement to keep the target at an annual rate of increase in the CPI of 2 percent. Over the period from December 1995 to December 2014, annual CPI inflation averaged 1.9 percent. 3 Commentary 429 The second issue relates to the Bank of Canada’s to deal with these risks and promote financial current risk-management approach to monetary stability. policy (Poloz 2014, 2015). This approach implies Macroprudential policy can address both the that, as in the past couple of years, when active time dimension and the cross-sectional dimension macroprudential policy is little used and when there of systemic risk (CGFS 2010), both of which is no guiding framework, monetary policy becomes were present in the run-up to the financial crisis. a more immediate line of defence against systemic The time dimension of systemic risk refers to the financial risks than it needs to be, with exposure to buildup of risks associated with the financial cycle greater risk of suboptimal outcomes in missing the or credit cycle. In the run-up to the global financial inflation target and compromising monetary stability. crisis, these risks related to the rapid growth in Our conclusions are threefold: many countries of total credit, residential mortgage • Canada’s 2 percent inflation target and policy credit, especially US subprime mortgage credit, and framework have served the economy well, most house prices in real terms (that is, relative to the importantly in anchoring inflation expectations; general level of prices). Rapid credit growth was • over the past two years, Canadian monetary associated with a significant rise in the leverage of policy would have been better placed to banks in many countries, as their assets rose relative combat low inflation and excess capacity to capital.
Load more

Recommended publications
  • From Next Best to World Class: the People and Events That Have
    FROM NEXT BEST TO WORLD CLASS The People and Events That Have Shaped the Canada Deposit Insurance Corporation 1967–2017 C. Ian Kyer FROM NEXT BEST TO WORLD CLASS CDIC—Next Best to World Class.indb 1 02/10/2017 3:08:10 PM Other Historical Books by This Author A Thirty Years’ War: The Failed Public Private Partnership that Spurred the Creation of the Toronto Transit Commission, 1891–1921 (Osgoode Society and Irwin Law, Toronto, 2015) Lawyers, Families, and Businesses: A Social History of a Bay Street Law Firm, Faskens 1863–1963 (Osgoode Society and Irwin Law, Toronto, 2013) Damaging Winds: Rumours That Salieri Murdered Mozart Swirl in the Vienna of Beethoven and Schubert (historical novel published as an ebook through the National Arts Centre and the Canadian Opera Company, 2013) The Fiercest Debate: Cecil Wright, the Benchers, and Legal Education in Ontario, 1923–1957 (Osgoode Society and University of Toronto Press, Toronto, 1987) with Jerome Bickenbach CDIC—Next Best to World Class.indb 2 02/10/2017 3:08:10 PM FROM NEXT BEST TO WORLD CLASS The People and Events That Have Shaped the Canada Deposit Insurance Corporation 1967–2017 C. Ian Kyer CDIC—Next Best to World Class.indb 3 02/10/2017 3:08:10 PM Next Best to World Class: The People and Events That Have Shaped the Canada Deposit Insurance Corporation, 1967–2017 © Canada Deposit Insurance Corporation (CDIC), 2017 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior written permission of the publisher.
    [Show full text]
  • The Honorable Stephen S. Poloz Governor, Bank of Canada ______
    The Economic Club of New York _________________________________ The Honorable Stephen S. Poloz Governor, Bank of Canada _________________________________ December 11, 2014 New York Hilton Midtown New York City The Economic Club of New York – Stephen S. Poloz – December 11, 2014 Page 1 William C. Dudley: Good morning...if I could have your attention please. My name is Bill Dudley. I’m the Chair of the Economic Club of New York and I’m also the President of the Federal Reserve Bank of New York. I’m pleased to introduce our speaker this morning, my central banking colleague, Stephen Poloz. I’ve enjoyed his company on many occasions. I have found him not only a highly capable central banker but an astute observer with respect to financial market and economic developments. When we’re at Basel and other places that central bankers meet, I always perk up when it’s his turn to speak. Now some background: He was appointed Governor of the Bank of Canada in June 2013 but he had plenty of prior central banking experience. He first joined the Bank of Canada in 1981 and occupied a range of increasingly senior positions over a 14-year span. In addition to his background as a central banker, he has over 30 years of public and private sector experience in financial markets, forecasting and economic policy. He served as managing editor of the publication, The International Bank Credit Analyst. He also had a long career at the Export Development, Canada where he was President and CEO before becoming Governor of the Bank of Canada.
    [Show full text]
  • Accounting for Ontario's Debt
    ACCOUNTING FOR ONTARIO’S DEBT ABOUT THE ONTARIO CHAMBER OF COMMERCE For more than a century, the Ontario Chamber of Commerce has been the independent, non-partisan voice of Ontario business. Our mission is to support economic growth in Ontario by defending business priorities at Queen’s Park on behalf of our network’s diverse 60,000 members. From innovative SMEs to established multi-national corporations and industry associations, the OCC is committed to working with our members to improve business competitiveness across all sectors. We represent local chambers of commerce and boards of trade in over 135 communities across Ontario, steering public policy conversations provincially and within local communities. Through our focused programs and services, we enable companies to grow at home and in export markets. The OCC provides exclusive support, networking opportunities and access to policy insight and analysis to our members. We also work alongside the Government of Ontario on the delivery of multiple programs, and leverage our network to connect the business community to public initiatives relevant to their needs. The OCC is Ontario’s business advocate. Author: Reid McKay, Economic Analyst Designer: Sarah Fordham RGD, Senior Designer ISBN: 978-1-928052-57-9 ©2019. Ontario Chamber of Commerce. All Rights Reserved. TABLE OF CONTENTS Glossary .......................................................................... 4 Introduction .................................................................... 5 Defining Ontario’s Sub-Sovereignty ...........................
    [Show full text]
  • Toward the Next Renewal of the Inflation- Control Agreement
    Institut C.D. HOWE Institute commentary NO. 453 To ward the Next Renewal of the Inflation- Control Agreement: Questions Facing the Bank of Canada As the Bank of Canada weighs its options for a new inflation-control agreement with the federal government, it should not squander its hard-won credibility by increasing the target rate of inflation. However, it should consider some form of level targeting. Steve Ambler The Institute’s Commitment to Quality About The C.D. Howe Institute publications undergo rigorous external review Author by academics and independent experts drawn from the public and private sectors. The Institute’s peer review ensures the quality, integrity Steve Ambler and objectivity of its policy research. The Institute will not publish any is the David Dodge Chair study that, in its view, fails to meet these standards. in Monetary Policy at the C.D. Howe Institute, The Institute requires that its authors publicly disclose any actual or professor in the Economics potential conflicts of interest of which they are aware. Department at the Université du Québec à Montréal, In its mission to educate and foster debate on essential public policy senior fellow of the Rimini issues, the C.D. Howe Institute provides nonpartisan policy advice Centre for Economic to interested parties on a non-exclusive basis. The Institute will not Analysis, and a member of endorse any political party, elected official, candidate for elected office, the Inter-University Centre or interest group. on Risk, Economic Policies and Employment (CIRPEE). As a registered Canadian charity, the C.D. Howe Institute as a matter of course accepts donations from individuals, private and public organizations, charitable foundations and others, by way of general and project support.
    [Show full text]
  • The Case of Canadian Inflation Targeting
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Laidler, David Working Paper The interactive evolution of economic ideas and experience: The case of Canadian inflation targeting EPRI Working Paper, No. 2015-1 Provided in Cooperation with: Economic Policy Research Institute (EPRI), Department of Economics, University of Western Ontario Suggested Citation: Laidler, David (2015) : The interactive evolution of economic ideas and experience: The case of Canadian inflation targeting, EPRI Working Paper, No. 2015-1, The University of Western Ontario, Economic Policy Research Institute (EPRI), London (Ontario) This Version is available at: http://hdl.handle.net/10419/123489 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have
    [Show full text]
  • Stephen Poloz, Governor of the Bank of Canada, and Carolyn
    Stephen Poloz, governor of the Bank of Canada, and Carolyn Wilkins, senior deputy governor at the Bank of Canada, spoke in Ottawa last month after the bank left interest rates unchanged. https://www.wsj.com/articles/immigration-is-helping-shield-canada-from-global-slowdown-11583074801?mod=lead_feature_below_a_pos1 Photo: David Kawai/Bloomberg News By Kim Mackrael March 1, 2020 10:00 am ET OTTAWA—Canada largely avoided the doldrums that afflicted other advanced economies last year amid a global slowdown. Immigration is a big reason why. Economic growth over the long term generally has two sources: an expanding workforce and advances in productivity, or output per hour worked. When more people are employed, they produce more goods and provide more services, earn more and spend more, creating demand for more workers. Canada owes its relatively solid pace of economic growth in recent years to gains in the labor force rather than productivity, which has stagnated. Canada’s labor force grew 2% last year according to data from the OECD, faster than the U.S. and Japan, the only other two countries for which the organization had data available for 2019. Most of that was fueled by population growth, about 80% of which comes from immigration. The growing head count, in turn, has supported growth in consumer spending and a rebound in home sales and prices that began during the second half of last year. That helped Canada overcome a sharp slowdown in trade, muted business investment and a cooling global economy last year. Above Average Canada's openness to immigration has supported its population and economic growth.
    [Show full text]
  • The Evolving Scope and Content of Central Bank Speeches
    CIGI Papers No. 202 — November 2018 The Evolving Scope and Content of Central Bank Speeches Pierre L. Siklos, Samantha St. Amand and Joanna Wajda CIGI Papers No. 202 — November 2018 The Evolving Scope and Content of Central Bank Speeches Pierre L. Siklos, Samantha St. Amand and Joanna Wajda CIGI Masthead Executive President Rohinton P. Medhora Deputy Director, International Intellectual Property Law and Innovation Bassem Awad Chief Financial Officer and Director of Operations Shelley Boettger Director of the Global Economy Program Robert Fay Director of the International Law Research Program Oonagh Fitzgerald Director of the Global Security & Politics Program Fen Osler Hampson Director of Human Resources Laura Kacur Deputy Director, International Environmental Law Silvia Maciunas Deputy Director, International Economic Law Hugo Perezcano Díaz Director, Evaluation and Partnerships Erica Shaw Managing Director and General Counsel Aaron Shull Director of Communications and Digital Media Spencer Tripp Publications Publisher Carol Bonnett Senior Publications Editor Jennifer Goyder Senior Publications Editor Nicole Langlois Publications Editor Susan Bubak Publications Editor Patricia Holmes Publications Editor Lynn Schellenberg Graphic Designer Melodie Wakefield For publications enquiries, please contact [email protected]. Communications For media enquiries, please contact [email protected]. @cigionline Copyright © 2018 by the Centre for International Governance Innovation The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Centre for International Governance Innovation or its Board of Directors. This work is licensed under a Creative Commons Attribution — Non-commercial — No Derivatives License. To view this license, visit (www.creativecommons.org/licenses/by-nc-nd/3.0/). For re-use or distribution, please include this copyright notice.
    [Show full text]
  • 2020 Annual Report Enbridge—A Bridge to the Energy Future
    2020 Annual Report Enbridge—A bridge to the energy future At Enbridge, our purpose is to deliver the energy that fuels And we’re continuing to build a team with diverse backgrounds quality of life. and experiences so that we can best tackle challenges and drive innovation in our business. Our four core businesses transport, store and generate energy. Whether it’s crude oil, natural gas or renewable power, we are Our core businesses the bridge between energy supply and demand, delivering energy that millions of families, small businesses, industries and We play a significant role in the energy value chain by communities across North America and abroad rely on every day. connecting people to the energy they need and want. We do that by prioritizing safety and reliability above all else, • Liquids Pipelines (LP) transports three million barrels working closely with communities and Indigenous groups near per day (bpd) to 25 refiners, connecting producers to the our operations, and minimizing our impact on the environment, best markets in the U.S. Midwest, the U.S. Gulf Coast and including our ambition to be net zero greenhouse gas (GHG) Eastern Canada. emissions by 2050. • Gas Transmission and Midstream (GTM) connects natural gas supply with key residential, industrial and commercial We think about the future of energy, constantly assess markets totaling approximately 170 million people, as well as energy supply and demand fundamentals and plan decades power generation facilities across the continent. ahead. Enbridge has grown and evolved by investing in new infrastructure and energy technology to meet changing global • Gas Distribution and Storage (GDS) serves approximately energy needs.
    [Show full text]
  • 2020 Annual Report Enbridge—A Bridge to the Energy Future
    2020 Annual Report Enbridge—A bridge to the energy future At Enbridge, our purpose is to deliver the energy that fuels And we’re continuing to build a team with diverse backgrounds quality of life. and experiences so that we can best tackle challenges and drive innovation in our business. Our four core businesses transport, store and generate energy. Whether it’s crude oil, natural gas or renewable power, we are Our core businesses the bridge between energy supply and demand, delivering energy that millions of families, small businesses, industries and We play a significant role in the energy value chain by communities across North America and abroad rely on every day. connecting people to the energy they need and want. We do that by prioritizing safety and reliability above all else, • Liquids Pipelines (LP) transports three million barrels working closely with communities and Indigenous groups near per day (bpd) to 25 refiners, connecting producers to the our operations, and minimizing our impact on the environment, best markets in the U.S. Midwest, the U.S. Gulf Coast and including our ambition to be net zero greenhouse gas (GHG) Eastern Canada. emissions by 2050. • Gas Transmission and Midstream (GTM) connects natural gas supply with key residential, industrial and commercial We think about the future of energy, constantly assess markets totaling approximately 170 million people, as well as energy supply and demand fundamentals and plan decades power generation facilities across the continent. ahead. Enbridge has grown and evolved by investing in new infrastructure and energy technology to meet changing global • Gas Distribution and Storage (GDS) serves approximately energy needs.
    [Show full text]
  • Mother Nature, Not a Bubble
    Mother nature, not a bubble Hilliard MacBeth Hilliard’s Weekend Notebook – Friday June 8, 2018 Richardson GMP Canadian housing myths are plentiful. But a new myth popped up recently in the 10180 101 Street, Suite 3360 Edmonton, AB T5J 3S4 form of a suggestion that “mother nature” is pushing house prices higher in Vancouver and Toronto. Tel. 1.780.409.7735 Fax 780.409.7777 Is “mother nature” driving house prices in those two large cities? Does that mean www.TheMacBethGroup.com it’s not a bubble? Hilliard MacBeth Many people, including former Ministers of Finance, have perpetuated the myth that Director, Wealth Management Portfolio Manager Canada’s house prices are not a problem, except in Vancouver and Toronto, where Tel. 780.409.7740 special factors support their elevated house prices. The special factors most often mentioned for Vancouver are a lack of land as it’s wedged between mountains and the Pacific Ocean. And for Toronto the justifications used are phrases with little or no meaning like “world-class” and alleged record levels of immigration and population growth. But now there is a new term to justify the bubble. Recently the governor of the Bank of Canada, Stephen Poloz, suggested that “mother nature” was responsible for house prices. As quoted in Bloomberg on June 4: Mother Nature' driving Vancouver, Toronto After years of hand-wringing over foreign investment in Canada’s most- scrutinized housing markets, Bank of Canada Governor Stephen Poloz argues fundamentals are at work as prices climb back in Vancouver and Toronto. “A year-and-a-half ago we had the changes in the Vancouver market and there was an initial effect and then a bounce back, and that just shows you that Mother Nature is still there – that the fundamentals for housing remain quite strong,” Poloz said in an interview with BNN Bloomberg late Friday in Whistler, B.C.
    [Show full text]
  • Inflation Fixation Getting Pushback
    Fourni par InfoMédia http://www.infomedia.gc.ca/parl Provided by NewsDesk Publié | Published: 2018-11-24 National Post | FINANCIAL POST | FP1 / FRONT Reçu | Received: 2018-11-24 00:56 (HNE) Inflation fixation getting pushback As Rates Rise, Bank Of Canada's Targeting Measure Is Being Second-Guessed Kevin Carmichael There are about three million Canadians working today who have no idea what real inflation looks like. Since the mid-1990s, the Consumer Price Index has stayed pretty close to the Bank of Canada's rough target of two per cent. That remained true in October, when the CPI was 2.4 per cent higher than a year earlier, Statistics Canada reported on Nov. 23. The "core" measures that policy makers created to remove noisier components of StatCan's price basket were even closer to the bull's eye, suggesting the central bank will carry on with its plan to raise interest rates as fast as economic conditions allow. The newest members of Canada's labour force - ages 15 to 24 - might be wondering what the fuss is about. Their parents and grandparents could tell them stories about how miserable life could be before heroes such as Paul Volcker, the former head of the U.S. Federal Reserve, and Gordon Thiessen, the Canadian central banker who introduced the current price-targeting regime, slew the inflation dragons. But their own experience with central banks likely has been negative. The only price spikes they will have experienced are those being caused deliberately by Stephen Poloz, the current governor of the Bank of Canada, and his deputies on the Governing Council: StatCan's measure of mortgage-interest costs rose 7 per cent in October from a year earlier, compared with an annual gain of only 3.8 per cent as recently as May.
    [Show full text]
  • 2018 Canada Country Report | SGI Sustainable Governance Indicators
    Canada Report Anke Kessler, Andrew Sharpe, Martin Thunert (Coordinator) Sustainable Governance Indicators 2018 © vege - stock.adobe.com Sustainable Governance SGI Indicators SGI 2018 | 2 Canada Report Executive Summary Canada has been performing well economically, unemployment rates are at their lowest since 2008 and the government’s fiscal situation is strengthening. Two years into their mandate, the Liberals under Prime Minister Justin Trudeau continue to implement an ambitious policy agenda involving additional tax dollars for innovation and infrastructure, pension reform and tax reductions for the middle classes, and support for oil projects balanced against action on climate change. With respect to SGI criteria, Canada continues to receive high scores on economy, taxes and budgets. The government continued to focus on fiscal stimulus, which seems to be having the desired effect. Stephen Poloz, governor of the Bank of Canada, recently credited the newly introduced Canada Child Benefit program with the country’s strong economic performance, which in turn has helped to keep budget deficits below projected levels. The Comprehensive Economic and Trade Agreement between the European Union and Canada came into effect in 2017, and Canada has been renegotiating the terms of NAFTA since August 2017. The government has also revised national security laws to reign in the powers of security agencies and create an oversight committee to improve accountability. Balancing the needs of the country’s oil and gas sector against concerns for the environment, Prime Minister Trudeau worked with the provinces to establish a pan- Canadian framework for carbon pricing, energy efficiency and renewable energy strategies, while at the same time approving two highly contentious crude oil pipelines and expressing support for Keystone XL.
    [Show full text]