Weak productivity is an economic ‘emergency,’ Bank of Canada warns

Bank of Canada senior deputy governor Carolyn Rogers gave a speech in Halifax on Tuesday in which she sounded the alarm on Canada’s flagging productivity rates.

The Bank of Canada is warning that waning productivity growth in the country is an “emergency” that can force higher interest rates and limit rising wages for Canadians.

Senior deputy governor Carolyn Rogers gave a speech in Halifax on Tuesday in which she sounded the alarm on Canada’s lagging productivity rates.

Rogers argued that productivity is a way to “inoculate the economy against inflation,” while sustaining “faster growth, more jobs and higher wages.” An economy with strong inflation also does not need to rely as much on interest rates when price pressures start to get out of hand, she said.

But Canadian productivity rates have fallen in six consecutive quarters despite signs of an uptick at the end of 2023, Rogers said, citing Statistics Canada data.

“You’ve seen those signs that say, ‘In emergency, break glass.’ Well, it’s time to break the glass,” she told the crowd.

Productivity can be measured in a few ways, but in general it’s the level of economic output per hour worked. Improving productivity doesn’t necessarily mean Canadians working harder, but rather equipping them with the tools they need to accomplish more in the same amount of time, Rogers said.

One of the main issues dragging down Canadian productivity rates is a lack of business investment. Canadian businesses routinely lag their global counterparts when it comes to investment in machinery, equipment and intellectual property, she noted.

Rogers pointed to a lack of competition across Canada’s industries as not driving companies to invest.