Our GRI Webinar series on Macroeconomic Policy aims to help our members better understand the extraordinary fiscal and monetary policies that have emerged in the wake of the global pandemic. Through ongoing discussions with leading economists, we’ve heard firsthand assessments of the implications for risk management, financial markets and our economy at large.

In this fourth in a series of discussions held on April 8, 2021, Don Drummond, Adjunct Professor and Stauffer-Dunning Fellow, Queen’s University, and Jack Mintz, President’s Fellow, School of Public Policy, University of Calgary shared their perspectives on what’s wrong with our Canadian economy and offered some monetary and fiscal policy suggestions to address our economic challenges.

Don Drummond laid out some of the problems for Canada, including the nature of shocks that have hit our economy and financial sector over the last number of decades. Our monetary and fiscal policy has been more or less on autopilot he said. There is a prevailing view that if we can control inflation and maintain modest interest rates that we won’t experience a severe economic shock. This isn’t true and Canada must change this mindset.

We’re in the midst of a shift down to a fairly permanent lower rate of economic growth that is not being fully recognized. It’s not enough to neutralize our monetary policies and return to the financial stability we experienced pre-pandemic, Don said. We need to prepare for the next inevitable shock. That includes being realistic, having buffers in place to prepare, and boosting the supply side of our economy.

Jack Mintz agreed that Canada needs to rethink its paradigm. Like many other economies, he said Canada has seen a huge amount of change but has been stuck on some old ideas. Jack outlined two principles affecting our outlook — consumer spending and increasing debt risk.

Household consumption has remained steady during the pandemic despite the government transfers put in place to support it. Aggregate demand has also remained relatively unchanged, but with the damage to the potential supply capacity of our country, he said long term consumption expenditure may be impacted. Canada’s net debt problem has been underestimated, including the future unfunded liabilities associated with our national pension plans.

To get out of this pandemic, Jack believes that growth is the key issue. Productivity pressures and the lack of adoption of new capital technologies are a serious problem. Our policies need to focus on private sector investment and improvements to human capital training. To build a resurgence in demand driven growth and our potential productivity capacity in the economy, Jack says Canada will also require targeted spending control and taxation.

To hear more from Don Drummond and Jack Mintz on the state of our Canadian economy and what we can do to address it, we invite you to listen to the full webinar The Good, the Bad, and the Ugly of our Canadian Economy and How to Fix it