market power among very few players. striking a balance between all these interests is not a simple task. but we should keep in mind that the level of competition can be maintained or enhanced by new entrants into the marketplace or by the threat of new entrants. i've also spoken about the need to promote efficiency in the regulation of securities markets. efficiency dictates that canada should have uniform securities laws and regulations based on principles that apply to everyone. the question is how to apply these laws and regulations in a tiered way to take into account the differing needs of issuers. all major provincial jurisdictions deal with issuers that vary greatly in terms of size and complexity — whether issuers are large, complex firms that want access to international capital markets, " mid - cap " firms that choose to access only canadian capital markets, or small speculative resource firms that have historically relied on canadian equity markets for financing. and the needs of investors are similar from one jurisdiction to another. so while the application of rules needs to take into account the size and complexity of firms, there is no need for different rules based solely on the province or territory of the issuer or investor. today, i want to bring canada's pension system into the picture. obviously, the health of the pension system is extremely important from the perspective of the people who rely on it for their retirement income. it is also important from the perspective of economic and financial market efficiency. a report to g - 10 deputies published in september emphasized that pension funds have already become the largest institutional investor class among g - 10 countries. it also noted that retirement savings and the related capital flows will have an increasingly important influence on financial markets. here in canada, policy - makers need to think about how our pension system can contribute to efficiency. there is a need for long - term investment in critical infrastructure to support canada's future 1 / 5 production capacity. and there are pools of pension capital that, given their very long - term investment horizon, can be invested in this manner. i will come back to this issue in a future speech. but in the balance of my remarks today, i want to look at the pension system itself and discuss the incentives under which these large pools of capital operate. we must allow these pools to be accumulated and invested so that they not only maximize returns to support future pensioners, but also maximize the future growth of the economy's production capacity. canada's pension system and risk there are essentially three

the form of higher ( or lower ) inflation than expected for a given level of demand — are always more difficult for policy - makers to deal with than demand surprises. nevertheless, the bank's framework for inflation - targeting allows temporary supply shocks to be largely ignored, so long as they do not feed into inflation expectations. the credibility that has been established means that they no longer do so. consider price surprises coming from the most volatile components of the consumer price index — components such as fruit and vegetables or oil and gas. as our operating guide, we use a measure of core inflation that excludes such components. this gives us, and economic observers, some confidence that we are looking at the underlying trend of inflation. thus, our interest rate response to price shocks that are perceived to be temporary can be minimal. as a result, there will be little effect on output. in other words, monetary policy does not turn temporary supply shocks into something that is destabilizing for aggregate output. fiscal policy and automatic stabilization on the fiscal side, the automatic stabilizers are tax revenues and employment insurance payouts. when the economy weakens, tax revenues tend to fall, and employment insurance payouts tend to increase. this buffers the effect on personal disposable income of the decline in output and therefore tends to reduce the amplitude of the output shock. if households based their spending decisions on their expected permanent level of income, as opposed to current income, there would be little role for the automatic stabilizers. but the evidence shows that many households, particularly those with lower incomes, cannot borrow freely against future income and therefore are often significantly constrained by their current level of disposable income. thus, automatic stabilizers on the fiscal side play a significant role. some have argued that a significant rise in the propensity to import, which can act as an automatic stabilizer in the economy, has perhaps decreased the importance of the automatic fiscal stabilizers. while this is true at the aggregate level, its effect has not been uniform across shocks affecting various final expenditure categories. the greatest increases in the propensity to import have come on the export side, because of the growing importance of two - way trade. components of domestic expenditure such as housing investment, non - residential construction, and consumption of services, however, still have very low marginal propensities to import. comparing and contrasting the automatic fiscal and monetary stabilizers some of the automatic fiscal stabilizers work almost immediately — for example, the