price stability as the objective of monetary policy. to make the path to price stability more explicit, the bank and the government agreed on specific targets for inflation control. the targets aimed at bringing inflation ( as measured by the consumer price index ) down from about 5 per cent at the end of 1990 to 2 per cent by the end of 1995. inflation decelerated sharply between 1991 and 1992 - - much more than the bank had anticipated or indeed was aiming for. this was mainly the result of the sharper - than - expected downturn of the canadian economy in 1990 - 1991 and the subsequent slow recovery. our economy had to cope with both the economic distortions caused by past high inflation and with the large and overdue adjustment needed to respond to the changes in technology and the more open and competitive world markets that i have been describing. when i reflect on the view expressed by the banka€™s critics that the 1990 - 1991 recession, the slow recovery and the sharp deterioration in our fiscal situation were all caused by an excessively tight monetary policy in the late 1980s, i find it useful to ask what would have happened if monetary policy had in fact been less anti - inflationary in the late 1980s. i believe that such a policy would have led to even greater inflation - related distortions in our economy, an even more pronounced recession afterwards and still greater problems for businesses trying to adjust to the new technology and the more competitive international environment. moreover, higher inflation would have led to higher interest rates and more expensive debt - servicing costs for governments and other debtors. indeed, with the benefit of hindsight, if there is a lesson in this experience, it is that the bank should have pursued a tighter monetary policy earlier in the second half of the 1980s. a tighter monetary policy earlier on might have moderated some of the speculative activity and debt accumulation that subsequently weighed so heavily on our economy. the other lesson is that fiscal policy, too, should have been tighter during that period. with a tighter fiscal policy, some of the buildup of public debt that governments are now having to contend with would have been avoided. more fiscal restraint during the second half of the 1980s would also have moderated the excess spending demands on the economy, removing some of the upward pressure on interest rates and the canadian dollar at the time. since the sharp deceleration of inflation in 1992, the role of monetary policy has been to keep inflation low. in doing so, monetary policy has provided canadian businesses with a

well we use labour and capital to produce output ( such as multifactor productivity ) have been exceptionally weak for years. we can do better. for example, the brainpower in this region appears well - suited to analyse the “ big data ” necessary to seize such opportunities as optimizing production processes and mass customization. in an era of persistently elevated resource prices, enhancing operating efficiency, improving resource management and developing products with a more sustainable environmental footprint make commercial and social sense. moreover, advances in building - energy efficiency, enhanced farm yields and power plant efficiency would pay immediate domestic dividends. however, once again, the real prize may be in emerging markets, which contain an estimated 85 per cent of the resource productivity opportunities in the world. 6 for a comprehensive and accessible analysis of canadian productivity, see r. martin and j. milway, canada : what it is, what it can be ( university of toronto press : toronto, forthcoming ), which draws on their decadelong analysis of these issues. r. dobbs, j. oppenheim, f. thompson, m. brinkman and m. zornes, “ resource revolution : meeting the world ’ s energy, materials, food, and water needs, mckinsey global institute report, november, 2011. bis central bankers ’ speeches innovation is critical to our success and canada ’ s record is only average. today, canada ’ s business r & d investment is at the lower end of oecd countries. as highlighted in the jenkins report, particular attention must be paid to the commercialization of r & d – taking innovative ideas from universities and turning them into commercial successes. 7 the symbiosis here in k - w between strong educational institutions and a cluster of innovative technology companies is a model for other parts of the country. retrain by continuing to invest in our greatest resource – our people. technology and trade are transforming the workplace. for years, routine tasks have been automated, such as the substitution of robots for assembly - line workers and atms for tellers. now the same is happening to interaction work, which has been the fastest - growing employment category. disaggregation of tasks, such as professional services, to separate out the routine components can lead to outsourcing and job displacement. 8 the need to improve skills across the spectrum of work has never been greater. with worldclass educational institutions pumping out highly qualified graduates, you are already making an enormous contribution to raising the