three components : the nominal exchange rate, relative hourly compensation and relative productivity ( chart 12 ). since the beginning of 2005, the appreciation of the canadian dollar explains about two - thirds of the increase in unit labour costs in canada vis - a - vis the united states. wage growth in the two countries has been broadly similar over the period, leaving productivity underperformance to account for the remaining deterioration in this measure of competitiveness : labour productivity in canada has grown at an average annual rate of just 0. 5 per cent since the first quarter of 2005, compared with 2. 1 per cent in the united states. after a long period of productivity underperformance starting in the 1970s, productivity growth in canada accelerated in the second half of the 1990s, keeping pace with a roughly coincident pickup in u. s. productivity growth ( chart 13 ). but since 2001, productivity growth bis central bankers ’ speeches in canada has slowed to historically low rates. it has languished well below u. s. rates, and has been at the low end compared with our competitors in the u. s. market. this is showing up in our international rankings across a range of competiveness measures. for example, the world economic forum, while rating canada ’ s banking system the soundest in the world three years in a row, dropped canada ’ s ranking in world competitiveness from 7th in 2000 to 10th in 2010. enough measurement. what do we need to do to restore canada ’ s sagging competitiveness? restoring competitiveness the public sector plays an important role in creating conditions to support productivity growth, and it is important to recognize that successive governments in canada have done many of the right things. canadian businesses benefit from a sound policy environment with low and stable inflation, sustainable fiscal policy, and well - regulated financial institutions. a series of important trade agreements have improved access to key markets, and tariff reductions have lowered the cost of intermediate inputs. in addition, a number of measures have substantially improved canada ’ s tax competitiveness for new investment, making it among the most attractive in the industrialized world. but while the public sector can sow the seeds of productivity gains, it is up to the private sector to reap the harvest. and it is time for business to step up and deliver. that means getting on with the job of investing, innovating, developing new markets, and finding new, more efficient ways of organizing and executing production. needless to say, there

sheryl kennedy : adjusting to economic change remarks by ms sheryl kennedy, deputy governor of the bank of canada, to the greater saskatoon chamber of commerce, saskatoon, saskatchewan, 22 february 2007. * * * it's a pleasure to be here in saskatoon. the last time someone from the bank of canada spoke to this chamber of commerce was five years ago, when governor dodge discussed " inflation targeting during a difficult year. " just five years ago, but what a different world it was then. the world economy wasn't nearly as strong. commodity prices were soft. from that vantage point, it would have been difficult to predict what happened over the next five years. who could have foreseen the price of potash rising 50 per cent, oil prices going up about 200 per cent, or the price of uranium appreciating fivefold? who could have known that the canadian dollar would appreciate by more than a third? more importantly, who could have predicted that the canadian economy would fare so well in dealing with these significant changes? the past five years have indeed been a period of great and relatively rapid economic change, both here in saskatchewan and across the country. in my remarks today, i'd like to describe this change and discuss its significance to our economic well - being. then i'd like to look at some of the factors that explain the success of the adjustment process thus far. finally, i'd like to suggest what needs to be done to ensure that we'll continue to be up to the task of meeting the challenges ahead. changes in the economy since 2002 let's start by turning back the clock, and looking briefly at what was going on five years ago. of course, the big news five years ago this month was the olympics in salt lake city. there, the fastest woman on ice, saskatoon's catriona lemay doan took gold – again, as she'd done in 1998 – in speed skating. and the women's hockey team, led by another saskatchewan athlete, hayley wickenheiser, won all five games they played, and also took home the gold medal. now, how was the economy faring? well, it wouldn't have won a gold medal, but the economy wasn't doing too badly, especially considering the slowdown that occurred in the wake of 9 / 11 in 2001. the world economy was growing at just over 3 per cent, and the canadian economy at just under