an improving economic picture, it is important to recognize that downside risks to growth remain. the fomc will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks. finally, i would like to say a few words about the federal reserve's recent actions to protect consumers in their financial transactions. in december, following up on a commitment i made at the time of our report last july, the board issued for public comment a comprehensive set of new regulations to prohibit unfair or deceptive practices in the mortgage market, under the authority granted us by the home ownership and equity protection act of 1994. the proposed rules would apply to all mortgage lenders and would establish lending standards to help ensure that consumers who seek mortgage credit receive loans whose terms are clearly disclosed and that can reasonably be expected to be repaid. accordingly, the rules would prohibit lenders from engaging in a pattern or practice of making higher - priced mortgage loans without due regard to consumers'ability to make the scheduled payments. in each case, a lender making a higher - priced loan would have to use third - party documents to verify the income relied on to make the credit decision. for higher - priced loans, the proposed rules would require the lender to establish an escrow account for the payment of property taxes and homeowners'insurance and would prevent the use of prepayment penalties in circumstances where they might trap borrowers in unaffordable loans. in addition, for all mortgage loans, our proposal addresses misleading and deceptive advertising practices, requires borrowers and brokers to agree in advance on the maximum fee that the broker may receive, bans certain practices by servicers that harm borrowers, and prohibits coercion of appraisers by lenders. we expect substantial public comment on our proposal, and we will carefully consider all information and viewpoints while moving expeditiously to adopt final rules. the effectiveness of the new regulations, however, will depend critically on strong enforcement. to that end, in conjunction with other federal and state agencies, we are conducting compliance reviews of a range of mortgage lenders, including nondepository lenders. the agencies will collaborate in determining the lessons learned and in seeking ways to better cooperate in ensuring effective and consistent examinations of, and improved enforcement for, all categories of mortgage lenders. the federal reserve continues to work with financial institutions, public officials

that canadian businesses can seize the opportunities that arise as the global economic recovery proceeds and markets expand. canada ’ s productivity underperformance is an enduring and much - studied feature of our economic landscape. and truth be told, puzzles remain. nevertheless, the concerted research effort over the past two decades points to several clear conclusions as to what makes some firms more productive than others. i will come back to these lessons. but first let me review the outlook for the global and canadian economies, and explore the evidence, the causes and the consequences of canada ’ s declining competitiveness. the global and canadian outlooks two weeks ago the bank of canada published its updated economic outlook. bis central bankers ’ speeches the good news is that the global economic recovery has gained momentum. global markets are expanding, and prices of the commodities canada exports have increased. private domestic demand in the united states has picked up and will be reinforced by recently announced monetary and fiscal stimulus. growth in europe has also been slightly stronger than anticipated, although ongoing challenges associated with sovereign and bank balance sheets will limit the pace of the european recovery. continued strong growth in emerging markets is supporting commodity prices, which have increased significantly since last autumn ( chart 1 and chart 2 ). with some emerging - market economies overheating, authorities there have begun implementing more restrictive policies with the goal of containing rising inflationary pressures. the recovery in canada is proceeding broadly as anticipated, with a period of more modest growth following the strong recovery experienced in late 2009 and early 2010 ( chart 3 ). going forward, demand in canada is projected to rely less on government and household spending and more on investment and net exports ( table 1 ). this rotation of demand is essential to sustaining a durable expansion. through 2009 – 10, government spending contributed one percentage point or more to growth each year, dampening the recession and spurring recovery. but with fiscal stimulus set to unwind as governments begin the return to fiscal balance, the contribution of government spending to growth is expected to turn negative. household spending, supported by extraordinary monetary and fiscal stimulus, has provided the most important source of growth since the start of the recovery in the third quarter of 2009, increasing at an average annual rate of 4. 3 per cent. with disposable income growing by 2. 3 per cent over the same period, the ratio of household debt to disposable income has risen to a record high of 148 per cent, surpassing the comparable ratio for u. s. citizens (