stephen s poloz : fireside chat remarks by mr stephen s poloz, governor of the bank of canada, at the greater vancouver board of trade economic outlook forum, vancouver, british columbia, 9 january 2020. * * * introduction good morning, everyone, and happy new year. it is great to be here in vancouver for the board of trade ’ s economic outlook forum. this part of the event has been billed as a fireside chat. and, while i am happy to share the bank of canada ’ s observations on the economic outlook, i very much hope that i will get the chance to hear from you — business leaders who are making real decisions with real money every day. at the bank, a large and talented team uses state - of - the - art economic models and reams of data to forecast economic growth and inflation. but just as important is what we learn from talking to canadians. so i look forward to hearing about what is on your minds for 2020. the bank will announce its next interest rate decision and publish a monetary policy report with updated economic projections in a couple of weeks. to help set the stage for our discussion today, let me set out four key areas that are top of mind for the bank. global trade policy developments the first is the evolution of global trade policy. this has been a pressing concern for the past three years. the impact of protectionist actions, and uncertainty about what might come next, continues to hold back exports and investment globally. on the surface, there has been some improvement on this front lately, although it remains to be seen whether this will lead to a recovery of trade and investment. the canada - united statesmexico agreement is close to being ratified, and that will remove one big source of uncertainty for many canadian companies. and the united states and china have agreed to stop raising tariffs and to roll back some of them. but a lot of damage has been done ; this year, we estimate that global gdp will be around 1 percent lower than it would have been without the trade conflict. this loss will likely be permanent, even if growth resumes from that lower level. plenty of uncertainty remains around the implications of the us - china agreement for canadian exports and around whether any more of the new tariffs can be rolled back. some are concerned that the next step will be for the us administration to take similar trade actions against the european union. it is understandable that companies are reluctant to make big investments in this setting. experience tells

that high inflation, large government deficits, slower productivity growth, and lower commodity prices have tended to complicate canada ’ s economic situation over the past 25 years. but as i said at the beginning, much of the greater sense of difficulty and concern that canadians have felt in the 1990s has to do with the after - effects of the strong medicine we have had to take to turn our economic performance around. the success we have had so far in this regard bodes well for our future. canada ’ s inflation rate has come down dramatically, averaging less than 2 per cent since 1992. and there are now agreed targets between the bank of canada and the government of canada to keep inflation low and stable in the future. more importantly, canadians have come to expect continued low inflation and to build that expectation into their plans. the federal government and most provincial governments now have balanced budgets or are running surpluses. the total government debt - to - gdp ratio, which peaked at 70 per cent in 1996, has since fallen to 63 per cent. with present prudent fiscal policies, it should continue to decline steadily. future gains in productivity are difficult to predict. certainly, our improved inflation and fiscal situation, together with the low interest rates that they have made possible, provide the best climate for fostering productivity that we have had in a long time. moreover, canadian businesses have undergone major restructuring during the 1990s in response to increasingly competitive world markets. business investment has been rising smartly recently and more firms have been adopting new production technologies. it is also interesting to note that, after eight years of economic expansion, productivity growth in the united states has picked up, rather than falling off as usually happens at this stage of the cycle. tight labour markets seem to have encouraged a record level of investment in that country and more efficient use of technology than before. while the pickup in canadian investment in machinery and equipment has lagged somewhat behind that in the united states, new technology is not the exclusive preserve of our u. s. neighbours. so i hope that in canada, too, we will see a similar payoff from the adoption of new technology and a comparable improvement in productivity. as for commodity prices, there has already been some turnaround this year, but a firmer recovery requires a strengthening world economy – in particular, a turnaround in japan and the rest of asia. the other point to note in this connection is that the relative importance of commodities in the canadian economy has declined. the share of