Bank of Canada Governor Stephen Poloz has said that Canada’s strong economic performance over the past year was due in large part to federal government spending.
Speaking at Queen’s University in Kingston, Ontario, Governor Poloz said recent federal spending on programs, such as enhanced child benefits and infrastructure, have lifted the economy and pushed interest rates to a level higher than they would have been without government stimulus.
He also said that the federal government’s steps in the last couple of years to take on more public debt has helped prevent an even faster buildup of household debt that has still managed to climb to historic highs.
The Bank of Canada Governor added that he higher rates have helped keep the accumulation of household debt lower than it otherwise would have been had Canada continued with government belt-tightening approaches of the past.
Governor Poloz’s remarks come a couple of weeks after the Trudeau government tabled a federal budget that has faced criticism for its plan to continue running annual multibillion-dollar deficits across the five-year projection horizon — despite the country’s surprisingly strong economic performance.
In response to a journalist’s question, the governor said he agrees with the view consumers are facing high debt loads today because they filled in the debt accumulation void left when governments turned to austerity by shutting down stimulus measures to address fallout from the 2008 financial crisis.
In terms of future interest rate hikes, Governor Poloz reiterated the central bank’s position that further monetary tightening will likely be required going forward.
“We remain of the view that in contrast to the relatively rapid-fire pace of tightening between July of last year and this January, a gradual pace of hikes is likely going forward," he said.
