MNI:BOC-CPI Stress As Firms See Canada As Hard Place To Invest

Business leaders see Canada as a hard place to invest central bank deputy Nicolas Vincent said in a speech Wednesday aimed at creating dialogue about the affordability squeeze, but also pressures governments to build an economy that can grow faster without boosting inflation.

"My colleagues on Governing Council and I regularly meet with business leaders across the country... these discussions often focus on the business environment in Canada and their impression that it isn't very conducive to investment," Vincent said. Burdensome regulation is often cited in those meetings and barriers to trade between provinces are another difficulty, he said. 

Weak investment has come alongside a drop in productivity growth to 1% over the last two decades from 3% in the 1970s, Vincent said. Canada has also fallen behind G7 peers and its dominant trading partner the U.S., he said. That reduces Canada's potential for growth without price pressure.

"Businesses in Canada have been investing too little for too long. It's one of the main reasons for the country's poor productivity," Vincent said. 

Canadians have given up of CAD7,000 per person of lost GDP since 2000 as a result he said and narrowing that gap could ease recent affordability complaints, he argued. Cutting red tape, upgrading infrastructure and fostering competition in sectors dominated by a few firms such as telecommunications, banking and transport would help, he said. Encouraging large companies that are more likely to invest and export is also a good idea he said, in a country that in recent years has given tax breaks and other incentives to small firms.