The Conservatives -- and the Parliamentary Budget Office -- continue to pummel the Liberals over their budget. But Stephen Poloz made it clear yesterday that the Bank of Canada has a different take on things. Tom Walkom writes:
Speaking to reporters Wednesday, central bank chief Stephen Poloz said the government’s decision to run $29-billion deficits this year and next will more than offset the negative effects of a slowing world economy, a rising Canadian dollar and low oil prices.
The net effect, he said, is that he now expects Canada’s economy to do better this year than the Bank had predicted in January.
In an accompanying report, the bank says the government’s decision to spend more than it takes in promises to add an extra half a percentage point to the economy’s growth rate.
That doesn't mean that Canada's economy will be firing on all its cylinders. But, then, neither is the world's economy:
The world economy continues to struggle. China, a crucial player, faces financial stress. Japan’s wage growth is lacklustre. In Europe, investor confidence is sagging.
Throughout, downward pressure remains on the price of oil and other commodities that Canada sells abroad.
The crucial U.S. economy is recovering but not at the pace the bank had expected in January.
So, things may not be great. But, at least they're better -- because, instead of following Milton Friedman's doctrine, the central bank doesn't have to do all the heavy lifting.
Poloz has made it clear for some time that his ability to influence interest rates can do only so much to keep the economy on track and that the government, with its control over spending and taxation, should do more.
With their decision to deliberately run stimulative deficits, Trudeau and Morneau have complied.
For the time being, at least, Friedman and his acolytes have been sent packing.