The household sector picked up much of the slack in response to record-low interest rates, especially by investing in housing. But we cannot rely on policy-induced growth to maintain our living standards forever. The Canadian economy requires a major rotation toward a more sustainable growth track. First, we need a substantial recovery in exports, Canada’s natural engine of economic growth.
From that will follow more investment spending by companies, accompanied by more employment growth. All of this will help absorb our spare capacity, bringing inflation sustainably to our target of 2 per cent. And along the way, there will be a gradual reduction in our financial stability risks, such as household imbalances. This is a natural sequence that we will monitor carefully.