Between June 2013, when he was appointed to the post, and December 2015, Bank of Canada Governor Stephen Poloz uttered barely a word about fiscal policy. Then, on Dec. 8 in Toronto, he broke his silence on the subject, acknowledging in a speech that government spending could play a positive role in saving an economy pushed to the brink. A month later, he alluded to the potential benefits of fiscal policy again, telling an audience in Ottawa that it would take more than a weaker currency to counter the blow to Canada’s economy from the collapse of oil prices.
“Other complementary policies can be deployed to offer a broader array of buffers while still encouraging the necessary longer-term adjustments, including fiscal policies and policies that make labour markets more flexible,” Poloz said.
It could be nothing. Or, as I mused in a piece for Canadian Business, it could be related to the departure of a prime minister who was certain his belief that a balanced budget was the right response to a severe contraction in business investment and a deterioration of potential growth. Since the October election, Ottawa has been ruled by a prime minister who intends to run deficits to finance tens of billions of dollars in infrastructure spending. It is safe again for a Canadian public official to say that deficits aren’t always bad.
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