Canada’s central bank just told business leaders to prepare for economic pain that will outlast most of them. Bank of Canada (BoC) Governor Tiff Macklem declared the country’s old economy dead last Wednesday in Toronto, warning of “painful” and permanent restructuring that will take decades. He’s advocating for big gambles he admits may not work, asking households to pay higher prices for a payoff they likely won’t live to see. 

Canadian Economic Downturn Structural, Not Cyclical

The BoC delivered an unusually political message this week: The country’s downturn isn’t cyclical, but structural. Cyclical issues are related to the business cycle, rising and falling with the natural booms and busts we’ve all come to love and hate. Structural changes are permanent and require drastic changes for the economy to operate. The Governor attributes this shift to three forces: slowing population growth, a breakdown in US trade relations, and artificial intelligence. 

“The impact of these forces on the Canadian economy will not be a temporary cyclical fluctuation. These are deep structural changes…” BoC Governor Macklem.

Canada’s Era of Population-Driven Growth Is Over

The country’s era of population-driven economic growth is over, and they aren’t just referencing recent immigration blunders. The Governor explains the labour force grew an average of 1.5% annually for the past 20 years, but the BoC sees it “hardly growing at all over the next few years.” 

Canada’s central bank just told business leaders to prepare for economic pain that will outlast most of them. Bank of Canada (BoC) Governor Tiff Macklem declared the country’s old economy dead last Wednesday in Toronto, warning of “painful” and permanent restructuring that will take decades. He’s advocating for big gambles he admits may not work, asking households to pay higher prices for a payoff they likely won’t live to see. 

Canadian Economic Downturn Structural, Not Cyclical

The BoC delivered an unusually political message this week: The country’s downturn isn’t cyclical, but structural. Cyclical issues are related to the business cycle, rising and falling with the natural booms and busts we’ve all come to love and hate. Structural changes are permanent and require drastic changes for the economy to operate. The Governor attributes this shift to three forces: slowing population growth, a breakdown in US trade relations, and artificial intelligence. 

“The impact of these forces on the Canadian economy will not be a temporary cyclical fluctuation. These are deep structural changes…” BoC Governor Macklem.