During the 20th century, manufacturing industries and services became increasingly important.
Others saw an opportunity to benefit from high inflation by speculating in real estate or other assets. Today, too, we face some challenges.
Canadian Club of Toronto Moreover, net public debt as a ratio of GDP fell from close to 104 per cent in the fiscal year 1995/96 to an estimated 80 per cent in 1999/2000. That is some adjustment!This fiscal restructuring, although essential, was difficult and disruptive. And the large U.S. military expenditures during the Vietnam war amplified the boom. They are released once a year with a five-year lag.It was to the Canadian Club of Toronto that I gave my first speech as Governor of the Bank of Canada seven years ago. The economy of Canada is a highly developed market economy.
Low interest rates have also encouraged households to buy houses, cars, and other major consumer goods—purchases they had tended to postpone earlier in the decade.I have left a detailed discussion of the role of monetary policy (and of the Bank of Canada) for last.To explain the role of monetary policy through the 1990s, I need to go back to the 1970s and 1980s. Economic growth was not re-established until early 1993, with the end of the recession being officially declared on 26 April that year, but the Conservative government which had been in power continuously since 1979 managed to achieve After the end of the recession, the British economy enjoyed a record run of unbroken economic growth lasting more than 15 years, until the economy lurched back into In the United Kingdom, there was a significant wave of rioting at the height of the recession in 1991, with unemployment and social discontent being seen as major factors. By the late 1980s, inflation pressures were on the rise again.In Canada, those pressures, and the fears of ongoing inflation that had been undermining our economic performance, finally eased after the successful implementation of the inflation-reduction targets adopted in February 1991. Indeed, the world seems to be going through a real technological revolution—a revolution spawned by the increasing efficiency and declining costs of computers and fibre optics and their application to information processing and communications.The United States has been at the forefront of this revolution.
However, the extent of any future gains in our productivity is still difficult to gauge at this point.There is, of course, more to the recent favourable economic news in Canada than just the early signs of a pickup in productivity growth. Let me highlight some of the major improvements.I have already noted the influence of technology and globalization in changing the world economy during the 1990s. That is when the gravity of the problems that would dominate the Canadian economic landscape for much of the decade became clear.By 1990, the persistent inflation of the 1970s and 1980s had pushed the consumer price index (CPI) to a level nearly four times as high as in 1970.
With the fall of the Soviet Union and Eastern European communism in the late 1980s, trade opportunities expanded greatly.Technological developments brought a … Like the private sector, the public sector too had to undertake significant downsizing and salary restraint.Overall, given the type and size of structural changes that had to be made, it is not surprising that, for much of the 1990s, unemployment rates in Canada remained high and incomes stagnated.The economic problems of the 1990s that I have been recounting make for a rather sombre story.The next chapter of that story, however, is rather more cheerful. That is when the gravity of the problems that would dominate the Canadian economic landscape for much of the decade became clear. The Recovery has been based on exports, after currency devaluation of 40% and reviving world economy share of exports as percentage of GDP has risen from 20% to 45%,Despite several major economies showing quarterly detraction during 1989, the British economy continued to grow until the third quarter of 1990. This is very important if we are to avoid skill shortages that could constrain the expansion of our economy.To conclude, our economy has been expanding robustly over the past five years, inflation has remained low, employment and incomes have been rising. But whatever else one may say, through this period, our businesses responded to the challenge and did a remarkable job of restructuring their operations and adjusting to the new economic realities.Canada's other major economic problem in the early 1990s was large budget deficits—federal and provincial. As with other G7 countries, Canada had two separate economic contractions in …