The International Monetary Fund(IMF) finished its consultation “centred on policies to secure stronger, inclusive, and self-sustaining growth while preventing the further build-up of housing market imbalances”.
NAFTA & Housing
The report, written before the central bank raised interest rates by a quarter of a percentage point on Wednesday to 0.75 per cent, found that the economy had regained momentum but that problems within the Toronto and Vancouver housing markets could alongside uncertain NAFTA negotiations seriously harm economic recovery.
The report also said the Bank of Canada’s current monetary policy stance is appropriate, and it cautioned against tightening. As a sudden housing crash or a rise in US tariffs by 2.1 percentage points would rapidly decimate our export and consumer markets causing a short term loss of 0.4 % of GDP.
The report also supported Bank of Canada’s current monetary policy and cautioned against any sort of monetary tightening.
The positive momentum in the economy is expected to continue in the near term. A strong U.S. economy, expansionary fiscal and monetary policy, and stable oil prices are expected to lift real GDP growth to 2.5 percent in 2017 and 1.9 percent in 2018.
Showing that both oil and our relationship to the US economy will be important factors to our economic growth.
A secondary aspect of the report further focused on the important role of woman in the economy. Noting that as productivity growth remains low, woman (who now graduate university more often than men) joining the full workforce could be what is required to increase total Canadian productivity and competitivity.
The report lastly recommended government programs to attract private capital into Canada’s ageing population.
Private capital will be attracted by acceptable risk-adjusted rates of return. While private capital is costlier than government financing, private investors are expected to apply their expertise to lower total project costs, thus offsetting at least partially the higher financing costs. Private investors should be selected for specific projects in an open and competitive manner to minimize the risk of these rates of return being excessive.
Finding that private financing brings with it expertise and that therefore it will be the best method of advancing the extremely large projects the Federal Liberal government have undertaken in regards to infrastructure spending, as they have committed nearly 7% of GDP to infrastructure development.