Image via WikipediaMONTREAL — Canada could enjoy a "breakaway decade" of economic growth if businesses invest more to improve productivity, the head of the Royal Bank of Canada said Monday. Gordon Nixon told a Canadian Club audience in Montreal that Canada has the potential to significantly outperform the developed world in terms of economic growth and social leadership.
"Our economy has been resilient, the housing market is up, past federal surpluses have provided flexibility, the banking system is stable and corporate tax rates are low," he said.
But Nixon said the country's promise can only be realized by tackling several key shortcomings.
They include reducing provincial and federal deficits, increasing immigration and tackling Canada's Achilles heel of low productivity.
In particular, he challenged businesses to spend more on innovation, noting that over the last 30 years the productivity gap between Canada and the United States has more than tripled.
"Innovation-fuelled productivity is the lever we can pull to increase the economic pie we all share and, in doing so, improve our standard of living and gain competitive clout in the global marketplace."
Governments have helped by cutting regulatory and tax burdens, but Nixon says they must now work aggressively to balance their budgets.
Meanwhile, Canada should gain a competitive advantage as other countries are forced to boost taxes and cut spending.
"Canada today is an attractive place to live, work and build successful businesses. And, with continued fiscal responsibility, we should be able to avoid the current plight of many countries that will be forced to undergo painful restructurings to address their systemic failures," he said.
"It's our turn as business leaders to say thanks to the government for the tax reform and now we are going to use it to invest and (make) innovation part of our agenda."
Meanwhile, he said Canadian governments at both the federal and provincial levels must continue to put their financial houses in order after the recent recession.
"We cannot let the advantage gained through 15 years of fiscal responsibility slip away," he said.
"Notwithstanding the political challenges of fiscal restraint, it is essential that the provinces and the federal governments aggressively work their way back to fiscal balance."