CALGARY – Bank of Canada governor Stephen Poloz spoke to a Calgary audience on Monday afternoon, saying dropping commodity prices should not deter long-term investments in the resource sector.
The head of the central bank delivered the keynote address at Calgary Economic Development’s 2016 Economic Outlook.
Poloz said investment decisions made years ago by players in the commodities sectors were no mistake, even though prices have dipped in recent months.
Poloz’s address reminded its audience how the Canadian economy had benefited significantly in recent years from rising commodity prices. As an example, he highlighted how the price of copper had tripled while oil and nickel doubled between 2008 and 2010.
“We shouldn’t ignore the resources that we have been blessed with,” Poloz said. “Without those investments (years ago), we would never have been able to capitalize on the higher prices, which boosted Canada’s aggregate income.”
The event marked Poloz’s first public speaking engagement in Calgary since his appointment in 2013.
His speech comes on the heels of a difficult period for the economy, which contracted over the first two quarters of 2015 and pushed Canada into a technical recession.
The steep drop in the price of crude oil, which closed just below US$47 a barrel Monday after falling from a high of US$107 last year, has been slapped with much of the blame for the shrinking economy. The economy has also been hindered by slower than predicted rebounds in other sectors.
As a result, the oil-price shock forced experts, including the Bank of Canada, to downgrade growth projections for the country.
The gloomier economic conditions have also become a focal point for much political debate in the current federal election campaign.
Business leaders in the oil industry told the central bank earlier this year they would be cutting investments by about 40 per cent because of the steep price drop, which has not recovered as quickly as anticipated, Poloz said.
He added that in recent weeks these companies were still revising their longer-term forecasts for the price of oil.
The resource sector, he said, is still adjusting to the tougher conditions – a process he believes will take “considerable time.”
None of the volatility, however, should deter Canadians from continuing to seek benefits from the country’s resources, Poloz said.
“We’ve adjusted to rising prices – we can adjust to falling ones,” Poloz said in the speech being delivered in a province where, he noted, resources make up more than a quarter of economy.
“While an abundance of raw materials may complicate the management of companies and the conduct of economic policy, it’s far better for a country to have resources than not to have them.”
“Even when prices are falling, as they have been recently, our endowment represents a store of value and a source of future riches.”
Other speakers at the event included Calgary Mayor Naheed Nenshi, ATB Financial chief economist Todd Hirsch and Conference Board of Canada Chief Economist Glen Hodgson.
With files from Global News reporter Melissa Ramsay
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