Canadians need to be ready as ‘everyday volatility’ becomes new norm: Poloz

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Canadian employees and businesses will need to adapt to a more uncertain world where “everyday volatility” increasingly appears to be the new norm, says the former governor of the Bank of Canada.

In an interview with The West Block guest host David Akin, Stephen Poloz said the challenges many are facing right now in high gas prices, sinking housing affordability, and unstable employment all reflect the realities of living in an age marked by risk and uncertainty.

“Those things are on a rising trend,” Poloz said, pointing to factors like technological change, aging populations and income inequality that he argued contribute to “higher bouts of volatility.”

“I think companies and their employees will need to prepare themselves. Be more conservative, be ready for more volatility like we see today, such as oil prices or house prices or employment up and down. Those are the kinds of things, the everyday volatility, that’s going to hit people.”

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Poloz has a new book out on the topic, called The Next Age of Uncertainty: How the World Can Adapt to a Riskier Future.

Often, governments take on the role of protecting citizens from the impacts of high volatility, Poloz said, pointing to actions like those the federal government has taken during the COVID-19 pandemic.

But whether governments will be able to blunt the effects of the volatility that is coming in the future is another question entirely, Poloz suggested.

“I think it’s going to be very hard for traditional policy tools to do that,” he said.

The Russian invasion of Ukraine on Feb. 24 roiled global markets, and uncertainty over the impact of severe western sanctions on Russian exports like oil and gas has seen prices soar in recent days.

Gas prices, in particular, have risen sharply — exceeding $2 per litre in B.C.’s Lower Mainland.

Poloz said he thinks prices will come down soon, but uncertainty will remain.

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“High oil prices usually are their own cure, right? Because they destroy demand and that causes people to drive less, and also normally prompt a supply response,” he said.

“I’d be very surprised if we didn’t see oil prices getting back down into the $100 or below $100 range before too long.”

Home prices are another source of uncertainty for many Canadians.

The pandemic pushed demand to record levels and has moved housing out of reach for many. Others jumped into the market, fuelled by forced quarantine savings and record-low interest rates.

There have also been concerns, though, about real estate speculation and what role that is playing in the current market.

Poloz said it remains hard to tell what amount of the fire in the markets is caused by speculation, and how much is simply a result of increasing immigration and a growing population coupled with a lack of homes available for purchase.

“Hard to predict at this stage because those other fundamentals remain strong.”

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