Commodity prices could benefit from global growth, says Bank of Canada deputy governor
Global growth could drive up commodity prices, which would in turn benefit Sudbury's mining sector.
“It isn't so much what Canada is doing that will drive up commodity prices, but what the rest of the world is doing,” Murray told Northern Life in an exclusive interview.
Murray was in Sudbury Monday, where he visited Vale's operations, went to Laurentian University, and gave a keynote address organized by the Sudbury Chamber of Commerce.
He said the United States are expected to lead the acceleration in global economic growth thanks to a stronger household market, helpful monetary policy and diminishing fiscal drag.
Global growth is expected to increase to 3.4 per cent in 2014 and 3.7 per cent in 2015, compared to modest growth of 2.9 per cent last year.
On the domestic front, Murray said Canada's weakening dollar – now at $0.91 – is not a sign of a weak Canadian economy, but is instead reflective of the new growth in the U.S.
“It does provide on balance, some stimulus,” Murray said about a lower Canadian dollar. “It does make Canadian products more competitive and more attractive with foreign purchasers.”
A lower dollar could negatively impact Canadian importers, but on balance, Murray said it could prove positive for the economy at current levels.
Murray said the Bank of Canada, which controls the country's rate of inflation, and supplies Canada's banking notes, can aid the economy by keeping inflation at or near a two-per-cent target.
“Essentially it's this balance between allowing a little inflation, so you have some room to manoeuvre, but keeping it low enough that it provides this more certain economic environment,” Murray told Northern Life.
Canada's inflation rate is currently slightly lower than two per cent, which Murray said does not give much wiggle room in poor economic times, when lowering the inflation rate can prove beneficial.
Despite a mostly positive economic outlook for the next two years, Murray said there are some areas of concern. Housing starts in Ontario were down 21 per cent in 2013.
The Bank of Canada's financial department lists the sharp decrease in Ontario housing starts as its most important domestic risk.
Murray said one reason for the sharp decline has been a stock surplus of condominiums that have been purchased as investments.
Ontario's housing starts grew at a level beyond what the population warranted, and the decline should return the market to a more manageable level, Murray said.
In 2013 Ontario's GDP grew by 1.3 per cent, while the national rate of growth was 1.8 per cent. That growth for the province is expected to increase to 2.3 per cent in 2014.