Winnipeg Free Press

Winnipeg Free Press (Newspaper) - June 25, 2024, Winnipeg, Manitoba B5 TUESDAY JUNE 25, 2024 ● BUSINESS@FREEPRESS.MB.CA ● WINNIPEGFREEPRESS.COM BUSINESS Bank of Canada governor mum on future key rate cuts, seeks action on national output Productivity growth ‘Achilles heel’: Macklem A PRODUCTIVITY lag is Cana- da’s “Achilles heel,” the Bank of Canada’s governor told a Win- nipeg business crowd Monday. “We have been very good at grow- ing our economy by adding workers,” Tiff Macklem said. “We have been much less successful at increasing output per worker.” He addressed about 450 business- people at a Winnipeg Chamber of Com- merce luncheon at the RBC Convention Centre. Beyond, observers watched on- line via a livestream. Macklem spoke publicly for the first time since the Bank of Canada cut the country’s key interest rate by a quarter of a percentage point to 4.75 per cent June 5. Inflation is cooling, observers had said, allowing for a drop in the rate — the BoC’s first cut in more than four years following a series of hikes in 2022-23. As inflation slows, productivity is vital, Macklem underscored Monday. “If you want more non-inflationary growth, we’re going to need a con- certed discussion (about productivity) between businesses, governments and academics, civil society,” Macklem told reporters after his speech. The country’s real GDP growth is no longer keeping pace with the United States, he outlined, echoing senior deputy governor Carolyn Rogers, who warned in March productivity growth had reached emergency levels. Loren Remillard, president of the Winnipeg chamber, questioned Macklem during the luncheon about whether the central bank could be more aggressive in reducing its key policy rate. Businesses didn’t have the band- width to assume more debt during the COVID-19 pandemic, meaning they weren’t investing in new innovations, Remillard commented after the event. “The cost of that debt is just astro- nomical compared to where it was pre-pandemic,” Remillard said, adding productivity is an issue he hears about “on the daily.” Improving productivity is important to sustaining growth, especially with an aging population and limitations with immigration. Productivity keeps businesses competitive internationally and pays for higher wages, Macklem asserted. Government policy, barriers between provinces and a raft of other consider- ations, including adequate housing and investment in technology, affect pro- ductivity, he added. He relayed Canada appears en route for a so-called soft landing, where un- employment doesn’t jump as inflation declines to the bank’s target. The labour market has adjusted rela- tively well to higher interest rates; how- ever, newcomers and young workers are disproportionately affected as com- panies rein in hiring, Macklem said. The unemployment rate for new- comers is rising faster than the over- all unemployment rate. It suggests Ottawa has “room to slow the growth of non-permanent residents” without causing significant labour shortages, he observed. Canada’s unemployment rate for youth has also hiked — it’s about two per cent above its pre-pandemic aver- age, Macklem said. There could be more job growth without creating new inflationary pres- sures, he noted. A tougher job market for newcomers and youth is feeding into the central bank’s monetary policy decisions. Migrants are typically disadvantaged because they don’t have a comparable social network to people born in Can- ada, Remillard told the Free Press. Manitoba’s overall unemployment rate was 4.9 per cent in May, falling 0.2 percentage points from the month pri- or. It was lower than the national aver- age of 6.2 per cent. On Monday, Macklem stayed quiet on the potential number of rate cuts over the remainder of the year. The next Bank of Canada decision arrives July 24. The entity is watching data on mort- gage renewals. About half of mortgage holders have renewed their contracts since the Bank of Canada began in- creasing its key interest rate, Macklem said. The 50 per cent left will have a bigger reset than those already renewed, on average — it’s another thing factoring into the bank’s decisions, Macklem ex- plained. “We don’t want monetary policy to be more restrictive than it has to be,” he told reporters. “We don’t want interest rates to stay higher than they have to be to get inflation back down.” Still, the BoC won’t jeopardize its prog- ress on decreasing inflation, he said. Canada’s inflation rate has stayed below three per cent since January, tumbling from a peak above eight per cent in June 2022. The bank’s goal is two per cent annually. Manitoba currently holds the lowest inflation numbers due to, in large part, to the governing New Democrats’ tem- porary pause on the provincial gas tax. The keystone province’s inflation rate was 0.4 per cent in April; across Canada, inflation rose 2.7 per cent year-over-year. Supply chain issues contributed to heightened inflation in the recent past. Canada could see more supply shocks going forward, Macklem said. “We do need to think about how we’re going to manage them better,” he said during a news conference. He informed chamber luncheon at- tendees the central bank is building such supply issues, and their transitory effect on inflation, into its analysis and models. Macklem praised Canada’s high labour force participation, strong im- migration and education system. gabrielle.piche@winnipegfreepress.com GABRIELLE PICHÉ MIKE DEAL / FREE PRESS A discussion is needed between businesses, governments, academics and civil society about how to deal with productivity and non-inflationary growth, Bank of Canada governor Tiff Macklem says. Leyad continues to pad Winnipeg property portfolio MONTREAL-BASED developer Leyad has purchased another piece of Win- nipeg property — the latest in several such announcements over the past four months. Leyad bought Garden City Square, which includes 160,000 square feet of building space on 16 acres of land. Staples, Marshalls, Dollarama and Mc- Donald’s are among the tenants. Leyad doesn’t anticipate changes in the immediate future, chief executive Henry Zavriyev said in a news release Monday. The acquisition comes two months after Leyad touted its purchase of John- ston Terminal at The Forks, and four months since declaring ownership of the building housing CDI College. It’s also the owner of a 263,000-sq.- ft. industrial building on Mountain Av- enue. Clothing manufacturer Canada Goose is its main tenant. Winnipeg is a large city seemingly growing “at a great pace,” Zavriyev said in February. The company has been eyeing several properties in the metro. Leyad brands itself as one of the lar- gest apartment managers in Montreal and surrounding regions. It’s been buy- ing properties across the country. It recently purchased a shopping centre in northern Saskatchewan and made another $60-million worth of transactions in 2024’s second quarter. A multi-tenant distribution centre in Quebec and mid-rise apartment build- ings in Alberta were among the invest- ments. Leyad, which is privately owned, did not disclose publicly the cost of pur- chasing Garden City Square. Zavriyev previously declined to di- vulge the price tags of Johnston Ter- minal and CDI College. — Free Press staff AER tabs 17% growth in oilsands production by 2033 CALGARY — The regulator respon- sible for overseeing Alberta’s oil and gas sector has released a new report projecting the province’s oilsands production will grow by more than 17 per cent by 2033. In the latest version of its annual forecast, released Monday, the Alberta Energy Regulator predicts production of raw bitumen — the thick, sticky oil found in Alberta’s oilsands region — will grow to four million barrels per day in 2033, up from the 3.4 million barrels per day produced last year. Most of the growth is expected to come not from oilsands mines, but from in situ operations, which use steam to loosen up the oil deep below the surface of the earth. The report paints a picture of a fu- ture in which the oilsands remains the No. 1 driver of Alberta’s energy sector, in spite of what the AER says are increased growth opportunities for alternative forms of energy such as hydrogen, geothermal, helium and lithium. “In our opinion, the conventional forms of energy — I’m talking about oil, gas, bitumen — should continue and will be part of the energy mix dur- ing the energy transition,” said AER chief economist Afshin Honarvar, on a webcast held to discuss the report. In 2023, oilsands bitumen ac- counted for 66 per cent of Canada’s total oil equivalent production, ac- cording to AER figures. But the sector is under increasing scrutiny for its emissions-heavy pro- duction methods. The oil and gas sec- tor is already Canada’s heaviest-emit- ting industry, and rising oilsands production over the past decade has meant total emissions from the sector are increasing at a time when many other sectors of the economy are suc- cessfully reducing overall emissions. The federal government has pro- posed mandating a ceiling on oil and gas emissions in order to help slow climate change. The rules would re- quire the industry to cut greenhouse gas emissions by 35 to 38 per cent from 2019 levels by 2030. Alberta’s formal position is an emis- sions cap would be akin to a production cap, restricting growth and invest- ment in the province’s energy sector. But the AER believes the oilsands can grow while simultaneously re- ducing its emissions, if it deploys car- bon capture and storage technology. A consortium of oilsands compan- ies, called the Pathways Alliance, has expressed interest in building a mas- sive carbon capture and storage net- work in northern Alberta to reduce emissions from oilsands production sites, but has not made a final invest- ment decision. — The Canadian Press AMANDA STEPHENSON ;