For Mark Carney it was an afternoon of reflection, a time for measuring successes with just a tinge of lament for unfinished business.
Carney, although he does not leave his position as governor of the Bank of Canada to take the top job at the Bank of England for another month, gave his last scheduled testimony before parliament — in this case the Senate banking committee — on Wednesday afternoon.
Unlike Tuesday’s meeting with MPs which hit on several contentious policy issues, the two-hour session with the upper chamber was more relaxed, with each senator on the panel taking turns praising rather than grilling the governor after his introduction as a central bank “superstar.”
“Today was bittersweet,” said committee chairman Irving Gerstein. “Governor you have handled the Canadian central bank with both purpose and grace, helping guide the Canadian economy in what can only be described as difficult times.”
From the top, Carney was asked for his most significant achievement in the five years he’s been bank governor.
“The core responsibility of the Bank of Canada is to maintain confidence in money,” he responded, saying he was proud he and his deputies were able to keep inflation over the period slightly below two per cent, which avoiding marked disinflation or even outright deflation during the 2008-09 financial crisis.
“And in that context we were, along with the government of Canada and the Canadian private sector, able to support the strongest recovery of the major advanced economies.”
As well, Carney said he was able to build on the work of his predecessor, David Dodge, to reduce counterfeiting, introducing new, hard-to-copy polymer $100, $50 and $20 bills.
The most recent figures show counterfeiting has fallen to about 30 notes per million from a peak of about 440 per million a little more than a decade ago, he said.
Overall, he said while he believes the economy is strong but still faces risks, including the high level of debt Canadians hold, in part because of the bank’s decision to keep interest rates low. During his watch, household debt to disposable annual income ballooned to ever increasing highs and now stands at 165%.
He says recent months have given him some comfort that debt accumulation and the hot housing market both appear to be levelling off, but it was too early to declare victory.
“There are still risks … in the housing market,” he said, speaking in French. “These risks aren’t great but they are there nonetheless. And it’s not the right time for a family to … stretch (finances) and buy a house.”
As well, he added, the Canadian financial system still faces risks from “excessive ring-fencing” (protectionist measures) in the global system as a reaction to economic weakness and moves by vulnerable countries to sidestep coming international bank reforms.
“As an open economy, and as an economy with one of the most resilient financial systems in the world, this is very much not in our interests,” he said.
Carney said Canada’s difficulty getting Western Canada’s oil to market continues to hurt the economy, particularly slowing investment in the oilpatch.
Canadian oil prices are twice as volatile as world crude, he says, in part because of transportation bottlenecks. If the volatility persists, he said, it will effect investment in the sector for several years, slowing economic growth.
Carney offered no advice for his successor, expected to be named in the next week, but on prompting, had some for Canadians.
“At the end of the day, the Canadian economy is strong,” he said. “We have a lot of opportunities, we have a lot of advantages here. We have a resilient financial system. We can also count on the fact inflation will be stable and predictable. As far as the labour market, the prospects are solid. If one does have confidence, it’s a good time to invest.”