On the surface, Canada’s economy seems to be doing well. Yet, there is one area of persistent weakness that weighs on policy makers – private sector capital formation. Canada is well down on the list of OECD countries when it comes to business spending as a share of GDP.
Businesses investment in physical capital (especially machinery and equipment) matters critically for productivity growth. It spurs innovation, efficiency gains and increased competitiveness.
In my January Letter from the President, I outline some reasons as to why businesses may be underinvesting and propose some policy initiatives to boost capital formation in the country. You can read it here.