OTTAWA — The governor of the Bank of Canada says the resource sector ought not to be deterred from making long-term investments despite the sharp price drop for many commodities.
In prepared remarks for a speech Monday, Stephen Poloz said investment decisions made years ago by players in the commodities sectors were no mistake, even though prices have dipped in recent months.
Poloz's address reminded its audience how the Canadian economy had benefited significantly in recent years from rising commodity prices. As an example, he highlighted how the price of copper had tripled while oil and nickel doubled between 2008 and 2010.
"We shouldn't ignore the resources that we have been blessed with," Poloz said in the address, to be delivered to a group called Calgary Economic Development.
"Without those investments (years ago), we would never have been able to capitalize on the higher prices, which boosted Canada's aggregate income."
His speech comes on the heels of a difficult period for the economy, which contracted over the first two quarters of 2015 and pushed Canada into a technical recession.
The steep fall in the price of crude oil, which hovered just above US$47 a barrel Monday after falling from a high of US$107 last year, has been slapped with much of the blame for the shrinking economy. The economy has also been hindered by slower than predicted rebounds in other sectors.
As a result, the oil-price shock forced experts, including the Bank of Canada, to downgrade growth projections for the country.
The gloomier economic conditions have also become a focal point for much political debate in the current federal election campaign.
Business leaders in the oil industry told the central bank earlier this year they would be cutting investments by about 40 per cent because of the steep price drop, which has not recovered as quickly as anticipated, Poloz said.
He added that in recent weeks these companies were still revising their longer-term forecasts for the price of oil.
The resource sector, he said, is still adjusting to the tougher conditions — a process he believes will take "considerable time."
None of the volatility, however, should deter Canadians from continuing to seek benefits from the country's resources, Poloz said.
"We've adjusted to rising prices — we can adjust to falling ones," Poloz said in the speech being delivered in a province where, he noted, resources make up more than a quarter of economy.
"While an abundance of raw materials may complicate the management of companies and the conduct of economic policy, it's far better for a country to have resources than not to have them."
"Even when prices are falling, as they have been recently, our endowment represents a store of value and a source of future riches."
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Andy Blatchford, The Canadian Press