Bank of Canada's Stephen Poloz calls the R-word 'unhelpful'

Bank of Canada governor Stephen Poloz says Canada's economy will grow by just one per cent this year, after two consecutive quarters of shrinkage. Technically, that's a recession, but Poloz chose his words carefully Wednesday.

As the bank governor chooses his words carefully, Conservatives look to change the subject

Bank of Canada governor Stephen Poloz steps onto the stage at the National Press Theatre for a news conference Wednesday. It was a delicate performance. (Adrian Wyld/Canadian Press)

Boy, those poets at the Bank of Canada sure know how to make the story sing. Consider this lyrical riff from the bank's gripping new monetary report:

"The trajectory for core inflation is little changed from April, since the additional downward pressures on inflation from a wider output gap are largely offset by an upward revision to the estimated impact from exchange rate pass-through."

Makes ya close your eyes and dream, doesn't it? That exchange rate pass-through never fails to get the heart thumping.

OK, it's easy to have fun with monetary gobbledegook. But the typically turgid prose of central bankers is not impenetrable by accident. Like all technical talk, it is designed to blur, soften and obscure what's happening. Whatever's causing that noise in your car, your mechanic just wants you to get that it's complicated and will cost you plenty.

So it is that the governor of the Bank of Canada, Stephen Poloz, is not so gauche as to use the R-word to describe that ominous whine you're hearing in the economy.

"Recession?" Well, he's not going to get into that debate. Yeah, sure, the economy did shrink a bit in the first two quarters of the year. Fine, that fits the technical definition of a recession. But let's call it something else! 

What happened, Poloz said, was a "mild contraction."

There. It sounds so much less painful than a recession, right?

Pressed by reporters to just come out and use the R-word, Poloz dug in.

"I just find the discussion quite unhelpful," he sniffed. "It's especially unhelpful when what has happened to the economy is very narrowly defined."

What he meant was that the recession — sorry! mild contraction! — was based in only one part of the wider economy, namely, the oil and gas industry.

"It's about 10 per cent of the economy," Poloz insisted, saying the oil and gas slowdown had an outsize effect on the national picture because of a huge, 40 per cent cut in oil companies' investments in future production.

Bank of Canada cuts key rate to 0.5%

8 years ago
Duration 2:13
Bank of Canada Gov. Stephen Poloz explains why he made the rate cut today.

Don't use the R-word

Of course, headline writers are in a different business. It's not their job to avoid spreading doom and gloom about an economy that needs more confidence and enthusiasm. So the headlines reflected the Bank of Canada's official certification that, yes, the economy did shrink during the first six months of the year.

Canada in recession! Man the lifeboats!

But, in truth, the lifeboats can wait. We've already survived — because the recession, such as it is, is already over. Probably.

We're no longer in those first two quarters. For the second half of the year, the Bank of Canada and private sector economists all predict growth — if one per cent can be called growth. At least it isn't a mild contraction.

And, to be fair to Poloz — which is less fun, but even central bankers have feelings — he didn't pull his punches on the bleak picture in the world beyond Canada. Like the Harper government, he says the Canadian economy is being hit by problems elsewhere.

"Global economic developments have been quite disappointing," he intoned. He cited the slide in oil prices and the slowdown in China. Greece is no big help, either. Besides that, "non-resource exports have also faltered in recent months," which Poloz called "a puzzle that warrants further study."

"The Canadian economy," the governor concluded, "is undergoing a complex and significant adjustment."

So shouldn't the government be stimulating the economy? Poloz sidestepped that one. The government's fiscal policy, he said, is "not a question for the bank."

OK, but the government is claiming that its $3 billion in child-care cheques is just the stimulus we need. Will it work?

On that, Poloz bit. "It certainly is a factor," he said, saying while only half of that money might actually be spent, that would still mean "a noticeable bump in consumption spending in the third quarter...it's a significant thing to our outlook."

Never mind that — Justin's just not ready!

So: what's the political impact of all this? For the opposition, the bad news is good news, undermining the Conservatives' claim to economic competence.

For the government, it's time to change the subject. The minister of finance stayed out of sight. Instead, the Conservatives defaulted to their standard attacks on the opposition.

"The global economy remains fragile and is being dragged down by forces beyond our borders," said a written statement from the prime minister's office.

"Now more than ever we must continue with our low tax plan, and not take unnecessary risks with the inexperienced leadership of Justin Trudeau," the statement blared. "Justin Trudeau is just not ready to be prime minister."

Then, remembering who's leading in the polls, the PMO turned its guns on the NDP.

"Canadians will not be fooled by Thomas Mulcair... Thomas Mulcair is offering the same high tax, high debt policies that created the type of chaos we see in Greece today."

Well, at least it wasn't technical jargon. On the contrary, we all understood perfectly what the Conservatives were saying: "OK, the economy ain't great — but the other guys will be worse!"

We'll see if that works. But so far, during those sluggish first six months of the year, the Conservatives' poll numbers saw ... well, let's call it a mild contraction.


Terry Milewski worked in 50 countries during 38 years with the CBC. He was the CBC's first Middle East Bureau Chief, spent eight years in Washington during the Reagan, Bush and Clinton administrations and was based in Vancouver for 14 years before returning to Ottawa as senior correspondent.