Poloz summons his inner Mark Carney, speaks out on public policy

Former Bank of Canada governors Mark Carney and David Dodge were never shy about telling governments what they should, or shouldn't, do.

That has not been Stephen Poloz's inclination in his nearly five years at the helm of the central bank. For the most part, Mr. Poloz has avoided inserting himself into public policy debates, preferring the role of analyst over advocate.

There are hints that may be changing. Mr. Poloz and other top Bank of Canada officials have shown uncharacteristic candour in several recent speeches. In December, Mr. Poloz called for an overhaul of on-the-job training to deal with the scourge of youth underemployment and better protection of government and financial computer networks to deal with cyberattacks.

More recently, senior deputy governor Carolyn Wilkins talked about reining in the power of Google and other technology giants in a speech to a gathering of officials in Montebello, Que., preparing for June's Group of Seven leaders summit. Ms. Wilkins characterized as "interesting" the suggestion that tech companies should be regulated like utilities and forced to pay consumers for the data they collect.

And Lawrence Schembri, another deputy governor, caused a minor stir last month when he suggested there should be "more explicit co-ordination" between the bank's interest rate moves and government spending plans during times of crisis.

In some respects, it's perfectly normal for central bankers to weigh in on important public policy debates. U.S. Federal Reserve officials do it all the time, regularly expressing opinions on everything from tax cuts to consumer protection and labour policies.

Not so much at the Bank of Canada.

"The Bank of Canada's people have tended to be pretty quiet in the past," acknowledged economist Stephen Williamson, a professor and central banking expert at the University of Western Ontario.

And yet Prof. Williamson and other central bank experts see nothing particularly radical or unusual in the recent statements.

Bank of Canada officials may be reluctant to butt heads with the governments to protect their independence.

"While it's reasonable for the bank, which has deep research capabilities, to express views on all these issues, the obvious concern is that their independence could be challenged if they wade in too far, or too aggressively," said Doug Porter, chief economist at the Bank of Montreal.

Being more outspoken may be tied to the Bank of Canada's efforts to lay the groundwork for the renewal of its inflation targeting agreement with the federal government in three years.

"These pro-active speeches touch [on] longer-term issues fundamentally important for the 2021 renewal of the inflation target," remarked Sébastien Lavoie, chief economist at Laurentian Bank Securities. "There is nothing to lose by having a discussion to see how macro policies could be more efficiently conducted."

The central bank is right to be talking about emerging issues that may affect its ability to control inflation in the future, according to Mr. Lavoie. Ms. Wilkins' concern about the role of technology and automation is relevant because these forces may be contributing to income inequality and suppressing inflation.

"It is necessary for the Bank of Canada to be transparent right now about this fundamental issue affecting the well-being of Canadians, firms' competition dynamics, potential output and thus inflation," he said.

And that is as it should be. The Bank of Canada operates the largest economic analysis shop in the country, with the most sophisticated computer models and an unmatched depth of expertise.

Canadians should welcome the Bank of Canada's engagement in the most important public policy debates – even if it means sometimes being out of step with the government of the day.

Of course, Mr. Poloz and his staff can do that discreetly behind closed doors, in their regular meetings with top government officials.

But they should also have enough leash to speak out in public on issues vital to the country's economy.

That doesn't come naturally to Mr. Poloz. He has carefully steered clear of offering policy prescriptions. For example, he has repeatedly highlighted the chill on business investment caused by recent U.S. tax changes and the uncertain future of the North American free-trade agreement. And yet he's been silent about what – if anything – Canada should do to counter the threat.

The bank's recent deviation into new policy areas appears to be more happenstance than a strategic shift in tone or communication strategy.

That's too bad. Perhaps it's time for him to give the Trudeau government a little economic advice.