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CTV.ca News Staff
Date: Sun. Jan. 23 2011 1:01 PM ET
Bank of Canada Governor Mark Carney says Canada has to change tack to keep up with a shift in power that has seen economies in Asia rise to the forefront and the U.S. lose much of its lustre.
"This is a paradigm shift without question in the global economy - this shift in wealth and power," Carney said during a sit-down interview with CTV's Question Period that aired Sunday.
An economic outlook released by the Bank of Canada earlier this week pointed to China and India, where economies are beating expectations coming out of a global economic collapse from which the U.S. is still recovering.
According to Carney, Canada's economic mindset will have shifted from viewing America as the economic powerhouse to living in a world of emerging markets in the East.
Canadian manufacturers are adjusting to a shift in commodity prices as well as changes to the supply chain. Producers will have to rethink everything from what they are making and where they purchase their supplies, to whom they are selling their products, the Bank of Canada governor said.
"We have got to open up new markets," Carney said.
With a balance of power shifting to Asian countries, Carney said the Euro-centric G7 economic policy maker becomes less relevant, while the G20, which includes finance ministers from emerging markets such as China and India, assumes more authority.
Carney said analysts are still trying to calculate how the international monetary system will react to a stronger and more central Chinese yuan.
"These are the issues that we have to grapple with today to project forward where China and India and other major powers are going to go, and help design a system that remains open and to the benefit of not just Canada but everybody," he said.
However, Carney said it wasn't time to jump ship on the United States, refusing to describe Canada's largest trading partner as a declining world power.
"The U.S. is not a declining world power; it is a reclining world power. They are getting their house in order," he said. "It is less about reducing our dependency on the United States than increasing our exposure or dependency or access to these other markets."
Carney said the U.S. economy, which is predicted to improve by 3.3 per cent this year, will continue to recover but Canada still has to invest into Asian markets.
"There are other very good emerging markets where we are under-exposed and we need to build our game there. It is starting, but we really, really do need to accelerate it."
Earlier this week, the Bank of Canada announced it would leave its overnight lending rate at one per cent. The key overnight lending rate has remained unchanged since Sept. 2010.
The bank expects the Canadian economy to grow at a rate of 2.4 per cent this year and 2.8 per cent the next.
Carney said that Canadians should be wary of taking on too much debt, saying that the near-record low interest rates would not last forever.
"Canadians could overextend themselves and they could get into a position where the debts that are sustainable at very low interest rates prove unsustainable when rates return to a more normal level," Carney said.
"Don't take the current situation and extrapolate it, extend it out to the future. At some point, interest rates are going to move higher, they're going to go back to more normal levels.
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