Former Bank of Canada governor Stephen Poloz says Canada is in a recession, arguing the economy’s weakness has been masked by strong population growth.

“I would say we’re in a recession, I wouldn’t even call it a technical one,” said Poloz, now special adviser to Osler, Hoskin & Harcourt LLP, during a webinar on Tuesday. “A technical one is a superficial definition that you have two quarters of negative growth in a row, and we haven’t had that, but the reason is because we’ve been swamped with new immigrants who buy the basics in life, and that boosts our consumption enough.”

On Friday, Statistics Canada reported that gross domestic product per capita had declined for the sixth consecutive quarter, falling by 0.4 per cent in the third quarter. This measure has been negative in eight out of the last nine quarters. Growth in the Canadian economy this year came in above forecasts at 2.1 per cent for the second quarter, before dropping to one per cent in the third quarter.

“We did have one pop up in the previous quarter, but that was a pretty minor thing,” said Poloz. “And the only good news, if I caught that, is government spending. That’s not the sort of thing to build your recovery on.”

Poloz said the Canadian consumer has suffered a 30 per cent increase in the cost of living following the recent inflationary period, which has reduced spending. Additionally, inflation has fallen faster than was predicted, which Poloz argues only happens during a recession.

The recent threat by incoming U.S. president Donald Trump to slap a 25 per cent tariff on all imports from Canada also remains a source of uncertainty for Canada’s growth going into next year.

A report by the Canadian Chamber of Commerce said that if tariffs on Canada and Mexico were implemented on inauguration day, it would lead to a 2.6 per cent hit to Canada’s GDP and a 1.6 per cent decline to the U.S. economy.

Poloz said the tariffs could also pose an inflationary risk for central banks, which would put them in an “awkward place” as they would have to keep rates higher for longer, just as the economy is slowing.

“There’s the presentation to the (central) bank, the economy is slowing, but inflation is picking up because of tariffs,” Poloz said. “What do you do? I think most central banks are going to say, I gotta be worried about the inflation part. And so that’s a recipe for deeper stagflation.”

The federal government recently introduced a two-month pause on the goods and services tax for a select number of goods, in an effort to help stimulate consumer spending. Poloz said such a measure could help Canadians with their bills in the short term, but will do little to improve long-term economic growth.

“There are so many other ways to boost the economy that would provide a longer lasting effect,” he said. “So giving away these things is kind of like giving somebody a fish instead of giving them a fishing rod, right?”

• Email: jgowling@postmedia.com

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