RBC CEO says Canada is on the ‘wrong path’

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Canada has to get “in sync” with the United States and do a better job of plugging into its larger neighbour’s economic system in order to improve struggling productivity at home, says the head of this country’s biggest bank.

Royal Bank of Canada chief executive Dave McKay told a lunchtime crowd in Toronto on Tuesday that “very senior people” in the U.S. have told him they don’t believe Canada is creating enough value, economically.

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“One very senior person said to us recently, in a group of CEOs, ‘You are not serious people,’” he said in reference to addressing the issues facing the two countries.

The chief executive, speaking at the Canadian Club Toronto, added that Canada’s economic situation is “not bad now, but we’re definitely on the wrong path and we’ve got to start making some fundamental change to get back.”

Canada’s productivity levels and its gross domestic product (GDP) per capita have lagged in recent years.

McKay said it’s important for Canada to figure out “what the U.S. needs” and derive value through that process.

As an example, he said the U.S. would need to rely on Canada’s natural resources, such as the metals required for the energy transition. But Canada’s regulatory process is “slowing us down,” he said. It currently takes several years to build a mine in this country due to the checks and balances involved.

He also referenced the energy sector and the importance of Canada’s role in defending the Arctic.

“We are out of sync with the U.S.,” McKay said. “If you think about what the U.S. needs, it actually lines up really well with what we are good at; we are just not getting it done. The U.S. needs less rhetoric from Canada and just more getting stuff done.”

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Canada also needs a more competitive tax system, one that rewards risk takers and encourages companies to grow big instead of selling out to the U.S., he said.

“Recent tax policy has penalized risk takers,” he said. “We start companies, but then we sell really early. We sell to the Americans, who come up and get this amazing intellectual property for free.”

McKay said the Canadian government and businesses need to work together to deliver the economic outcomes the U.S. requires instead of having a division where business is viewed as the villain and government as the protector.

The current situation has also led to an increase in unemployment among Canada’s youth, which has further hurt the economy, he said.

“Our youth have 10 per cent unemployment. They are being left out,” he said. “They are disengaging from our economy. They are worried about climate, they don’t have a job, they don’t think they are going to own a home. They are tired of what’s going on and they are looking elsewhere.”

• Email: nkarim@postmedia.com

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