The Canadian economy has been the envy of the industrial world in recent years but has "failed dismally'' in productivity, according to a report from TD Bank Financial Group.
"Canada has recorded a remarkably bad productivity performance,'' Don Drummond, chief economist of TD Bank, said in a release.
"Productivity has been tepid in terms of absolute growth rates and relative to the growth and levels recorded in other major economies. If this continues it will threaten the standard of living of Canadians.'' The report, Canada's Productivity Challenge, said the country's productivity - as measured by output per hour worked - dropped to a virtual standstill in 2003 and 2004.
"What Canada needs is a shift in focus away from consumption and towards savings and investment,'' Drummond said.
"This is not just about tax cuts. It's about a cultural shift involving a major review of public policy and an increased commitment by the private sector to investment and innovation.'' Productivity rose strongly during the 1960s with average annual gains of 3.6 per cent, but eased in the 1970s and 1980s to growth of 2.1 per cent and 1.4 per cent, respectively, then 1.8 per cent in the 1990s, the report stated.
The recent slowdown was shared by other major industrialized countries that are members of the Organisation of Economic Co-operation and Development (OECD), "but Canada's underperformance has been particularly notable,'' the report said, noting that Canadian productivity has grown more slowly than 18 out of 22 OECD countries since 1960 and slower than 21 of 23 over the past two years.
Productivity is a key driver of a rising standard of living over time. Stronger productivity growth allows faster growth without leading to higher inflation.