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The Alberta Venture Podcast – Craig Alexander, Chief Economist at TD Bank

Oct 13, 2010

by Max Fawcett

By Max Fawcett

It’s not often that you get the opportunity to pick the considerable brain of a chief economist at one of Canada’s big five banks. That’s why we jumped at the chance to speak with Craig Alexander, TD’s chief economist, who was in Edmonton last week. In a wide-ranging discussion that covered everything from the possibility of a double-dip recession to the upside of moderate economic growth, Alexander outlined the challenges and opportunities that lie ahead for Alberta’s business community.

The Alberta Venture Podcast – Craig Alexander, Chief Economist of TD Bank

Some highlights:

-Alexander expects “modest to moderate economic growth” over the next few years, with national GDP growing by 2 per cent. He expects Alberta to outperform the national average “by a significant margin.”

-About the Canadian dollar at parity, Alexander notes that “it’s here to stay for the foreseeable future.” But, he says, most Canadian companies have responded admirably to this new reality. “They didn’t play ostrich,” he says. “They recognized that there was a problem and they changed their business models to adapt to that.”

-He doesn’t expect to see runaway resource prices in the near term, and while that might be a disappointment for some of Alberta’s resource companies it also means that wage and salary growth will be muted.

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-Alexander believes that it’s a perfect time for businesses to invest in expanding their own productive capacity. “I think the stars are aligned remarkably well for business investment,” he says, noting the unique combination of strong balance sheets, rising corporate profits, low interest rates, tamped down wage and cost growth, a strong Canadian dollar (applied to the purchase of machinery commonly denominated in US dollars) and a favourable tax regime for investment.

-We’re not out of the woods just yet. While he notes that he’s no Nouriel Roubini, Alexander pegs the possibility of a double-dip at one in three, and identifies continuing weakness in the U.S. economy and concerns about sovereign debt risk in Europe as the most likely culprits for such an outcome. “I worry about the psychology,” Alexander says. “I think if the U.S. actually saw an outright contraction in GDP it would reinforce the expectations or the fears of a downturn, and fundamentally that’s the environment that you have to worry about.”

-QE2 isn’t the answer, either. “The piper will eventually have to be paid,” Alexander says. “Spending more now is going to make the pain down the road worse. I can understand why America feels like it needs to do more, but my assessment is that if you just give it time it will heal. But you have to understand it’s a multi-year process.”

-Exporters should be looking to international markets, which Alexander believes will comprise 70 per cent of global output in 20 years (as compared to 30 per cent 20 years ago, and 50 per cent today). But, he says, that doesn’t meant that companies should ignore the American market. With ten times our population there are still opportunities of scale there to be had, even in a weak economic climate.

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