Bank of Canada governor, David Dodge, called on the need for flexibility to allow the economy to adjust to global trends in a speech to the Calgary Chamber of Commerce in which he also called on Albertans to push for improved securities regulation.

Dodge pointed out that Calgary enjoys some natural advantages in the financial industry. “It is situated in the heart of the oil patch and is already home to the venture exchange and to a fledging commodity exchange. But Calgary is unlikely to be able to fully exploit these advantages until Canada, as a whole, develops a more efficient framework for its securities market,” he said.

“From the analysis that we have done at the Bank of Canada, it’s clearly in the interests of all Canadians, but particularly in the interests of Calgarians, to establish a uniform Canadian regulatory framework,” he stressed.

“This must be based on uniform principles, which are applied appropriately, taking into account the size and complexity of the issuer. And our securities laws must be consistently enforced,” Dodge suggested.

“Just as Alberta played a lead role in reshaping the Canada Pension Plan to make it a model for the world, I trust that the Government of Alberta and the Calgary business community will play a lead role in establishing a uniform framework for securities regulation in Canada – a framework that will help to develop this city’s potential beyond the oil and gas sector,” he noted.

Additionally, he called for improved labour market flexibility, more training and education, and the elimination of barriers to inter-provincial trade, among other things.

The speech also touched on the current state of the economy, and Dodge said that the Bank expects the Canadian economy to remain operating near its capacity for the next couple of years.

Dodge stressed that global economic prospects remain very favourable. “While weakness in the U.S. housing sector is likely to continue for a short while, the weakness doesn’t appear to have spread to the rest of the U.S. economy, and growth is expected to pick up over the course of 2007,” he said.

The Bank judges that the Canadian economy was operating at, or just above, its production capacity at the end of last year, Dodge noted. “We continue to project that it should operate near its capacity throughout 2007 and 2008,” he added. “Total CPI inflation at the national level should average just above 1% in the first half of this year, returning to the 2% inflation target in early 2008. Core inflation should remain near 2% through to the end of next year.”

He also suggested that the risks to its outlook are more or less balanced. “The main upside risk to our inflation projection continues to come from stronger household demand in Canada. Consumption could be stronger than expected, as households borrow against increased equity in their homes. Various indicators of household credit have also shown strong growth over the past year,” he said.

“The main downside risk continues to come from the United States where, as I mentioned, clear weakness remains in the housing sector. But there are some encouraging signs. The slowdown in the U.S. housing and automotive sectors does not appear to have spread more broadly,” he noted. “Overall, we judge that the risks to our inflation outlook in Canada are roughly balanced. However, there remains a possibility of a disorderly resolution of global imbalances.”