BoC interest rate cut 'a big mistake': Kevin O'Leary
Published Thursday, July 16, 2015 8:52AM EDT
Kevin O’Leary, chairman of O'Leary Financial Group and host of the CTV2 program Shark Tank, says it was a “mistake of the highest measure” for the Bank of Canada to cut its key interest rate to 0.5 per cent, as the country struggles to come to grips with a growing economic slide.
O’Leary says the rate cut will only diminish the value of the Canadian dollar against the greenback, while doing little to impact the broader economic issues that saw the loonie fall to its lowest level in more than six years on Wednesday.
“We have more systemic problems in our Canadian economy that aren’t going to be affected by a marginal tax reduction,” O’Leary told CTV’s Canada AM on Thursday. “There’s more damage done by this rate decline than there is good.”
O’Leary said the primary issues affecting Canada are downturns in the U.S., Chinese and European economies, combined with questionable economic policies in a handful of Canadian provinces. He added that a rate cut will only add to Canada’s woes by damaging investor confidence.
“It signals to the rest of the world that we have a weak economy,” he said.
Business professor Marvin Ryder also blamed the U.S., European and Chinese economies for Canada’s economic downturn. The U.S. is in the middle of a slow, shaky recovery after a harsh winter, while Europe is hampered by Greece’s debt crisis and China is trying to stop the bleeding after a sharp decline in its stock market in the first half of 2015.
“The cause of our downturn isn’t internal to Canada,” said Ryder, a professor at McMaster University’s DeGroote School of Business.
Ryder said a lower interest rate will be mildly beneficial to consumers, but it probably won’t significantly impact their decision-making process. “If you were thinking about buying a house, you’re still thinking about buying a house (after the rate cut),” he said.
And businesses are unlikely to start spending much more, Ryder said, suggesting that businesses are not investing in Canada because they “don’t see enough demand for Canadian products.”
“I don’t think it’s going to have much of an impact, one way or another,” Ryder said.
O’Leary was more bullish in his assessment, calling the rate cut “a big mistake.”
He said the best way to measure Canada’s economic prosperity is to look at job creation and wage inflation. “By both those measures, we’re failing,” O’Leary said, adding that an interest rate cut will not change those problems.