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Over the past year, I have spoken a number of times on the topic of efficiency, and why it is so important for Canadian policy-makers to keep in mind the goal of an efficient financial system. Today, I want to talk about Canada's system of pension plans and how they contribute to the efficiency of financial markets and of the economy as a whole.

As globalization intensifies, more and more regions are realizing the benefits of open trade and capital account liberalization. But with increased globalization also comes increased exposure to shocks originating outside each country's borders.

When Paul and I appeared before this Committee last April, we said that the economy appeared to be operating slightly below its production capacity, and that we expected it to move back to full capacity in the second half of 2006. In our October Monetary Policy Report, which we published last Thursday, we said that economic growth in the first half of the year was somewhat stronger than we had previously expected. Indeed, the global and Canadian economies have continued to grow at a solid pace, and our economy now appears to be operating at full production capacity.

It's not surprising that the Bank of Canada is interested in promoting economic integrity. After all, the Bank of Canada Act mandates us, as far as possible within the scope of monetary policy action, to "promote the economic and financial welfare of Canada."

Past and recent movements in energy prices and in the exchange rate for the Canadian dollar, along with competitive pressures from China and other newly industrialized economies, are giving rise to significant ongoing adjustments in the Canadian economy. Given these adjustments and the slow growth of productivity in recent years, the Bank has slightly reduced its estimate of potential output growth for 2005 and 2006.

In the report, we said that the global and Canadian economies have continued to grow at a solid pace, and our economy now appears to be operating at full production capacity. Past and recent movements in energy prices and in the exchange rate for the Canadian dollar, along with competitive pressures from China and other newly industrialized economies, are giving rise to significant ongoing adjustments in the Canadian economy.

The Bank of Canada has been contributing to the goal of an efficient financial system in a number of ways. The Bank's monetary policy aims to keep inflation low, stable, and predictable.

Today, I will talk about two types of global economic imbalances. The first relates to the way that savings and investment are being distributed across countries in an increasingly uneven way. The second is the possibility that, over the next couple of decades, the global economy might face a protracted period in which desired savings exceed planned investment, partly because of demographic trends.

Global and Canadian economic developments have been unfolding broadly as expected, and the Bank's outlook for output and inflation in Canada through to the end of 2006 is little changed from the scenario outlined in the April Report. Strong growth in final domestic demand in Canada continues to offset the drag from net exports.

As business people with ties to Canada and the United Kingdom, you are keenly interested in the economic prospects of both countries. When we look closely at our economies, it is striking how much they have in common in terms of policies and outlook.