April 27, 2012 / 2:17 PM / 6 years ago

Bank of Canada: use foreign funds on business, not homes

OTTAWA (Reuters) - Bank of Canada Governor Mark Carney said on Friday that Canada will continue to attract large flows of cheap foreign capital and that those funds should be used to make companies more productive rather than to build houses.

Bank of Canada Governor Mark Carney waits to testify before the Commons finance committee on Parliament Hill in Ottawa April 24, 2012. REUTERS/Chris Wattie

“It is reasonable to expect that Canada will attract for the next decade or so sizeable foreign capital ... and the question is what are we going to do with that capital,” Carney told a business audience in Ottawa. “Are we going to build houses ... or are we going to invest in our businesses and retool our competitiveness?”

Carney also repeated his warnings about excess household debt as Canadians take out mortgages at extremely low borrowing rates, saying the country should heed the lessons of the U.S. housing crash.

“We’ve seen this movie. It just played in a major cinema just south of here, over and over and over again, and it would be the height of folly to repeat those mistakes,” he said.

“There’s a variety of things we can do, have done and could do prospectively to make sure that doesn’t happen.”

He also repeated that the strong Canadian dollar is a challenge for the economy. The central bank is “not obsessed” with the value of the currency but it does play a big role in determining monetary policy, he said.

Reporting By Louise Egan; Editing by Jeffrey Hodgson; and Peter Galloway

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