Bank of Canada Governor Tiff Macklem sounded the alarm on the productivity problem in Canada during a speech he delivered in Winnipeg yesterday, Tuesday.

According to prepared remarks, Macklem pointed to the strengths of the Canadian labor market, including high labor force participation, strong immigration, and a robust education system.

While the labor market has certainly slowed under the weight of rising interest rates, the governor notes that it has adapted to higher rates without a significant contraction.

However, looking at the long-term economic picture, he said: productivity is the Achilles' heel of the country, noting that on average, companies invest much less per worker in Canada than they do in the United States.

Macklem emphasized that knowing how to make Canada a better place for investment is crucial to supporting non-inflationary economic growth and higher living standards.

The governor's speech today came after weeks of the Bank of Canada making its first interest rate cut in more than four years earlier in June.