Canada’s late 2025 growth will stay soft because risk aversion and regulatory drag choke investment. The central bank and Canada’s largest bank now say it plainly. On October 8, 2025, RBC’s Dave McKay framed Canada’s risk aversion as a “bubble wrap” problem in Calgary, then tied it to slow approvals hurting capital formation, as reported at the event. Financial Post covered the remarks that day, and the phrasing matches Canadian Press syndication across CityNews. On October 16, 2025, Tiff Macklem said he expected soft growth in the second half, consistent with the Bank’s own summer guidance.
In his July 30 opening statement, Macklem quantified that outlook: “GDP growth is about 1% in the second half of this year as exports stabilize and household spending increases gradually,” a sober 1% that implies slack persists. Tiff Macklem added tariffs have pushed GDP onto a permanently lower path. That is not a forecast you fight with sentiment. It is a structural drag you fix with policy.
Shorten Approvals, Unlock Capex
The mechanism is dull and decisive. Long, uncertain permitting extends payback periods, lifts risk premiums, and kills net present value. Boards then park projects or move them south, where time to yes is shorter. The Bank of Canada is unusually explicit about the remedy, listing “removing barriers to investment by shortening regulatory approvals and reducing regulatory uncertainty” as a lever for productivity and competitiveness. The actors are clear too, Ottawa and provinces control these levers.
Macklem also tried to shake leaders out of procedural complacency in Saskatoon, saying, “Elbows up has been galvanizing, but now we need to roll up our sleeves. There is a lot of hard work to do.” Tiff Macklem was pointing at structural reform, not rates. The meaning is simple. Monetary policy can cushion shocks, it cannot compress a 24‑month approval into 6 months.
McKay’s October 8 push lands on the same hinge. He linked fear of mistakes to slow approvals and repeated false starts that raise the cost of capital. That makes the transmission clear, the private sector is saying time and certainty, not subsidies, unlock capex.
Enforcement lives with cabinets and regulators, not the central bank. Treasury Board, line departments, and provincial ministries can narrow review windows, set firm stop‑clock rules, and publish one‑stop milestone trackers. Then capital will test the promise. If the federal and provincial processes deliver materially shorter, predictable approvals by mid‑2026, the growth mix can shift from consumption to investment. If timelines slip or legal uncertainty rises, expect the 1% second‑half profile to repeat into 2026. The switch is in government hands, not on Wellington Street.
