Canada weathered the global economic crisis well, mainly reflecting sustained growth in domestic pending, and the economy is continuing to grow despite the persistence of international turbulence, most recently stemming from the euro zone sovereign debt crisis. In Canada's case, several factors are acting in its favour. Federal fiscal plans are seen by markets as credible, favouring low borrowing costs. The banking system is sound and required no taxpayer bailouts during the 2008-09 crisis. Comparatively strong growth among emerging market economies has shifted global purchasing power to commodity exporters like Canada via both higher export prices and stronger currencies. Nevertheless, uncertainty regarding the global situation and risk-averse financial markets are a drag on business confidence and investment, while prolonged low interest rates could push mortgage-debt and house prices higher from already elevated levels, at least in some large cities. Canada enjoys strong institutions and policy credibility, but for many years its economic growth has relied mainly on increasing labour and capital inputs. By contrast, growth of multi-factor productivity (MFP) has been weak and declined further in the past decade. Innovation indicators such as business R&D and patenting rates are poor. Boosting innovation is an important and well established way of raising MFP growth, which is in turn needed to sustain rising living standards, especially as the population ages. The overarching theme of this "Survey" is improving the policy framework for innovation, including in particular by strengthening the role of the tertiary education sector. Chapter 1 considers how to raise business innovation and concludes that increased service-sector competition and better design of public support, including less reliance on tax credits, would help. Chapter 2 considers policies to expand the supply of highly skilled workers and enhance the performance of Canada's many tertiary education institutions to better meet the economy's skill needs for innovation and growth. (Contains 48 figures, 10 tables, and 15 boxes.) [This paper was featured in "The OECD 2012 Economic Survey of Canada and the Relationship between Higher Education and Productivity," "College Quarterly," Volume 15, Number 2, Spring 2012. To access this report, see EJ979426.]