Thursday October 15, 2009
Big problems in higher dollar
There is a certain giddiness attached to a soaring Canadian dollar, with visions of cheaper trips to Florida or New York for those who can afford to travel. There is also a degree of smugness about us doing better than the Americans in managing the economy.
We should dismiss such thoughts, however. The fact is that a higher-valued dollar is a disaster for Ontario’s economy, based as it is on exports of manufactured goods into the U.S. market. Canadian Manufacturers and Exporters (CME) estimates that, for every hike of one cent in the value of our dollar, 25,000 factory jobs are lost. And since the beginning of this year, the loonie has gone up 15 cents.
Partly this is attributable to our better fiscal situation, in comparison to the tax-averse Americans. (The U.S. deficit – a staggering $1.6 trillion this year – is “unsustainable,” according to the Congressional Budget Office.) And partly it can be traced to rising prices for commodities, particularly oil, for the loonie is now a “petro-dollar.”
For manufacturers, this is a double whammy: the higher dollar makes their products less competitive in the American market, and higher oil prices drive up their costs.
“Canadian manufacturers are really caught between a rock and a hard place,” says CME President Jayson Myers. Prime Minister Stephen Harper notes the “difficult effects” on the economy. (Source: Toronto Star)