Dismal dollar: Is a weak loonie all bad news for the economy?

The loonie hit its lowest level in more than 12 years this week, briefly trading below 71 cents US, but one Canadian economist says the weak dollar isn't all bad news.

See Full Article

While Canadian consumers will notice prices going up in grocery stores, malls and when shopping online, Craig Alexander, vice-president of economic analysis for the C.D. Howe Institute, says the weak dollar is good news for exporters and will help soften the blow from plunging oil prices.

"A weak Canadian dollar is actually good for the Canadian economy," Alexander told CTV's Canada AM on Friday.

Alexander said there's "a lot of pain" in Canada's commodities sector, especially in Alberta with plunging oil prices. But he said the weak loonie will act "as a shock absorber" in those industries.

"They sell their products in U.S. dollars, so when they convert it back into Canadian dollars, a weaker loonie helps soften the blow from weaker oil prices," Alexander said. "…It means that you end up with fewer job layoffs and job losses."

Meanwhile, a weak loonie makes Canadian exporters more competitive, especially for those selling their products in the U.S.

Alexander said this can lead to job growth and higher wages.

This seems to be the case for Carleton Place, Ont.-based bat maker Sam Bat, which sells the majority of their products south of the border.

The company's president Arlene Anderson told CTV Ottawa on Thursday that sales are up 35 to 40 per cent.

"That's a major advantage to us," she said.

In a speech in Ottawa on Thursday, Bank of Canada governor Stephen Poloz said non-resource sectors have seen rising employment and investment.

Weak dollar part of ‘natural process’

Alexander said the weak Canadian dollar is part of a “natural process.”

“It allows our economy to adjust to lower commodity prices, and help it perform in a tough economy," he said.

However, Alexander acknowledges that there's a "negative tone" associated with a weak dollar, and a low loonie is bad news for importers.

Ultimately, he said the higher costs of imports, including for fresh fruits and vegetables and clothing, will be passed on to consumers.

"Canadians will be frustrated that when they buy things online, that are often priced in U.S. dollars, that they're going to be paying more," Alexander said.

He continued, "There's no question that for imported goods or for spending abroad, a weak Canadian dollar does have negatives to the economy."



Advertisements

Latest Economic News

  • Uber Canada hits back at Liberal plan to charge tax on rides

    Economic CBC News
    Uber Canada says it wants the federal government to hit the brakes on plans to charge GST/HST on ride-hailing fares. Finance Minister Bill Morneau unveiled the proposed tax in Wednesday's budget. An executive with Uber's Canadian operations on Thursday called it a "tax on innovation" that would hurt Uber drivers and users. Source
  • Uber decries new tax measures on ride-hailing announced in federal budget

    Economic CTV News
    TORONTO -- Uber is crying foul over new tax measures announced in the federal government budget that would see the company subject to the same sales tax rules applied to taxi drivers. The Liberal government's budget Wednesday included amending the definition of a taxi business to include ride-hailing services such as Uber and subject them to the same GST and HST rules as taxis. Source
  • Ontario piloting financial literacy classes

    Economic CTV News
    TORONTO -- Students in more than two dozen Ontario high schools are taking part in a pilot project aimed at teaching them financial skills necessary to succeed in the new global economy. The Liberal government says the project, which is underway in 28 schools, is part of its promise to improve financial literacy education. Source
  • Air Miles suspends redemption of Cash Miles in stores after some are 'stolen'

    Economic CTV News
    The loyalty program Air Miles says that it is temporarily suspending the ability to redeem “Cash Miles” in stores after the company realized “Cash Miles have been stolen” in a “small number of in-store Air Miles Cash transactions. Source
  • Enbridge spill east of Edmonton estimated at 10,000 litres of crude oil

    Economic CTV News
    CALGARY -- The National Energy Board says about 10,000 litres of light crude oil spilled Monday at a storage site east of Edmonton. Enbridge said that as of Tuesday morning, it had recovered almost all of the oil, which had leaked from a tank value in an industrial area of Strathcona County. Source
  • B.C. reports 64 pipeline benefit deals with 29 northern First Nations

    Economic CTV News
    VICTORIA - The British Columbia government says it has completed benefit agreements with 90 per cent of the eligible First Nations along four proposed natural gas pipeline routes across northern B.C. The Ministry of Aboriginal Relations says 64 natural gas pipeline benefits contracts have been signed with 29 First Nations and that most include initial financial payments worth over $1 million. Source
  • Disney CEO Bob Iger gets contact extension to July 2019

    Economic CTV News
    NEW YORK -- Disney CEO Bob Iger is getting a one-year contract extension. The Walt Disney Co. on Thursday ended any speculation that Iger would retire this year, extending contract to July 2, 2019. Source
  • Canada gets green light to join controversial China-led infrastructure bank

    Economic CTV News
    OTTAWA -- Canada has been approved to join a controversial new international infrastructure bank led by China. The Asian Infrastructure Investment Bank says Canada is among 13 applicants approved for membership in the bank by its board of governors. Source
  • Disney, Universal battle tax bills for Florida theme parks

    Economic CTV News
    ORLANDO, Fla. -- It takes a lot of land to accommodate Cinderella's castle, The Wizarding World of Harry Potter and Epcot's 11-country World Showcase -- and a hefty purse to pay the property taxes on it. Source
  • Mickey vs. the tax man: Disney, Universal fight tax bills

    Economic CTV News
    ORLANDO, Fla. -- It takes a lot of land to accommodate Cinderella's castle, The Wizarding World of Harry Potter and Epcot's 11-country World Showcase -- and a hefty purse to pay the property taxes on it. Source