The falling loonie - not always a bad thing
Published Thursday, January 22, 2015 5:58PM EST
Last Updated Thursday, January 22, 2015 6:43PM EST
This is how we usually describe a devaluing Canadian dollar, and it all sounds pretty negative.
But is it really a bad thing?
Some argue the Canadian dollar should be weaker. Some are thrilled it’s heading in that direction.
“I couldn’t be happier,” says Arlene Anderson, President of Sam Bat, a small company based in Carleton Place west of Ottawa that manufactures baseball bats. It pioneered the use of Canadian maple for bats instead of the more traditional ash wood. Now those bats are used by some of the biggest big-league ball players.
Anderson is happy because Sam Bat exports around 20,000 bats a year and sells them in American dollars. The stronger the U.S. dollar is compared to the loonie, the better.
“This will improve our liquidity,” says Anderson. “It will enable us to grow and to employ more staff.”
Good news for Sam Bat, and for all the manufacturers and exporters across Ontario who have struggled to stay competitive when the Canadian dollar was at or close to par.
And that’s not the only way a falling loonie can help the economy.
While Canadian tourists might grumble at having to pay more to travel abroad, Canada’s multi-billion dollar tourism industry should benefit. Travellers from abroad now have more incentive to come here where their money is worth more.
Ditto the retail sector. A weak Canadian dollar tends to help keep more of those dollars from crossing the border into the U.S. and instead coax them into Canadian cash registers.
“For many businesses there’s been a lot of good news over the last several months,” says Anthony Heyes, an economics professor at the University of Ottawa.
Heyes suggests the loonie isn’t falling behind so much as it is returning to a more natural level. “People will argue over that because obviously economies evolve,” he says. “But historically you would expect to be maybe 20 to 25% below the U.S. dollar.”
Small comfort if you’re heading to Florida this winter. But it could ultimately be a boon to the economy, particularly in manufacturing-based Ontario. Anthony Heyes points out there are always winners and losers no matter which way the dollar moves.