A strong, steady Canadian dollar can be a double-edged economic sword for businesses and residents.
The loonie has hovered around par in recent months and sits at $1.03 against the U.S. dollar.
Graham Voss, associate professor of economics at the University of Victoria, said what people do in the face of parity depends a lot on how long the dollar stays strong.
“We’re kind of used to the dollar fluctuating a fair bit, but what we’re seeing over the last little while is pretty persistent strength,” he said. “The more time people have to adjust to things is when you start to see changes in behaviour.”
Voss believes most Canadians are relatively savvy about the exchange rate and aware of the advantages and disadvantages of a strong Canadian dollar.
“They know it’s a good time to take a vacation in the United States and businesses might look at investing in their company with respect to goods and materials coming from overseas – particularly the U.S.,” he said. “The downside is of course if they’re trying to export goods, then they’re competing with overseas or American producers. That makes for a more difficult, competitive environment. Canadian firms by necessity are going to have to be responsive as best they can to the dollar.”
Levi Sampson, president of Nanaimo Forest Products, owner of Nanaimo’s Harmac pulp and paper mill, said he checks the worth of the Canadian dollar every day.
“When your dealing in U.S. dollars, every cent the Canadian dollar goes up has a major impact on our bottom line,” he said. “That being said, we’ve had very high pulp prices that has offset the rise of the Canadian dollar.”
With pulp selling for $900 a tonne, and Harmac shipping 50 per cent of its product to China, Sampson sees a strong future for the mill, despite the robust Canadian dollar.
“If pulp dropped down to 2008 prices of below 500 and the dollar was still strong, you would have every pulp mill losing their shirt,” he said.
A healthy loonie also means an increase in Canadians heading to the U.S. to shop – something Mark Drysdale, executive director of Tourism Nanaimo, is keenly aware of.
A rising Canadian dollar has a significant impact on the tourism industry, but not because U.S.residents aren’t coming here.
“The American tourist hasn’t really been a big component of our visitors,” he said. “The bigger issue is people in the close-in Canadian markets are travelling south instead of travelling to Vancouver Island.”
Of tourists stopping at Nanaimo’s visitor information centres in 2009, 47 per cent were from B.C., six per cent from Alberta, 13 per cent from other parts of Canada, 10 per cent from the U.S. and 20 per cent from Europe and Asia.
“You take that 66 per cent Canadian component and all of a sudden a big chunk of those tourists are heading south, you could imagine the impact on the industry,” said Drysdale.
Mike Delve, vice-chairman of the Greater Nanaimo Chamber of Commerce, said he hasn’t heard much concern from members regarding the dollar.
“A lot of the Nanaimo economy is about moving money around in the community,” he said. “Of course the ones it really hurts is the exporters and the economy as a whole suffers to some extent from that.”
Delve would like to see Nanaimo’s businesses focus on developing the Canadian market.
“If we’re going to be exporting products, why don’t we create products we can export within the Island and then to the Lower Mainland instead of depending on going across the border,” he said. “If we’re marketing to ourselves, then [the dollar’s value] doesn’t hurt us at all.”