The Canadian dollar has been consistently declining over the past several months and recently, it’s been reaching decade-long lows. On Tuesday, the loonie dipped below 70 cents U.S. for the first time in 13 years, with oil trading at $31 a barrel.
It can be hard to predict how the low Canadian dollar will affect our day-to-day lives, but there are a few things that will undoubtedly change as the loonie edges closer to its all-time low of just under 62 cents U.S.
According to UBC Sauder School of Business associate professor Werner Antweiler, these are the things we can expect from a declining dollar:
The price of food will increase.
Expect to pay more for fruits and vegetables as the dollar weakens.
“When we look at the overall effect of exchange rates on consumer prices, the items that are mostly of concern are essentially what you buy in the grocery stores,” Werner told Vancity Buzz.
Many of our fruits and vegetables are imported directly from the United States, so we can expect the most significant impact on the price of California crops, and Werner said this will primarily affect lower income families.
Canadian exports will gain momentum.
Despite the rising price of imports, the low dollar will boost international demand for exports from Canada. Having a lower loonie means Canada has a competitive edge over other countries.
“Whenever the Canadian dollar is depreciating, it makes Canadian produced goods more competitive in international markets and in particular, of course, the United States,” said Werner.
“We’ve already seen a little bit of the positive effect of that on output in some of the key provinces for manufacturing in Ontario and Quebec.”
A strong manufacturing sector also means higher wages for people working in that industry. Werner notes, however, that a strong export market could create a shortage of domestic products for Canadians, making certain things more expensive.
Exchange rate moves are unpredictable.
Werner said it’s impossible to predict the future of the dollar, since exchange rates move swiftly and without warning. In January of 2002, the exchange rate hit its record low of 62 cents U.S., and then five years later in November 2007, it hit its all-time high of $1.09 U.S. This swift movement makes investors shy, according to Werner.
“The see-sawing of the exchange rate is bad for long-term investment, as a more stable business environment is more conducive to innovation and planning. Our increased dependence on oil markets has exposed us to to increased exchange rate volatility.”
Despite a bad environment for investors, we will likely see Americans coming north of the border to take advantage of great shopping deals.
The film industry is taking off again.
Vancouver has once again become a destination for American filmmakers thanks to the low dollar, bringing in tax revenue and helping to drive the local economy.
“You should expect a lot more film trucks on Vancouver streets,” said Werner.
And the numbers are there to back up Werner’s theory. Around 24 productions are currently filming in Vancouver, including T.V. shows like The Flash, Motive, and Once Upon A Time and movies like the Bruce Lee biopic titled Birth of the Dragon.
Tourism will also benefit from a weak dollar, with Americans flocking to places like Whistler for ski vacations this winter.