David Rosenberg, chief economist with Gluskin Sheff + Associates, parsed the recent pontifications of Bank of Canada Governor Stephen Poloz and noticed repeated use of the word “exports.” Three times in two sentences, in fact. And how Poloz seemed to want an even lower Canadian dollar when measured against the U.S. dollar. So much so that Poloz said the central bank considered lowering interest rates last week but kept them flat.
Such an admission by a central banker is very unusual. Rarely do they say what they might have done. Maybe Poloz counted on such talk driving down the C$ even further. If interest rates go down, money moves elsewhere, making the C$ in less demand, thereby causing Canadian exports to be cheaper, so sales to the U.S. increase, and the economy improves. Or so goes the fond hope.
What Rosenberg did not mention is that Poloz seems to have had a penchant for a lower C$ and higher exports ever since he became governor in June 2013. And why does Poloz hold this view? Could it be because Poloz spent the fourteen years before rejoining the Bank of Canada (he’d been there early in his career) at the Export Development Corporation?
Has the strategy worked? Well, during his term the C$ has fallen from 95 cents U.S. to 75 cents while exports are up only about 10 percent in the more than three years. Hardly worth the effort given the higher costs for Canadian consumers because of the increased cost of imports. So, here’s my poor pitiful request for the governor: Could you please forget your exporting past and instead plan for a future that benefits all Canadians?