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Still Biting for Our Cash

By Linda Leatherdale, Toronto Sun

Loonie may be at par but prices just aren't right.A dollar on par has some dancing in the streets.

Others are crying in their beer.

And still others are fuming that the price is still not right.

No doubt there are winners and losers as our loonie -- finally -- hit parity with the U.S. dollar for the first time in 31 years -- a remarkable feat considering that our buck was coined the "northern peso" when it crashed to 62 cents US in 1992. Then it hit a record low 61.75 cents US in 2002.

Some cynics will argue Ottawa engaged in a manipulative plot to let the Canadian dollar freefall, so that former prime minister Brian Mulroney's free trade deal would be hailed a success.

A low dollar makes exports of Canadian manufactured goods cheap -- and the United States is our largest trading partner.

Others will also argue Mulroney's Tories slyly hiked the manufacturer's sales tax (MST) to 13.5%, then axed it to usher in their hated 7% GST -- all while telling Canadians they got a deal. Killing the MST was also good for exporters.

But today, with the rise of our dollar, exporters are miserable, warning we're going to see thousands more in layoffs in our manufacturing heartland, where we've already lost almost 300,000 jobs since 2002.

Also a loser is our tourism industry, which has barely recovered from SARS and 9/11.

Last week, Statistics Canada confirmed the industry's worst fears, reporting travel from the U.S. fell to its second lowest level in 35 years in July. To blame was our climbing dollar, and hard times south of the border, with the sub-prime-liquidity crisis causing experts to utter the "R" word. That's "recession."

So, it blows my mind that Mayor David Miller, who ramped up spending by $1.5 billon and gave himself a 9% pay hike, would want to nail the coffin shut with his suggestion of a new entertainment tax on this hard-hit sector.

Then Stephen Harper's Tories gave the industry a blow by cutting the advertising budget at the Canadian Tourism Commission and axing the GST Visitors Rebate Program, which allowed a rebate on foreigners' purchases that amounted to more than $199. Critics complain this will result in 2,000 lost jobs.

Other losers are auto parts makers, lumber and paper companies, and exporters of farm products.

But, there are winners -- like those lucky Snowbirds heading south to avoid the blistery winter in the Great White North.

"This incredible exchange rate is exciting for us," said Rosalyn Hunter, director of VoX International, a Canadian firm that promotes Texas as a vacation destination for Canadians.

As with other states, tourism traffic to Texas has been on the rise -- and Hunter, who's in Texas this weekend at a conference, says she'll share the good news after our dollar hit above $1 US. "Low unemployment, increased consumer spending and a record exchange rate -- it's never been a better time to promote Texas," she said.

Importers and wholesalers are also loving it, as it costs less to bring goods into Canada. So are currency speculators, who bought up the Canbuck in hopes of eventually selling them for the U.S. greenback.

Meanwhile, talk around the water cooler is how cross-border shopping is in vogue again and how the price of many goods should be a lot cheaper by the time Christmas rolls around.

But, some experts ask, will businesses that ate it with a "northern peso" pass along the savings now that our dollar is at par? They also warn it could be up to two years before consumers see any effect in Canadian stores.

"When the Canadian dollar was even around 65 cents to 70 cents US, prices didn't adjust because of the sharp depreciation of the Canadian dollar," Scotia Capital economist Meny Grauman said.

Any delay in price cuts is "unacceptable rubbish," said consumer advocate Bruce Cran, president of the Consumers' Association of Canada, which gets hundreds of complaints each day from shoppers who want to see lower prices on everything from produce to electronics to cars.

Cran is telling Canadians "they should look after themselves first" and shop in the U.S. if the purchase makes sense. For example, a new website, ucanimport.com, says Canadians can save between $5,000 and $15,000 on their car by shopping across the border.

Doug Porter, BMO Capital Markets chief economist, has updated his study into how Canadian retail prices have responded to the loonie's rise -- and he concludes the price is still wrong.

Only Big Macs, Tim Hortons coffee, Apple iPods and iTunes, seem to be priced right. On other goods, Canadians pay more.

Take a child's chair by Pottery Barn. The price disparity is a whopping 34%. Automobiles sold in Canada also cost more. For a Ford Mustang, the sticker shock is 15% more here, and for an Acura MDX it's 17%.

Then there's greeting cards, magazines, books and cameras.

"Retail prices in Canada have responded to the loonie's moonshot with all the speed and alacrity of a three-toed sloth on a hot summer's day," Porter's study concludes.

One commodity, though, where experts say a high dollar has shown up in the sticker price is gasoline. This summer prices hovered above $1 for a litre of self-serve, regular unleaded. But today -- even though the price of a barrel of oil has shot up to a new record above $83 US -- a litre costs anywhere from 95 cents to 98 cents.

And let's not forget the high taxes we pay on many goods -- like the GST, which is a tax on tax at the pumps. High taxes mean we also pay more.

It's time for a consumers to vote with their feet.

SOURCE: BMO ECONOMIC RESEARCH