The Canadian loonie will hover at parity with the U.S. dollar for some time to come, and deservedly so, thanks to Canada's economic strength, Finance Minister Jim Flaherty said Wednesday.
"This is a new world," Flaherty told reporters after speaking about controlling debt at a think-tank discussion at the Woodrow Wilson Center for International Scholars in Washington, D.C. The high Canadian dollar reflects a "sound fiscal situation" in Canada, he added.
"It is unreasonable, given those fundamentals, for anyone in Canada to expect the Canadian dollar to go back to the days when it was significantly devalued vis-a-vis the U.S. dollar … It makes sense for the Canadian dollar to be much closer to the U.S. dollar than it was for some years."
The Canadian dollar hit a 2½-year high earlier Wednesday of $1.0154 US. The loonie's been at or near parity with the U.S. currency for weeks, a state of affairs that causes headaches for Canadian exporters who get paid in U.S. dollars.
That's why Ottawa is throwing a lifeline to exporters and manufacturers by lowering corporate taxes, reducing tariffs and extending an accelerated capital cost write-off, Flaherty said.
The finance minister spoke to the media after an event that proved something of a Canadian love-in. Those in attendance included Gary Doer, the Canadian ambassador to the U.S., and astronaut Julie Payette, who recently signed on for an eight-month stint as a public policy scholar at the Woodrow Wilson Center.
Canada 'a good example'
"We look at Canada as a good example of what we ought to do on several different fronts," David Biette, the director of the centre's Canada Institute, told Flaherty.
Not everyone agrees. Liberal Leader Michael Ignatieff on Wednesday criticized the Conservatives' fiscal management, particularly the government's move to cut taxes while facing a fiscal deficit. "It's crazy to cut corporate tax by $6 billion when you are in a $56-billion hole and I think Canadians understand that," said Ignatieff.
Speaking Wednesday on CBC's Power & Politics with Evan Solomon, Flaherty defended his government's move to cut corporate taxes to 16 per cent from 18.5.
"I operate in the real world of economic growth and jobs, and reducing taxes on job creators creates jobs," said Flaherty. "We've proved that. Since 2007, we've been reducing the business taxes. We have the manufacturers and exporters testifying to the reality that tens of thousands of new jobs have been created as a result of reducing the tax."
The finance minister also said Canada would put global financial standards in place well before deadlines imposed by the Basel Committee of international bank regulators.
The new regulations are supposed to be in place by 2019, but Flaherty said Canada will move much faster than that.
The new standards would require banks to prepare for economic recessions by holding on to more cash and assets that can be easily sold off. They aim to ensure taxpayers aren't on the hook when a financial institution fails.
"It's an advantage for our financial system to move more quickly to the Basel III standards," Flaherty said. "It creates more business confidence. It creates more confidence outside of Canada for direct investment in Canada."