The National Bank have published a very useful and interesting report on the current account deficit, which is now running at about 3% of GDP. They argue that the deficit – largely driven by a huge fall in our manufacturing and wider goods trade balance – has now become structural, and should be cause for much greater concern than is now the case. They also argue that the Canadian dollar is clearly over-valued, and that its rise has been fuelled by large inflows of hot money rather than by the strength of resource exports.
As Arthur Donner has pointed out, bringing our large trade deficit back into balance would provide a very large boost to GDP and job growth. Yet for some strange reason, Ontario Premier Dalton McGuinty was recently pilloried for making the entirely reasonable observation that a too high Canadian dollar is bad for the Canadian economy.