No shortage of confidence in province: speaker

As group head of Canadian banking for RBC Royal Bank, David McKay spends plenty of time on the road — travels that allow him to assess the economic mood across Canada. Right now, he says, things are pretty upbeat in Alberta.

As group head of Canadian banking for RBC Royal Bank, David McKay spends plenty of time on the road — travels that allow him to assess the economic mood across Canada.

Right now, he says, things are pretty upbeat in Alberta.

“It’s palpable, the confidence,” said McKay, who was visiting the Royal Bank’s new branch at Clearview Market Square in Red Deer on Thursday.

The same is true in Saskatchewan, and Newfoundland and Labrador, he added.

“You don’t feel it in Ontario as much, or Quebec.”

In those provinces, the high loonie continues to weigh down the manufacturing sectors. But McKay doesn’t blame petroleum exports for Canada’s inflated currency — a phenomenon dubbed Dutch disease.

“The reality is, we’re going to have to learn to compete. And if we do build competitive industries around a dollar at par, we’ll never have to worry about it going down.

“So, in the long run, it’s probably a good thing for our economy; in the short run, there’s tremendous dislocation.”

Some manufacturers are adjusting, taking advantage of the high dollar to buy more efficient equipment. In fact, noted McKay, gross output from Ontario’s manufacturing sector has gone up — even though job numbers are down.

GDP growth in Alberta this year is expected to hit four per cent, with Saskatchewan even higher, said McKay. But the average for Canada is projected at between two and 2 1/2 per cent.

This is lower than it should be for a post-recession economy, he said, suggesting that ongoing concerns about the European debt crisis is slowing domestic growth.

“Business leaders require certainty, and certainty leads to investment and growth; uncertainty leads to slower growth and lack of investment.”

In fact, Canadians have no direct exposure to Europe’s financial woes, and are even benefitting from the Bank of Canada keeping interest rates low to stimulate investment here.

“If Europe was to stabilize, you’d see rates go up.”

The financial situation in the United States remains a concern, said McKay, with the government there reluctant to adopt austerity measures.

“The challenge is the government is trying to stimulate the economy before they deal with the fiscal balance. They need at some point to raise taxes and decrease benefits.”

On the Canadian housing front, McKay downplayed the risk of a U.S.-style market collapse.

Prices have been driven up in Vancouver by foreign investment, he said, and in Toronto by a shortage of developable land and an influx of immigrants. But homeowners here are not exposed like their counterparts to the south were.

He explained that Canadian banks must show mortgages on their balance sheets, whereas American institutions were able to package them for sale as securities — reducing the incentive to ensure the soundness of such loans. Additionally, said McKay, the tax deductibility of mortgage interest in the United States encouraged irresponsible borrowing, and there wasn’t a requirement for insurance on high-ratio mortgages, as there is here.

Even if interest rates do jump, he said, many Canadian homeowners are now locked into long-term mortgages at a fixed rate.

“They’ve insulated themselves for the next five years.”

McKay also pointed out that consumer debt appears to be under control, with its growth over the last six months well below the long-term average.

Debt levels of older people approaching retirement is a concern, he acknowledged, although many are now seeking professional advice.

“Canadians are underestimating how long they’re going to live; Canadians are underestimating how much they’re going to have to save to retire.”

Two weeks ago, McKay was named Retail Banker of the Year by international industry publication Retail Banker International. The award was based on outstanding performance and leadership.

Retail Banker International also chose RBC Royal Bank as the Best Bank in North America.

hrichards@bprda.wpengine.com

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Alberta Premier Jason Kenney arrives for an announcement at a news conference in Calgary, Alta., Tuesday, Sept. 15, 2020. THE CANADIAN PRESS/Todd Korol
Inquiry into oil and gas foes to deliver report next year: Kenney

CALGARY — An inquiry into who is funding environmental opposition to the… Continue reading

Whatever snow may possibly fall in Red Deer on the weekend will melt when it hits the warm ground, says meteorologist Kyle Fougere with Environment and Climate Change Canada. (File photo by ADVOCATE staff)
Weather expected to get warmer next week in Red Deer

It’s going to be a cold weekend, according to Environment Canada. Saturday… Continue reading

Retired city manager Craig Curtis will argue for keeping the Molly Banister Drive right-of-way at Tuesday's public hearing. He warns of future gridlock if the extension is removed by city council. (Photo by Sean McIntosh/Advocate staff)
Former Red Deer city manager warns killing the Molly Banister Drive extension is ‘a terrible mistake’

Craig Curtis will argue for keeping the road alignment at next week’s public hearing

Alberta has 3,651 active cases of COVID-19. (File photo)
432 new COVID cases sets another record Friday

Central zone holds steady at 126 active cases

B.C. Liberal leader Andrew Wilkinson, B.C. NDP leader John Horgan and B.C. Greens leader Sonia Furstenau. (Black Press Media)
VIDEO: One day until B.C. voters go to the polls in snap election defined by pandemic

NDP Leader John Horgan’s decision to call an election comes more than a year ahead of schedule and during a pandemic

Alice Kolisnyk, deputy director of the Red Deer Food Bank, says the agency expects an increase in demand as the COVID-19 pandemic continues. Every new subscription to the Red Deer Advocate includes a $50 donation to the food bank. (Photo by BYRON HACKETT/Advocate Staff)
Support the food bank with a subscription to the Red Deer Advocate

The community’s most vulnerable members are always in need of a hand,… Continue reading

Canada's Chief Public Health Officer Theresa Tam responds to a question during a news conference Friday October 23, 2020 in Ottawa. Canada's top physician says she fears the number of COVID-19 hospitalizations and deaths may increase in the coming weeks as the second wave continues to drive the death toll toward 10,000. THE CANADIAN PRESS/Adrian Wyld
Top doctor warns severe illness likely to rise, trailing spike in COVID-19 cases

Canada’s top physician painted a bleak picture Saturday of the toll the… Continue reading

Conservative Leader Erin O'Toole holds a press conference on Parliament Hill in Ottawa Wednesday, Sept. 2, 2020. Conservative Leader Erin O'Toole is naming his shadow cabinet, including his predecessor Andrew Scheer as the party's infrastructure critic. THE CANADIAN PRESS/Sean Kilpatrick
O’Toole tells Alberta UCP AGM Liberals were “late and confused” on COVID response

Conservative Leader Erin O’Toole says Alberta has responded to the COVID-19 pandemic… Continue reading

Indigenous fishermen carry lobster traps in Saulnierville, N.S. on Wednesday, Oct. 21, 2020. THE CANADIAN PRESS /Andrew Vaughan
Federal representative hopes to ease tensions in Nova Scotia lobster dispute

HALIFAX — The man tasked with lowering the temperature in a heated… Continue reading

A voter places her absentee ballot in the ballot box, Wednesday, Oct. 7, 2020, at Merrill Auditorium in Portland, Maine. THE CANADIAN PRESS/AP/Robert F. Bukaty
American voters living in Canada increasingly being counted in presidential race

The largest number of Canadian-based American voters cast their ballots in New York and California

This photo provided by Air Force Reserve shows a sky view of Hurricane Epsilon taken by Air Force Reserve hurricane hunter team over the Atlantic Ocean taken Wednesday, Oct. 21, 2020.   Epsilon’s maximum sustained winds have dropped slightly as it prepares to sideswipe Bermuda on a path over the Atlantic Ocean.  The National Hurricane Center says it should come close enough Thursday, Oct. 22, evening to merit a tropical storm warning for the island.  (Air Force Reserve via AP)
Hurricane Epsilon expected to remain offshore but will push waves at Atlantic Canada

Epsilon is not expected to have any real impact on land

A composite image of three photographs shows BC NDP Leader John Horgan, left, in Coquitlam, B.C., on Sept. 25, 2020; BC Green Party Leader Sonia Furstenau, centre, in Victoria on Sept. 24, 2020; and BC Liberal Party Leader Andrew Wilkinson Pitt Meadows, B.C., on Sept. 24, 2020. THE CANADIAN PRESS/Darryl Dyck, Chad Hipolito
British Columbia votes in snap election called during COVID-19 pandemic

NDP Leader John Horgan called the snap election one year before the fixed voting date

Nunavut's provincial flag flies on a flag pole in Ottawa, on Tuesday June 30, 2020. The annual report from Nunavut's representative for children and youth says "complacency and a lack of accountability" in the territory's public service means basic information about young people needing services isn’t tracked. THE CANADIAN PRESS/Adrian Wyld
Nunavut’s young people ‘should be expecting more’ from government services: advocate

‘The majority of information we requested is not tracked or was not provided by departments’

Most Read