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.

Just Posted

Spring book sale this weekend in Red Deer

Red Deerians can get lost in a world of inexpensive books this… Continue reading

Central Alberta wildlife rehab facility not prepared to take orphaned bear cubs, yet

It’s been about eight years since the Medicine River Wildlife Centre was… Continue reading

Regional sewage line moving ahead despite concerns

Cost sharing among concerns of municipalities involved in Sylvan Lake-to-Red Deer sewage line

Red Deer family who lost everything in house fire begin rebuilding

Couple had moved into north-end home only two days before basement fire

Tory Leader Andrew Scheer says he doesn’t feel betrayed by Maxime Bernier

MONTREAL — Andrew Scheer says he doesn’t feel betrayed by former Tory… Continue reading

WATCH: Fine wine and food at Red Deer College

The Red Deer College Alumni Association hosted its 14th annual Fine Wine… Continue reading

Boston’s Tuukka Rask, Riley Nash step up in Game 4 win over Leafs

Bruins 3 Maple Leafs 1 TORONTO — The Boston Bruins didn’t need… Continue reading

Supreme Court ruling corks B.C. vintners’ hopes for free trade of Canadian wines

VANCOUVER — The Supreme Court of Canada ruling upholding interprovincial trade laws… Continue reading

Lance Armstrong settles $100M lawsuit with U.S. government

Disgraced cyclist reached $5-million settlement with sponsor U.S. Postal Service

Montreal couple hoping city lets them keep beloved pet pig named Babe

MONTREAL — Babe the pig spends his days sleeping, going for walks… Continue reading

WATCH: This is a story about a stoned raccoon at a fire station

An unusual pair showed up in the pre-dawn hours at Fire Station… Continue reading

Plastic makers’ credit ratings may be hit by pollution rules

Plastic packaging makers may be less credit-worthy in the future as governments… Continue reading

Black Press Media acquires two new Alaska newspapers

New Media Investment Group to acquire the Akron (OH) Beacon Journal while Black Press Media takes on daily newspapers in Juneau and Kenai Alaska

‘Dining of the future’: vegan restaurant boom fuelled by meat eaters

Foodies say Canada is in the midst of a renaissance in plant-based… Continue reading

Most Read

Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month