A study by the Canadian statistics organisation Environics Analytics has shown that the average net worth of households in Canada had pulled ahead of the United States by about $43,000, or 14%, from a deficit of roughly $60,000 five years earlier.
The study claims that a combination of factors have led to the average Canadians wealth to overtake their US cousins for the first time ever. They list three things as the major cause of the change. The first is the collapse of the U.S housing market.
When the US market fell the Canadian one didn’t, nearly all of the roughly $75,000 decline in U.S. household assets in the Environics study was a result of the one-third drop in the value of their real estate holdings. At the other end of the spectrum the average Canadian household saw an increase of $64,000 of assets due to a 25% increase in their real estate portfolio.
The strength of the Canadian currency soared from the 88 cents level against the US in 2006 to the high level of $1.02 in 2011, the ‘Loonies’ highest peak for years. Another advantage for the Canadians is that their economy is commodity based and rises and falls on the back of the price of raw goods and materials. The last few years has seen the price of oil soar from around $65 in 2006 to over a $100 this year.
By adding up the drop in US real estate values, the hike in commodity prices and the strength of the Canadian Dollar it’s hardly surprising to find the financial position of Canadian households has improved, measured against the Americans.
The study is sure to be pounced upon by Mitt Romney the rival to President Barrack Obama in this election year. He will undoubtedly use the study to incite anger in the American people and use it as a weapon to attack the Obama administrations record on the economy.
The Canadian Dollar is set to make further gains against the US Dollar as the ‘Loonie’ is edging higher thanks to a greater appetite for high yields and further signs that the Bank of Canada is planning on sticking to its bias towards higher interest rates.
The Bank’s quarterly monetary policy report drove home the message that the bank will continue with the current stance towards interest rates despite other nations choosing to cut theirs or initiate monetary easing measures. Currently the Loonie is trading in the region of 0.992 against the US Dollar.
The Pound to Euro exchange rate is currently trading at 1.280
The Pound to US Dollar exchange rate is currently trading at 1.568
The Euro to Australian Dollar exchange rate is currently trading at 1.117
The Euro to US Dollar exchange rate is currently trading at 1.224
The Euro to Pound exchange rate is currently trading at 0.780