There’s broad public support in Canada for retaining the loonie rather than moving toward a common currency with the U.S., says a top national economist.

Warren Jestin, chief economist at Scotiabank, says while the Canadian dollar is still an “afterthought” for many global investors, he predicts it will continue to move in an upward direction for the rest of this year.

“If we adopted the U.S. dollar, it wouldn’t solve our internal issues,” Jestin told a panel discussion sponsored by the Fraser Institute last week in Calgary.

Warren Jestin

“It would not realign our standard of living where we think it should be relative to the U.S. In fact, the whole issue of adopting the U.S. currency may fade as the Canadian dollar begins to move up.

“We may not always love the loonie, but I don’t think we’re about to leave it anytime soon.”

Jestin said surveys have shown Canadians would be reluctant to embrace a common currency – a point challenged by Fraser Institute executive director Michael Walker.

“If they are surveying the broad population, they are not surveying the right group,” said Walker, adding “wealth-holders” should be canvassed for their views.

“The vast bulk of the assets in Canada are not held broadly, they’re held by the top 15 or 20 per cent of the population,” he added.

“And we get the results of that survey when we observe what is happening to the value of the dollar itself. They’re making choices that push down the value of the dollar.”

Jestin disagreed, noting that average Canadians will have the final say on the currency issue, “because it will be a political decision.”

The feeling appears to be mutual south of the border. A survey released last week shows two-thirds of Americans do not want Canada to adopt the U.S. dollar as its currency and 84 per cent reject the idea of Canada, the U.S. and Mexico creating a common North American currency.

“Adopting a new North American currency is not an option because Americans clearly reject the idea,” says David Stark, public affairs director of NFO CFgroup, the Canadian market research firm that conducted the survey.

The survey showed about 32 per cent of Canadians would consider adopting the U.S. dollar and 34 per cent are open to a new common currency.

Jestin said while the value of the Canadian dollar, which closed at 65.22 US cents Thursday, won’t rise drastically any time soon, this country still has “excellent domestic fundamentals” – including huge job creation and a healthy trade and fiscal surplus, compared to the U.S.’s twin deficit situation in the latter areas.

Although the U.S. dollar has cachet amongst investors, Jestin feels a change is in the wind as other foreign investment opportunities open up.

“The Canadian dollar will only rise in my view, in relation to a general shift away from the U.S. dollar, which means we will be rising as a currency, but so will the Euro and the Aussie dollar. The big issue is who rises fastest,” the economist said.

But Walker said Canadians puzzled over why their dollar continues to sink when the country is tackling inflation and reducing debt and taxes need only look at the fact that Canadians and Americans are holding relatively less and less of their assets in Canadian dollars because of a downtrend in the real after-tax rate of return.

Walker also took aim at “regulatory burdens” such as labour and environmental legislation, which he believes handcuffs the ability of investors to derive maximum value.

Labour regulations in Canada “empower trade unions to extract a portion of the return directly in higher wages. Indirectly they reduce the returns by hampering innovation and the flexibility of labour adjustments, which reduces further the effectiveness of capital employed here,” he said.

It’s time for Bank of Canada governor David Dodge to speak out, he added, on issues such as labour laws and property rights and how they affect currency values.

“What are they keeping their powder dry for, as the value of our currency on a trend is going lower and lower? They should use (their) much vaunted independence to speak out on these kinds of issues,” he insisted.