Moreover, lower net export earnings from our primary commodities imply, all else being equal, a larger deficit in our balance of international payments and a greater need for foreign borrowing than would otherwise be required. All these commodity-related developments have led to downward pressure on our exchange rate.
And the lower dollar spreads the wealth and income effects of falling commodity prices across the economy. In effect, a lower Canadian dollar means higher domestic prices for all those goods that are imported and for many of the import substitutes we produce here. For a given level of income, these higher prices imply a decline in living standards for Canadian consumers.