POLITICS

Canadian dollar barely registers minority election win for Parti Quebecois

09/05/2012 12:24 EDT | Updated 11/04/2012 05:12 EST
MONTREAL - Word of a minority government in Quebec for the party synonymous with separation barely seems to have ruffled the Canadian dollar's feathers.

The high-flying loonie stayed virtually level in after-hours trading Tuesday night as voters handed a minority election win to the Parti Quebecois and its leader, Pauline Marois.

The dollar, Canada's best-known barometer of economic stability, was sitting at $1.0141 US shortly before midnight ET, virtually unchanged from earlier in the day — a sign that currency traders figure the PQ poses little threat to the country's economy.

"It's not a bad election result (for business)," McGill economics professor William Watson said as it became clear the PQ had fallen short of a majority win.

The PQ won just 54 seats, nine short of the 63 needed for a majority. As a result, observers say, the left-of-centre party is likely be forced to either abandon or water down those aspects of its platform least palatable to Canada's business community.

"I think the program will have to be modified somewhat," Watson said. "I think there will be a push towards the left, but not as far as the program threatened."

The business community across Canada and inside Quebec will welcome any move by the new government to back off a pledge to dramatically increase taxes on wealthy individuals, companies or the resource sector, he added.

And it's sure to embrace the likelihood that a referendum on Quebec independence won't be in the cards — at least during the first 12 to 18 months of what could well be a short-lived government.

Having Marois as premier can only add to the political uncertainty in Quebec, since it raises the spectre of a referendum taking place eventually, said Carleton University professor Bruce Hicks.

But unlike the last time the PQ took power in 1994, Marois — the first-ever female premier in Quebec — doesn't have the mandate that almost resulted in a Yes result in the sovereignty vote that took place the following year.

"This government isn't being voted in — it's tumbling in, because the Liberals are being voted out," Hicks said.

Former Montreal Canadiens star Mike Cammalleri asked the question on Twitter that most property owners in Quebec were wondering as they watched the election results roll in: "How's this vote going to affect the value of my house in Montreal?"

The answer, experts say, is that after 10 years of substantial increases, real estate prices are likely to remain flat in many Montreal communities — at least until the true threat of a sovereignty referendum appears on the horizon.

The PQ victory may limit direct new investment in the province, but it's not likely to frighten off established businesses, observers said.

"Its most direct impact will probably be on new business investment as opposed to scaring away businesses or money that's already committed to the province," said Hicks.

The dollar is also unlikely to suffer dramatically, in part because the Caisse de depot, Quebec's pension fund manager, and the Bank of Canada both have the ability to prop it up, he added.

A PQ government is sure to pick fights with Ottawa to boost nationalist support, but its minority standing will diminish its power to enact the sort of legislation that Quebec business leaders fear most, such as expanding the application of the Bill 101 language charter.

"It's going to be tricky to govern," said Michel Poitevin, economics professor at the University of Montreal.

Poitevin said the PQ will have to confront the reality of a slowing economy and revise some of its spending promises and economic plans, such as increasing the top marginal tax rate, freezing tuition fees and capping hydro rates.

Higher top-tier taxes, for instance, might prompt the early retirement of some of the province's most productive workers, he warned.

"Any party that would have been elected would have had to make tough decisions," Poitevin said. "I guess for the PQ, maybe it's going to be harder internally because of all the promises that they made."