Fiscal Cliff Poll: Possible Impact On Canada Has Majority Worried

Posted: Updated:
Print Article
FISCAL CLIFF POLL CANADA
Nearly two-thirds of Canadians are concerned our economy will be hurt if a deal is not reached by U.S. politicians to avoid the fiscal cliff, a poll commissioned by Sun Life Financial suggests. | Shutterstock

A plunge by Washington over the so-called fiscal cliff would hit Canadian miners and energy companies particularly hard since a slowdown in the U.S. economy would also drag down prices for base metals and oil.

Paul Taylor, chief investment officer for fundamental equities at BMO Asset Management, said Wednesday it will be the cyclical sectors that will be most affect if U.S. lawmakers fail to reach a deal to avoid the automatic tax hikes and spending cuts set to kick in next year.

"We are very much dependent on energy and materials which represent, of course, nearly 50 per cent of the Canadian equity market by market cap," Taylor said.

"And with slower U.S. — and read from that slower global economic activity — you would have to expect that the price of base metals and energy on which we depend so heavily would be affected negatively and they would certainly lose a bit."

The assessment of the risks by the Bank of Montreal came as a poll suggested 63 per cent of Canadians are concerned our economy will be hurt if a deal is not reached.

And Sadiq Adatia, chief investment officer of Sun Life Global Investments, said the fiscal cliff isn't all Canadians are worried about.

"Along with high debt levels and a slowing real estate market in Canada, the fiscal cliff situation in the U.S. is giving Canadians another reason to worry about the Canadian economy," Adatia said.

The question was asked as part of Sun Life Financial's annual check-up survey, which also found that more than half of Canadians feel they are not better off financially compared with a year ago.

Taylor noted that the economy is now just creeping along and a recession in the U.S. could be enough to take Canada down too.

The economy limped along at 0.6 per cent annualized growth in the third quarter, below the expectations of many including the Bank of Canada.

Statistics Canada also revised the results for the second quarter down one notch to 1.7 per cent.

"This could be the straw that breaks the camel's back and sends the Canadian economy into recession," Taylor said of the fiscal cliff.

"For that reason it is important from a Canadian economic perspective."

However Jack Ablin, chief investment officer for BMO Private Bank, said a failure to reach a deal by the deadline at the end of the year didn't necessarily mean going off any cliff.

"Certainly Dec. 31 detonates certain provisions to the tax code and spending cuts, (but) it isn't like we fall off right away. It is possible that we could continue to negotiate past Dec. 31 and the economy isn't necessarily destined to fall into recession," Ablin said.

He suggested deals could be reached in connection with changes to payroll taxes and unemployment benefits, while talks continued on a larger agreement.

"Even still, if they for example resolve the issue in the first couple weeks of January, my sense is we can continue forward with an economy that will still move in a positive direction," Ablin said.

The Sun Life poll was based on interviews with a sample of some 1,277 Canadians from the Ipsos Canadian online panel.

A survey with an unweighted probability sample of the same size would have an estimated margin of error of plus or minus 2.7 percentage points, 19 times out of 20.

The polling industry's professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.

Related on HuffPost:

What Could Fall Off The Fiscal Cliff
of
Share
Tweet
Advertisement
Share this
close
Current Slide

Suggest a correction

Around the Web

Obama, Boehner try to talk their way down from fiscal cliff - CNN.com

The "fiscal cliff" isn't a cliff at all - CBS News

Talks to avert 'fiscal cliff' show no progress

Fiscal Cliff Poll: What Do Americans Want In A Deal?

Federal worker Q&A guide to the fiscal cliff: Ten answers on jobs, cuts and more

Fiscal Cliff: Why Not Cut Entitlements?

A New Route Around the Fiscal Cliff

Senators: Girl power would get 'fiscal cliff' deal

Political Insight and Analysis From The Wall Street Journal's Capital Bureau

Dimon: Solve fiscal cliff, U.S. economy will soar

Farm Bill Becomes Fodder In 'Fiscal Cliff' Wrangling

Peering Over the 'Fiscal Cliff' in Pictures