Quebec Separation Unlikely: Pension Managers
Canadian pension fund managers more optimistic that Quebec will remain in Canada
Release Date: 8 October 1997
VANCOUVER, BC>>> Canadian money managers responsible for over $140 billion in total assets were asked whether the province of Quebec will separate in the next five years; forty-six percent of the respondents said it was either likely or somewhat likely, down significantly from 69 percent this summer, according to the Fraser Institute's Survey of Senior Investment Managers (Fall '97 ).
This change reinforces the latest Fraser Institute Canada Clock setting (1 December) which also showed movement away from the brink of separation (now 11 minutes to midnight from 11:54pm). "The latest survey results show a dramatic improvement in the fund managers' view of Canadian unity," said Fazil Mihlar, survey coordinator and senior policy analyst at the Fraser Institute. "At no time in the last two years [of this survey] have the managers been anything but pessimistic about the chances of Canada staying together. This is a clear signal to the federal government that an aggressive stance on unity is an effective policy strategy."
National Priorities: Debt Reduction, Tax Reform and National Unity
When asked what was the most important issue facing the federal government, debt reduction (33%), tax reform (26%) and national unity (26%) received top billing among the respondents. The federal government, however, has repeatedly stated that it intends to spend 50 percent of the "fiscal dividend" on spending programs and the rest apportioned between debt reduction and selective tax cuts.
Bank of Canada receives good marks
The Bank of Canada received a unanimous thumbs-up for its conduct of monetary policy. Seventy-two percent of the respondents stated that the bank was doing an excellent or very good job in its conduct of monetary policy, while 28 percent rated the bank's performance as good. (These results were compiled before the last Bank of Canada rate hike on November 25, 1997.)
Meanwhile, the Canadian dollar has moved to the lower end of the survey respondent forecasts for year end. The lowest forecast in this survey is for the Canadian dollar to end the year at US70 cents. The consensus forecast is for the Canadian dollar to finish the year at 73 cents.
Despite recent market volatility, the Bank of Canada has managed to keep short term interest rates well within the range of expectations. The consensus forecast is for 3-month T-bill rates to finish the year at 3.5 percent. The highest forecast for short term rates in this survey is 5 percent.
Low long term Canadian interest rates could counter the possible negative implications of a lower dollar. The consensus forecast for year-end 30-year Canadian bond yield is 6.67 percent. "Since current long term interest rates are much lower, the Bank of Canada should continue to receive recognition for achievements on this front," noted Mr. Mihlar.
Mixed views on Bank's policy mission
Thirty-five percent of the survey participants believe that the Bank of Canada's primary policy mission should be to maintain price stability. Thirty percent indicated that the bank should attempt to achieve price stability, promote economic growth, and also maintain exchange rate stability.
Unanimous support for Bank's inflation targets
The federal government and the Bank of Canada have set a goal of maintaining the annual inflation rate within a target range of 1 percent and 3 percent, with a mid-point target of 2 percent. Ninety-eight percent of respondents support the concept of inflation targets.
When asked what the inflation targets should be, the consensus opinion among the survey participants supported the targets as currently set.
Neither inflation nor deflation poses a threat to the Canadian economy
Sixty-seven percent of respondents believe that neither inflation nor deflation poses a significant threat to the Canadian economy over the next five years. The consensus opinion is that inflation will be 2.5 percent in 2 years and 3 percent in five years from now. When asked what the expected rate of inflation will be one year from now, the median response was 2 percent.
Majority support constitutional independence for the Bank of Canada
Sixty-seven percent of respondents said that the Bank of Canada should have authority under the Canadian constitution to independently set monetary policy. Twenty-eight percent, however, were opposed to the idea.
High approval rating for the Minister of Finance
Pension fund managers continue to have confidence in Finance Minister Paul Martin. In fact, all of the respondents rated his performance as excellent, very good or good.
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
For further information contact:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
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