December 14, 2010 by Joseph Krohn
The lowly penny may be doomed, as the Senate finance committee gets set to recommend that Canada eliminate the coin.
Sources say the committee has concluded that a century of inflation has eroded the value and usefulness of the one-cent piece.
The Bank of Canada says the copper-plated coin has lost 95 per cent of its purchasing power since 1908, when it was first produced in Canada.
It now costs more to produce the penny — about 1.5 cents each — than the coin’s actual face value.
The Royal Canadian Mint has been forced to sharply increase penny production in recent years as more and more Canadians hoard, rather than spend, the copper.
Finance Minister Jim Flaherty has mused in the past about doing away with the penny and his department has reportedly been studying the penny-free economies in Australia and New Zealand.
The Bank of Canada has also studied the potential inflationary impact of eliminating the penny and has concluded it would be negligible.
“On some transactions, the merchant loses and the consumer wins; on some, the merchant wins and the consumer loses,” Pierre Duguay, the bank’s deputy governor, told the Senate finance committee last spring.
“However, on balance it evens out.”