Jim Flaherty remembers when pennies were enough to keep him stocked in bubble gum for the baseball diamond, but after four years of chewing on the future of Canada’s smallest denomination, the Finance Minister says the penny’s days are numbered.
It’s an issue of when, not if, Canadians will have to round to the nearest nickel, he said. A new study launched this week by the Senate finance committee is focused on that very question, and Mr. Flaherty said he’ll be watching closely to see what the senators recommend.
“I think it’s inevitable that eventually the smaller coin, the penny, will be eliminated,” Mr. Flaherty said on Thursday, when asked about the penny during a conference call with Canadian media from Peru, where he was attending a meeting of finance ministers from the Americas and the Caribbean.
“I’m old enough to remember penny bubble gum, which I chewed way too much of as a kid playing Little League baseball. It’s probably not good for your teeth. I remember pennies being useful things,” he said.
Mr. Flaherty said the concern is that it now costs the Royal Canadian Mint more than a penny to make a penny, and because of penny “hoarding” by Canadians, the mint has to keep making more.
“We’ve looked at this a lot over the course of the last more than four years now… Countries like New Zealand have gone much farther and eliminated larger coin denominations as well. I think the Senate study will be helpful,” he said. “At some point, this will have to end.”
In its opening meeting on the topic Wednesday, senators on the national finance committee heard from senior officials from Finance, the Bank of Canada and the Royal Canadian Mint. They learned that New Zealand dropped its one- and two-cent coins in 1989 and five-cent coin in 2006. Australia began phasing out its one- and two-cent coins in 1992 and is looking at ending the five-cent coin. From their questions, senators were clearly wondering how the elimination of the penny would affect prices for consumers.
“Reviewing the experiences of these countries, among others, would be a valuable exercise for this committee,” said Wayne Foster, a policy director in Mr. Flaherty’s department.
The senators also learned from Beverley Lepine, the mint’s chief operating officer, that it costs a penny and a half to produce one. “So we are into a negative situation on every penny,” she said.