The Senate Finance Committee is discussing the future of the Canadian penny. The issue is whether to keep it or abandon it and round prices up to the nearest five cents.
Currency has long been a source of revenue for governments. It currently costs nine cents to produce a $20 bill. The difference between the cost of production the face value is revenue to the government, known as seigniorage. (It's a little more complicated than this. See link for details on the seigniorage from currency).
It currently costs about 1.5 cents to produce a penny. The seigniorage is negative. In the last 100 years, 33.9 billion pennies have been minted. (Source: Royal Canadian Mint) They didn't wear out, so where are they all? In your penny jar and mine will of course.
Getting rid of the penny will cause prices to rise. A $0.96 item will now be $1.00, a 4.16% increase. A $499.99 item becomes $500, an increase of 0.002%. This, however, is not inflation. One day will explain why.
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Marketing effects will tend to keep the cents figure in, but rounded down to .95. $0.95 looks a lot less than a whole big dollar! $9.99 will likely drop to $9.95 rather than increase to $10.
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