Friday October 28, 2022
Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Friday October 28, 2022
Freeland warns of ‘difficult days ahead’ as Canada’s economy shows sign of weakness
Finance Minister Chrystia Freeland issued a warning to Canadians Wednesday — the coming months won’t be pretty as rising interest rates slow a once red-hot economy and force some people out of their jobs.
The Bank of Canada’s recent rate hikes to tame sky-high inflation will increase borrowing costs for businesses and consumers alike, which will send shockwaves throughout the economy, Freeland said.
Speaking at an auto industry conference in Windsor, Ont., Freeland said she would be honest with Canadians about the roadblocks that lie ahead and the threat of higher unemployment and mortgage rates — developments that could hurt many households.
“Our economy will slow. There will be people whose mortgage rates will rise. Businesses will no longer be booming. Our unemployment rate will no longer be at its record low. That’s going to be the case in Canada. That will be the case in the U.S. and that will be the case in economies big and small around the world,” Freeland said.
“There are still some difficult days ahead for Canada’s economy. To say otherwise would be misleading.”
The Bank of Canada — like other central banks, including the U.S. Federal Reserve — has been aggressively raising rates this year to establish price stability and achieve its 2 per cent inflation target.
With inflation so sticky, economists are expecting more rate hikes to reduce demand and cool the economy. That could prompt a recession sometime in 2023.
While inflation has slowed somewhat in recent months as energy prices have stabilized, Freeland said the government will not be able to help everyone ride the inflationary wave.
“We cannot compensate every single Canadian for all of the costs of inflation driven by a global pandemic and Putin’s invasion of Ukraine,” Freeland said.
But she promised relief for the poorest Canadians who are most vulnerable to sudden spikes in the cost of food and rent.
During question period in the House of Commons on Wednesday, Conservative Party leader Pierre Poilievre said the federal Liberal government’s “half-trillion dollar inflationary deficits” over the past two fiscal years are responsible for the higher costs.
Pointing to the planned low-income supports, Poilievre said the prime minister has done “nothing for the vast majority of struggling families.”
“Even the small minority who do [receive the supports] will find it gobbled up by increased inflation,” he said, citing a recent RBC Royal Bank report that found the average family will lose $3,000 in purchasing power this year as a result of higher prices and interest rates.
He called on the government to scrap planned hikes to the federal carbon levy — something Poilievre has called a “triple, triple, triple tax” that will drive food prices higher because it will impose added costs on all parts of the supply chain.
In the face of Tory criticism, Freeland said the federal government will continue to tighten its belt in the coming months so that Ottawa doesn’t inadvertently drive inflation.
“Canadians are cutting back on costs and so too is our government. That’s our part … to not make inflation worse and more enduring,” she said.
Asked later by reporters if the government has more inflation relief planned, Freeland said now is a time for fiscal restraint. (CBC)