Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday June 17, 2022
Chrystia Freeland can do more to fight inflation
Canada’s annual inflation rate currently stands at 6.8 per cent — the highest since January 1991. This means the loonies in your pocket are losing nearly seven per cent of their purchasing power every 12 months.
With each passing day, it seems more like Canada has slipped out of the COVID-19 fire only to tumble into an inflationary frying pan. And with each passing day, millions of Canadians who were shepherded through the worst health crisis in a century by a responsive federal government are increasingly looking to the same government to spare them from economic disaster.
Those people received some, but only some, reassurance this is happening from federal Finance Minister Chrystia Freeland on Thursday. In a speech to Toronto’s Empire Club, the deputy prime minister revealed how the federal Liberals intend to collar, if not slay, the inflationary dragon. Considering this was Freeland’s first economic update since April’s budget and considering the costs of food, gasoline and a host of other consumer goods have only soared higher since then, her speech was both timely and necessary. But considering the almost total absence of new measures directly aimed at fighting inflation in her presentation, what Freeland said should represent her government’s starting point, not its finishing line. We’ve heard the words. We need more action.
Canada’s annual inflation rate currently stands at 6.8 per cent — the highest since January 1991. This means the loonies in your pocket are losing nearly seven per cent of their purchasing power every 12 months. It means a Canadian earning a median income of $55,700 a year potentially faces an annual inflationary loss of $3,787.60. Thankfully, for many low-income Canadians, some help is coming.
As Freeland explained, Ottawa has earmarked $8.9 billion to boost supports for people receiving Old Age Security, the Canada Child Benefit, the Canada Workers Benefit as well as the Canada Housing Benefit. That money will definitely make life more affordable for many people currently struggling to pay their bills and put food on the table. But it’s not indexed to match future increases in inflation. And virtually all of that money was committed in the last two federal budgets. It’s not new ammunition aimed at inflation.
On that front, Freeland offered precious little. The big guns in this fight are being fired by the Bank of Canada. The interest hikes it has introduced so far this year as well as the ones on the way will rein some of the demand driving inflation by making borrowing more expensive. It is a crude, blunt weapon. But it works, as evidenced by the recent cooling of the country’s overheated housing market. Freeland has vowed to respect the Bank of Canada’s efforts and not interfere with it with her government’s fiscal policy.
On that count, she’s correct. At its heart, inflation is a problem of too much money chasing too few goods. The Liberals can’t spend Canada out of inflation. Pumping new money into the economy, putting more money into everyone’s wallets today will drive the inflation rate higher tomorrow — to the point it is eventually uncontrollable and living standards plummet. That’s why the government is right to reject the demands of some federal Conservatives to cut the Goods and Service Tax or carbon tax.
To be fair to Freeland, inflation is for the most part a widespread, complex global problem — not one unique to Canada. For more than two years, the pandemic has repeatedly snarled supply chains and made it harder for consumers and businesses everywhere to buy what they needed. Russia’s illegal invasion of Ukraine further exacerbated the situation by disrupting shipments of oil, natural gas and, most frighteningly of all, food. Freeland can try to shield Canada in some ways from these storms; she can’t stop them.
But rehashing old budgetary commitments or trying to take credit for previously announced plans to train more workers aren’t the specific answers we need for the inflation conundrum. The government should use its considerable leverage to clear some of those supply chain hurdles. One suggestion we haven’t heard but deserves consideration would be to reduce the interprovincial trade barriers that continue to be a drag on our economy. If successful, such an initiative could offer relief to consumers and businesses without driving up the inflation rate. In addition, the Liberals should continue to hold the line on new spending and, if it is deemed necessary, confine it to a targeted segment of the population — those most vulnerable and in greatest need. (Hamilton Spectator Editorial)