Prime Minister Justin Trudeau is under increasing pressure to take a more high-profile role in the fight against inflation as he heads into next week’s ministerial meeting in Vancouver where the federal government’s priorities for the future will be set.
For months, some critics have accused Trudeau of allowing Canada’s central bank, the Bank of Canada (BoC), to fight inflation almost alone.
That criticism will grow later this month with the likely election of Pierre Polivre as Conservative leader. Polivre used his leadership his campaign to scapegoat Trudeau in Canada’s historically high inflation, calling it “Justin Inflation.”
A catchy slogan, and a misunderstood slogan, indeed.
In fact, Trudeau is on the sidelines when it comes to inflation. His government has acted with admirable restraint in not following the example of leaders at home and abroad, whose populist policies to ease inflation have done more harm than good, putting further upward pressure on prices. .
More on that later.
If the Trudeau administration is responsible for inflation, which in fact has little control over the government, it can take credit for economic growth expected to outpace the G7 countries this year.
And Canada’s decades of low unemployment and record wage growth.
It also has an inflation rate of 7.6%, the third lowest in the G7, higher than Japan and France, and lower than the US (8.5%) and UK (10.1%).
The BoC, whose ill-advised fiscal measures have forced interest rates to rise without hurting its work, has had surprising early success in its goal of destroying inflation.
Of course, inflation has already fallen. By next year, it is expected to drop to 3%. The recent drop in gas and house prices are just the most visible signs of falling prices across the economy.
Consumers have become so cautious with their spending that retailers across North America are clearing unprocessed inventory. Inflation would be higher today if Ottawa hadn’t restrained spending like consumers. Ottawa’s program spending reached nearly 30 per GDP during the pandemic, but the government’s April budget forecasts it to be around 16% this year.
National income growth has outpaced the budget’s projections, potentially up to $15 billion in windfall for Ottawa. This is money that can be used for inflation relief measures.
But as mentioned earlier, these measures will only exacerbate inflation, injecting more money into an economy already suffering from too many dollars chasing too few commodities. This is the classical definition of inflation.
Asked last month about the often gimmicky inflation-mitigating initiatives in other jurisdictions that have prompted some critics to follow suit in Ottawa, Finance Minister Chrystia Freeland said: Canada has been held back there.”
Ottawa is so averse to economic stimulus that it could exacerbate inflation that it put its proposed nationwide drug program on hold indefinitely, against the wishes of its NDP coalition partners in Congress. I’m here.
And the dental care program introduced by the Liberals in the April budget is something of a hollow initiative, given its very limited eligibility.
That said, what can a more active prime minister do to fight inflation?
Prime Minister Trudeau may cut federal fuel taxes, inspired by Ontario Prime Minister Doug Ford’s moratorium on gas taxes.
But if the main driver of gas prices is declining car usage, it will simply encourage driving.
Inspired by the province of Saskatchewan’s promise of one-off “affordable checks” for local residents this fall, Prime Minister Trudeau said he would cut checks for Canadian households, as he did during the pandemic. was able to return to
But that would also fuel inflation by stimulating an already overheated economy. Canadians are hopeful that Ottawa will use its funds to erase the pandemic’s deficit legacy and not make it worse.
Trudeau could impose wage and price controls just as his father fought the dismal double-digit inflation of the 1970s. It only distorted my personal and business decisions about investing.
The Trudeau administration may cut spending further. For example, CPP/QPP payments can be excluded from the inflation rate. May cut federal civil servant employment and wages. It could suspend the $9 billion annual national childcare program.
These measures could ease inflationary pressures by removing some money from the economy.
What is more certain is that they will lengthen food bank lines and provoke strike action in public services. postpone the release of the parent for
It is appropriate to put pressure on the Trudeau government to be more proactive about Canada’s role in ending the climate crisis, indigenous reconciliation, and death and destruction in Ukraine.
But when it comes to inflation, Prime Minister Trudeau’s proper position is to be on the sidelines, rooting for the Bank of Canada.