Deputy Prime Minister and Finance Minister Chrystia Freeland on Thursday defended the Bank of Canada against political attacks and restated government spending plans to help Canadians cope with the highest levels of inflation since 1991.
In a keynote address to the Empire Club of Canada in Toronto, Freeland detailed financial commitments to “help make life more affordable for millions of Canadians” — but the measures were all previously announced.
Freeland highlighted the federal government’s “Affordability Plan,” which she referred to as a suite of measures totalling $8.9 billion in new support for Canadians in 2022.
Among these measures is up to an additional $2,400 coming this year to low-income families via the Canada Workers’ Benefit and a 10 per cent boost to Old Age Security for seniors older than 75. Nearly one million Canadian renters are also set to receive $500 payments this year.
Boosts to programs such as the Canada Child Benefit and the GST credit could see the typical Ontario family with a kid in daycare and $45,000 annual income receive an extra $7,600 this fiscal year, she said, adding that cuts to child-care fees could see a Toronto family save up to $6,000 per child.
The measures were all included the past two federal budgets and are now taking effect. Freeland did not rule out additional spending to support Canadians in the future.
“Jobs are plentiful and business is booming, but it is also harder for a lot of Canadians to pay their bills at the end of the month,” Freeland said in her speech.
Last month, Statistics Canada reported the inflation rate for April rose 6.8 per cent compared with a year ago. That’s the highest since January 1991. The federal agency is expected to release May’s inflation report next week.
Freeland called recent skyrocketing inflation a “global phenomenon” that is being driven by lasting impacts of the COVID-19 pandemic, ongoing lockdowns in China and Russia’s invasion of Ukraine.
Opposition parties have criticized the Liberals for not acting on the surging cost of living, with the NDP grilling the government earlier this week on a lack of financial supports for Canadian families.
Tu Nguyen, economist with RSM Canada, told Global News on Thursday after Freeland’s speech that measures that are directed towards low-income Canadians can, if done right, have the effect of supporting the hardest-hit individuals without inadvertently fueling inflation.
“If they worked as intended, they wouldn’t be creating excess demand the way that they did back in 2020 when the government just inserted a lot of money into the economy. … That led to the high inflation we’re seeing today,” she said.
“How that plays out in reality remains to be seen.”
Attacks on Bank of Canada 'highly irresponsible': Freeland
The Bank of Canada has meanwhile hiked its benchmark interest rate by 50 basis points in back-to-back decisions in an effort to tamp down inflation and take some steam out of the economy.
The U.S. Federal Reserve took an outsized 75-basis-point step on interest rates Wednesday, with some economists expecting Canada’s central bank will follow suit in July.
Freeland reaffirmed her confidence in the Bank of Canada’s inflation-fighting mandate on Thursday.
“It has the tools and the expertise it needs to prevent inflation from becoming entrenched,” she said.
Freeland also defended the central bank from political potshots, calling attacks on the Bank of Canada “highly irresponsible” and “economically illiterate.”
The Bank of Canada and its role in balancing inflation and economic growth has been the subject of recent criticisms from Conservative Party leadership contender Pierre Poilievre, who said he would look to remove governor Tiff Macklem from his post if he were prime minister.
Freeland noted that the forecast for the global economy has “significant uncertainty” amid high inflation, the war in Ukraine and supply chain kinks. But she said she believes the Canadian economy, with its own agricultural output, a low unemployment rate and strong immigration demand, is well suited compared to some if its G7 allies to weather the storm.
“A soft landing is not guaranteed,” she said, referring to a gradual cooling of the economy that skirts a recession.
“There is absolutely no country in the entire world better placed than Canada to achieve that soft landing,” she added.
Nguyen said that the Liberal government will indeed have to risk dampening economic growth if its goal is to make the cost of living more affordable for Canadians.
“I think one thing that we have to accept is, in order to bring inflation back down … consumer demand should be lower. And we do need the economy to be cooler. So we need an economic slowdown,” she said.
Critics, labour leaders call for direct intervention on inflation
Conservative finance critic Dan Albas said after Freeland’s speech Thursday that she failed to present any new ideas to help Canadians with rising costs.
“Rather than coming forward with a plan to fight inflation, one that would, for example, give Canadians a break at the pumps, one that would help them be able to afford groceries, one that would be able to help them pay for their mortgage as it goes up, instead, today, Canadians got a lecture from a podium,” he said.
Ahead of Freeland’s speech, Canada’s unions called on the finance minister to announce new measures “to make sure millions of vulnerable workers and their families aren’t left behind by the worsening inflation crisis.”
“It’s the responsibility of governments to intervene and make sure families are not being left to bear this burden alone,” Bea Bruske, president of the Canadian Labour Congress, said in a news release Thursday morning.
“Beyond measures already announced in Budget 2022, additional direct and targeted help to families through an immediate increase in the GST credit would help vulnerable families who need it the most.”
— with files from Global News’s Abigail Bimman, The Canadian Press