More competition in sectors including grocery, telecom and energy could help to limit the rise of inflation in the long-term, a Senate of Canada committee found after months of expert testimony.
The Standing Senate Committee on Banking, Commerce and the Economy met regularly between September and December of last year to take experts’ temperature on the state of Canada’s economy.
Witnesses included current Bank of Canada governor Tiff Macklem as well as former governor Mark Carney, the parliamentary budget officer and other fiscal experts and a slew of high-profile Canadian economists.
Despite the range of opinion among the crowd, the Senate report said there was a broad consensus among most participants on a few items.
Firstly, Canada’s economy is set to slow in the months to come as the effects of higher interest rates take their toll and work to stifle too-high inflation.
While witnesses were in agreement that the rise in rates is “justified” and that high inflation was now being driven by more domestic factors, there was no consensus on the duration of the looming downturn.
The report also took a critical eye on Canada’s sectors with high levels of concentration, including groceries, banking, energy and telecommunications.
The Senate heard from Jim Stanford, director of the Centre for the Future of Work, that these sectors have seen a rise in profits over the inflationary period. He argued that this suggests the companies were “exerting their market power to take advantage of supply chain disruptions and strong consumer spending,” per the report.
Stanford advocated for excess profits tax in these sectors, with revenue here being fed to support for lower-income Canadians.
Experts told the Senate that while promoting competition isn’t necessarily a short-term fix for inflation, in the long term, it can help to limit price pressures and could help to boost productivity.
“The experts agree: creating a more competitive environment for Canadian enterprises would be a hedge against future inflation and drive costs down for consumers,” said Sen. Colin Deacon, the committee’s deputy chair, in a statement.
Stemming from the committee, the Senate report recommends additional transparency from the Bank of Canada in its inflation interventions and constraining government spending, limiting investments to targeted spending.
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