Economy and affordability on the table as Liberal cabinet meets in Vancouver

·4 min read

VANCOUVER — Federal cabinet ministers are mulling over how to help Canadians shoulder the weight of inflation but Finance Minister Chrystia Freeland is warning that any help from the government will target the most vulnerable and must be fiscally responsible.

The Liberal cabinet is in the midst of a three-day retreat in Vancouver this week as ministers prepare for the fall sitting of the House of Commons. Underlying every discussion right now is the difficulty Canadians are having paying their bills.

Freeland said she spent the summer travelling to meet with Canadians for the first time since COVID-19 hit, and the feedback she heard is that while people are confident in the long-term picture, the current cost-of-living turmoil is a real challenge.

"It was really important for me to get that kind of direct fingertip feel of what is happening in the Canadian economy and what Canadians are feeling," she said before heading into the second day of the retreat Wednesday.

Wednesday's sessions included a briefing from economists about the cost-of-living conundrum, just hours after the Bank of Canada raised its key interest rate for the fifth time in seven months in its continued effort to get inflation under control.

Inflation is starting to ease — the rate fell to 7.6 per cent in July after hitting a 39-year high of 8.1 per cent in June — largely because the price of fuel began to drop. But that did little to ease the cost of basic needs like groceries, which was almost 10 per cent more than a year ago. Gas prices are still on average 12 per cent higher than they were in September 2021.

In much of Ontario, natural gas rates went up 20 per cent or more in July.

A report this week by Equifax Canada said Canadians are starting to rack up debt to stay on top of their bills, with a 6.4 per cent increase in credit card balances between the first and second quarters of this year.

Internationally many governments have moved to ease the pain of inflation. Germany this week produced its third aid package of the year, worth another C$72 billion, including direct payments to seniors and students to help with soaring energy bills and a reduced rate for some electricity used by most households.

In August France passed a $26-billion aid package that increased pension and welfare payments and hiked the gasoline rebate implemented in the spring from about 24 cents to almost 40 cents.

In Canada, the Liberals have been reluctant to introduce similar measures, fearing that flooding the economy with money could drive up demand at a time when supply chain issues are a key driver of inflation.

Freeland's $8.9 billion "affordability plan" published in June mainly included measures promised long before inflation began its sharp climb, and which Freeland has said were already included in Canada's budget plan.

That includes child care agreements with provinces that will slash daycare bills for many families starting this year, increases to the Canada Workers Benefit and old age security pension promised in the 2021 budget, and annual increases to GST rebates and the Canada Child Benefit.

On Wednesday Freeland opened the door to doing more, saying she knows "the most vulnerable in our society need to be supported" but warning that any aid plan will be balanced with maintaining fiscal controls.

"I think that's going to be a very important subject of our discussions today and tomorrow," she said.

NDP Leader Jagmeet Singh, whose own caucus is having a pre-session retreat in Halifax this week, said Canada needs to follow the example set by other countries in doing more to bring the cost of living down.

"People are having an incredibly difficult time putting food on the table, paying their bills," he said.

Singh said the government needs to impose taxes on corporations that are taking advantage of rising prices, and use that money to help struggling families.

That has been the approach in several places, including Germany, Spain and the United Kingdom, which imposed temporary "windfall taxes" on some companies to pay for affordability aid packages.

For months, Singh has been asking the federal government to double the GST rebate and provide a one-time increase to the Canada Child Benefit.

The Liberals are expected to introduce the first step in a national dental care program soon, which was promised as part of the Liberal-NDP supply and confidence agreement reached last winter.

A $500 aid payment for low-income renters is also expected this fall.

Keeping the NDP happy is only one political problem for the Liberals this fall. As of Saturday, they'll also be facing another new Conservative leader.

Ottawa-area MP Pierre Poilievre is widely expected to win that contest, and he has spent much of his campaign arguing the Liberals are directly to blame for inflation.

This report by The Canadian Press was first published Sept. 7, 2022.

Mia Rabson, The Canadian Press