TORONTO — The federal government is prepared to take further action to address more severe economic volatility, but Finance Minister Chrystia Freeland wouldn’t say if a hard landing for Canada’s housing market would be the trigger for such moves.
Freeland told reporters Thursday that achieving a soft landing is going to be challenging, but Canada has a better shot at it than other countries.
“We understand we need to be agile, we need to be open to further action as the situation develops,” she said after addressing the Empire Club of Canada.
When asked if that includes reducing the gas tax to provide some relief at the pumps, Freeland said the government is “very much leaving the door open to further action.”
Freeland, who is also deputy prime minister, said the current volatile and uncertain economic time is largely driven by a challenging global environment.
“And so for that reason, I can’t make any promises to Canadians about how the next weeks and months are going to unfold. And I want to be honest about that,” she said after outlining the government’s plan to help the country’s most vulnerable deal with rising inflation.
“But I want to balance that candour with a really confident and true assertion and that is Canada is going into this turbulent global economic environment with real fundament economic strengths.”
Among them is a very well-regulated financial sector, including the mortgage market that has withstood previous economic challenges, she said.
Earlier, the minister detailed financial commitments to “help make life more affordable for millions of Canadians.”
In her speech, 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.
The measures, which include enhancing the Canada Workers Benefit and Old Age Security programs, helping struggling renters, cutting child care costs and giving dental care to poorer children, were all included in the past two federal budgets and are now taking effect.
Freeland called 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.
“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 but is lower than Britain, Germany and the United States. The federal agency is expected to release May’s inflation report next week, with economists warning it could broach 7 per cent.
The Conservative Party said Freeland’s speech “demonstrates a fundamental lack of understanding of the causes of inflation.”
“This flawed economic approach eats away at the earnings of hard-working Canadians and ignores the most basic principle of economics: that spending during an inflationary crisis will only fuel inflation further,” finance and industry critics Dan Albas and Gérard Deltell said in a joint statement Thursday afternoon.
The statement also said the Liberals “continue to blame global factors for inflation and refuse to provide the immediate relief to the cost-of-living crisis that Canadians need.”
“Rather, they re-announce policies that won’t take effect until the fall, as Canadians are left to suffer throughout the summer.”
Freeland insisted the government’s fiscal approach makes sense but agreed that it’s fair to talk about reducing fiscal stimulus. She said Canada is tied with the U.S. in conducting the fastest pace of fiscal consolidation in the G7.
“I think that’s the right place for us to be and I’d like Canadians to know that that’s a decision our government took in the budget.”
Although she didn’t mention him by name, Freeland appeared to take a shot at Conservative leadership contender Pierre Poilievre, who has threatened to fire Bank of Canada governor Tiff Macklem if elected prime minister.
“At this time of global economic and political volatility, undermining Canada’s fundamental institutions — very much including the Bank of Canada — is highly irresponsible, not to mention economically illiterate,” Freeland told the business audience.
The U.S. Federal Reserve hiked its key interest rate by three-quarters of a percentage point on Wednesday — its largest hike since 1994, leading economists to predict the Bank of Canada will follow suit next month.
Canada’s central bank has increased its key rate by half a percentage point twice in recent months, bringing it to 1.5 per cent in June and governor Tiff Macklem has hinted he is prepared to act “more forcefully” if high inflation persists.
This report by The Canadian Press was first published June 16, 2022.
