Heather Scoffield: Chrystia Freeland to unveil $7-billion plan to fight inflation
Finance Minister Chrystia Freeland is finally gearing up to address our inflation predicament head-on, and not a moment too soon.
On Thursday on Bay Street, Freeland will deliver what's being flagged as a significant" speech on inflation, affordability and the government's plan to guide the economy through the current turbulence to a smooth landing.
The Star has learned that she'll have a $7-billion (or so) list in hand that spells out exactly how federal programs are ramping up to help those who are particularly exposed to the harms of inflation.
Old Age Security, the Canada Child Benefit, the Canada Workers Benefit, the Canada Housing Benefit - they've all been enriched, and they're coming our way soon.
The finance minister will stress that the cost is in the fiscal framework already, but her point will be that the government's existing programs will soon be able to make most low-income Canadians whole - despite rising costs.
She'll also strive to calm rattled nerves by stressing how well we have rebounded since the dark days of the pandemic, and she'll have lots of empathy for those of us feeling uncertain.
What she won't have is anything new to deal with a wildly churning economy - and that's a shame.
We are in a messy situation right now with inflation. Despite hopes it would pass, it has not abated. It may not even have peaked. Oil, food and gas remain outrageously expensive, and they're not showing any signs of getting any cheaper. Instead, the high price of those basics is spreading to everything else.
At the same time, higher interest rates are beginning to inflict pain, especially in the housing sector that is so central to the strength of Canada's economy.
Financial markets are tanking, eroding wealth and confidence.
The confluence of rising rates, persistent inflation, an unpredictable pandemic and bear markets is uncharted territory.
The developments all suggest there is an increasingly narrow path to navigating a soft landing. So if a hard landing is in store, it would be good to know how the federal government plans to deal with that - and Freeland's speech on the state of the economy scheduled for Thursday would be the opportunity.
No doubt Freeland will want to emphasize that inflation is not her fault.
Before Russia invaded Ukraine in February, rising prices were already a problem. The world was stumbling along in the pandemic, supply chains were disrupted and companies couldn't move fast enough to produce what customers wanted or ship them to the right places in due haste.
China, the source of so many inputs, is on an on-again-off-again zero-COVID roller coaster that sends waves of nausea through suppliers around the world.
And Russia's invasion of Ukraine is indeed the most egregious source of inflation of all, cutting the world off from grain and food while driving up prices for oil and gas. The tentacles of the invasion are many, and they're insidious. Freeland is passionate on that subject, and (laudably) aggressive in her policy leadership against Russia.
But casting blame beyond our borders is not going to help Canadians deal with the inflation problem. Finding fault with Russia is one thing, but asking Canadians to wait out the conflict in the hopes of stable prices at the end of it all would be another thing altogether.
And so it's important to look within Canada's borders to constantly examine what domestic policies and practices are feeding the run-up in prices.
The Conservatives argue that reckless Liberal pandemic spending, high debt and high taxes are at fault, and therefore less spending, lower debt and lower taxes are the antidote. That line of argumentation ignores the scaling back of pandemic benefits, the steep decline in deficits and the gradual improvement in the debt-to-GDP ratio spelled out in the last budget.
But it does flirt with the fact that as a result of pandemic support and changing personal finance habits, Canadians now have about $200 billion in excess savings that could exacerbate our inflation problem.
The Bank of Canada, whose singular job it is to control inflation, is raising rates steeply to sop up this extra money.
But Freeland has a role here too.
The $200 billion in excess savings is not spread equally among the population, and it means some people may well be grumpy about inflation but they can afford to absorb it, while others without savings really can't.
Monetary policy can't deal with that but fiscal policy can.
Real estate market softening aside, rents are also surging, wages are lagging behind inflation, and Freeland is well aware that the day-to-day high prices of essentials hurts low-income Canadians the most.
For one, Freeland can make sure the government's policies don't exacerbate inflation, resisting the temptation to increase spending in such a way that counteracts the central bank's attempts to dampen demand.
She can also take a close look at all the policy levers she has to increase the supply of goods, services and labour - from tax incentives to ramp up production to attacking bottlenecks in the domestic supply chain to enabling more immigrants to join the workforce right away.
But mainly, she has the power of the federal purse to ensure she can cushion the blow for those who are hurt the most by economic hard times. That was the federal government's priority during the pandemic recession, and even though times have changed, that's one thing that should remain consistent.
Heather Scoffield is the Star's Ottawa bureau chief and an economics columnist. Follow her on Twitter: @hscoffield