Statistics Canada's latest data is clear is. We are suffering from a surge in inflation, the highest in 39 years, reaching7.7%in May. Faced with this serious situation that puts a heavy burden on all Canadians, steps must be taken to reduce inflation. First, we will raise the policy interest rate of the Bank of Canada with the next announcement scheduled for July.
The 0.9 percentage point increase in inflation from April to May this year was primarily due to soaring fuel prices, but the federal government wasted a lot of it. Has played an important role in bringing about the current situation.
Abolition of spending Inferno
The current federal government not only supports the population during times of crisis, but also gives astronomical amounts to new things (and the problem here). The program I've spent. These further expanded Canada's net federal debt, surpassing$ 1.26 trillionbetween 2021 and 22.
The effect of these new programs was to stimulate total demand, largely driven by the Bank of Canada's very loose monetary policy, along with the overgrowth of government institutions. This created an imbalance between the supply and demand for goods and services in the Canadian economy, leading to general price increases.
Therefore, as the government did, claiming that these spending is good for the people is decoupled from reality. Indeed, this spendingand maliciousacted like a true fire and had a serious impact on the Canadian economy. In addition, the lack of time to return to a balanced budget shows how important the sound management of public finance by current policy makers is.
The Bank of Canada is trying to extinguish hell by playing a good firefighter, at least now, after burning the flames and not sounding the alarm. Of course, this has some negative effects on the Canadian family, as water not only extinguishes the fire, but also damages the wood.
Rising interest rates have a non-negligible impact on people with mortgages, especially those who have bought real estate in the overheated housing market over the last two years. Higher rates also affect companies that are borrowing money to fund their business. The priority is certainly to put out the fire, but the negative side effects of doing so can be mitigated by certain wise policy measures.
Suspend gas tax
Current prices of fuel are particularly high, with a direct impact on Canadian wallets, especially retirees and underprivileged people. I am. Some rest will suspend the federal fuel tax. Following U.S. President Joe Byden, who has decided to suspend the federal gasoline tax of 18 cents per gallon forthree months, the Canadian government may suspendof 10 cents per liter. I can do it. Federal Gas Tax
Canada's Minister of Natural Resources Jonathan Wilkinson, however, could come to help Canadians by eliminating this taxRemoved immediately. Meanwhile, as Alberta succeeded, the state government needs to suspend its own special fuel tax.
It is not unreasonable to expect that the government, which has long caused this situation with excessive spending, should set up a financial home for the people who have been hit hard by inflation and rising interest rates. .. While adopting targeted measures such as fuel tax suspension to give the Canadian family a little relief. It's time to act, but some haven't received the notes.
Gabriel Giguère is a public policy analyst at the Montreal Economic Institute (MEI) and Olivier Rancourt is an economist at MEI.
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