Recently, both the Bank of Montreal and CIBC have warned that any increase in government spending would add to inflation, not help fix the problem. Avery Shenfeld, chief economist for CIBC World Markets, said that extra spending will heat things up rather than cool them down.
“In a period of high inflation and excess demand, cutting taxes or handing out cheques can add fuel to the inflationary fire, and make the job of a central bank that’s raising rates to cool demand all that more troublesome,”
Shenfeld wrote in a note to CIBC clients.
Into this walks Pierre Poilievre, the newly minted Conservative leader, who called out Trudeau for not offering any real help to those struggling while adding fuel to the fire with new payroll taxes coming in just a few months.
“The problem is the money will be vapourized by inflation,” Poilievre said when asked why he would oppose measures to help the lowest income earners.
“He says he’s going to give people $500 to help with the rent. Well, that works out to $40 a month in Toronto,
that will not buy you even one days rent for your $2,300-a-month average rental cost.”
For months, Justin Trudeau has been warned that his own government’s spending is part of the problem with inflation. His response to the worsening situation Tuesday was more government spending. Trudeau announced three temporary measures on Tuesday to help ease the cost-of-living pressures many...
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Poilievre has been warning the Trudeau government about the dangers of high inflation for more than a year; they’ve ignored the issue.
Now, Trudeau will spend $4.5 billion, which is more likely to make the problem worse rather than improve the lives of Canadians.
If you are on the low end of the income scale, you might be saying thank you and Hallelujah, but here is why this won’t be a long-term fix for these Canadians.
The help will last only a matter of months, while inflation won’t. These solutions don’t help stop the increases in inflation, they just make it easier to cope – for some. When the supports end in six months, these measures will have added to inflation but not brought down prices.
They also don’t impact most families.
Trudeau claims his measures won’t add to inflation, but economists at Canada’s biggest banks, which Trudeau praised Tuesday, would beg to differ. In June,
Scotiabank warned that government spending was already a contributing factor to inflation.
“Lower government spending on goods and services could help lower inflation,” the report from Scotiabank stated.
Without lower government spending, they warned, the pressure would be on the Bank of Canada to hike interest rates, hurting small businesses
and anyone with a mortgage.
Trudeau is promising to double GST rebate payments for the next six months, a one-time $500 rent subsidy for low-income Canadians, and a sliding scale dental care rebate that will top out pretty quickly and evade the average family.
To get a significant GST rebate, you will need to be a single parent earning $30,000 or less or a couple with kids earning less than $35,000 combined. This is the “Middle Class” that Trudeau is targeting
For the rental rebate, you will need to be a low-income Canadian paying more than 30% of your income on rent, have filed your taxes and fill out the right form.
As for dental benefits, those top out at $260 for a child once your combined family income is between $80,000-$90,000. For months, Justin Trudeau has been warned that his own government’s spending is part of the problem with inflation. His response to the worsening situation Tuesday was more government spending.