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Inflation in Canada soared 40 years ago. Is today’s price surge any different? – Global News

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Inflation in Canada continues to surge despite the Bank of Canada’s efforts to tamp down on price growth, with some economists and the central bank’s own governor expecting an even higher reading in the June report due Wednesday.

Inflation, which hit an annual rate of 7.7 per cent in May, has topped the Bank of Canada’s estimates through the first half of 2022.

Tiff Macklem, who holds the top post at the central bank, told a group of business owners last week that inflation will likely top 8.0 per cent in due course. The Bank of Montreal (BMO) said in its updated inflation forecast earlier this week that it now expects inflation will average 8.3 per cent across the third quarter of the year.


Click to play video: 'What the latest interest rate hike means for your family’s bottom line'



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What the latest interest rate hike means for your family’s bottom line


What the latest interest rate hike means for your family’s bottom line

The higher the temperature rises on Canada’s inflation thermometer, the more Canadians of a certain age flash back to the 1970s and 80s, when annual inflation hit 12.5 per cent in 1981.

Back then, the Bank of Canada was forced to raise its benchmark interest rate to 21 per cent to get prices back under control, triggering the deepest economic contraction since the Great Depression.

Experts tell Global News there are some striking similarities between today’s inflation episode and the price pressures of 40 years ago — as well as a few key differentiators that could mean the difference between hitting a recession or achieving the “soft landing” the central bank is after.

Striking similarities

James Orlando, senior economist with TD Bank, first started tracking the similarities between today’s inflation period and the highs of the previous generation back in April.

Then, he noted that the causes of inflation today — surging food, fuel and shelter prices — were the same ones driving Canadian prices higher over two distinct periods, one in the early 1970s and one later in the decade, stretching into the 1980s.

“Current inflation is very much just like what happened back then,” he tells Global News.


Inflation surged in the 1970s and 80s, with many economists drawing similarities to today’s price pressures.


Global News


The annual rate of inflation has steadily been rising throughout 2022.


Global News

For instance, many economists point to Russia’s invasion of Ukraine and the spillover effects on oil and food supplies as a primary source of global inflation today.

In the 70s, the Yom Kippur war, followed a few years later by the Iranian Revolution and the Iran-Iraq War, also put immense pressure on the prices of oil.

Meat prices, meanwhile, skyrocketed 70 per cent in 1978, according to Orlando’s analysis, leading to higher costs in the deli aisle that would feel familiar to many Canadian households looking at their grocery bills today.


Click to play video: 'Inflation: Why the price of groceries are expected to rise'



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Inflation: Why the price of groceries are expected to rise


Inflation: Why the price of groceries are expected to rise

Orlando wrote back in April that while today’s price hikes might not be at the same magnitude as the 70s and 80s, it might feel just as significant. When inflation hits the staples we buy regularly in the grocery store, it elicits a more intense, emotional reaction from consumers, he explained.

But while prices were high, Canadians also were spending heavily through much of the 70s thanks to rapidly rising wages and low interest rates.

Ian Lee, associate professor in the Sprott School of Business, remembers working through that inflationary period at BMO, handling mortgages for the bank in 1980.

He says in the 70s, it made sense to borrow rather than invest and buy later, because interest rates were low and tomorrow’s prices were expected to outpace any returns on savings and investments.

Read more:

Bank of Canada interest rate hike is a ‘hammer to housing’ market: BMO economist

“Saving didn’t make any sense at all. So it created a real spend, spend, spend, borrow, borrow, borrow culture,” he tells Global News.

Lee said that many Canadians — himself included — put their money into homes. A run-up on housing prices as Canadians rushed into the market only fuelled inflation further.

Shelter has been a primary driver for today’s inflation episode as well, with rents now surging at the same time as rising interest rates make mortgages more expensive to carry.

Key differences

Lee says one of the most important differences between today’s inflation and that of the 70s is the tightness of the labour market.

The 1970s and 80s saw stagflation materialize — slowing economic growth and high unemployment with prices surging nonetheless.

Today’s unemployment rate sits at a record low of 4.9 per cent, on the other hand.

Macklem has pointed to the strong labour force readings as proof that the economy can take higher rate hikes, even as some economists warn layoffs will follow suit if the bank is too aggressive.


Click to play video: 'Too much, too soon? Experts say rapid interest rates are pushing Canada closer to a recession'



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Too much, too soon? Experts say rapid interest rates are pushing Canada closer to a recession


Too much, too soon? Experts say rapid interest rates are pushing Canada closer to a recession – Jul 6, 2022

Indeed, when the Bank of Canada had to raise its policy rate above the 20-per-cent mark in the 80s, following the U.S. Federal Reserve into the “war on inflation,” the economic pain was intense: the unemployment rate rose to 12 per cent in 1983.

Lee says the only reason interest rates had to go so high back then was that the Bank of Canada didn’t recognize the inflation crisis before it was too late — prices crept up over the course of more than a decade, compared to the sudden jump in just a few month’s time that we’re seeing today.

Central banks around the world did not chiefly use their policy rates to tackle inflation by that point in history. Canada was among the first to adopt inflation targeting as a mandate in 1991.

Though Lee believes the Bank of Canada again waited too long to address bubbling inflation, today’s reaction is years ahead of the 1980s response.

“The longer you postpone taking the medicine, the worse the problem gets. And the tougher the medicine becomes,” he says.

Read more:

Recession fears won’t faze Bank of Canada, economists say. Why that may be a good thing

Lee projects interest rates will not have to rise as high as they did 40 years ago and the Bank of Canada has reacted in time to skirt double-digit inflation figures.

Orlando says that so far, the Bank of Canada has maintained belief among Canadians and businesses that it will get inflation back to target — a critical tool in its own right to keep expectations in line and stop high inflation from becoming entrenched.

“The belief is still there. And I think the inflation target is a big contributor to that.”

Are we close to peak inflation?

In its forecast this week, BMO projected that inflation would peak in the third quarter of 2022, dropping to an average of eight per cent in the fourth quarter and following a steady decline through 2023.

Tu Nguyen, an economist with RSM Canada, tells Global News that there are signs inflation could peak this summer, but what determines that is largely outside the Bank of Canada’s purview.

Oil prices have shown signs of decline over the past month from their peaks this past spring, and the aggressive action taken by central banks around the world should dampen consumer demand and give supply chains time to catch up.

Read more:

U.S. inflation unexpectedly hits 9.1%, setting new 40-year high

But while global pressures have shown signs of easing, they can just as easily persist or even reverse course through the fall, Nguyen warned.

“There is still a war going on,” she said. “There’s a lot of instability, geopolitical tensions and a pandemic raging. And who knows what’s going to happen on the global stage over the next six months.”

— with files from Global News’ Anne Gaviola

© 2022 Global News, a division of Corus Entertainment Inc.

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Australia plans a social media ban for children under 16

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MELBOURNE, Australia (AP) — The Australian government announced on Thursday what it described as world-leading legislation that would institute an age limit of 16 years for children to start using social media, and hold platforms responsible for ensuring compliance.

“Social media is doing harm to our kids and I’m calling time on it,” Prime Minister Anthony Albanese said.

The legislation will be introduced in Parliament during its final two weeks in session this year, which begin on Nov. 18. The age limit would take effect 12 months after the law is passed, Albanese told reporters.

The platforms including X, TikTok, Instagram and Facebook would need to use that year to work out how to exclude Australian children younger than 16.

“I’ve spoken to thousands of parents, grandparents, aunties and uncles. They, like me, are worried sick about the safety of our kids online,” Albanese said.

The proposal comes as governments around the world are wrestling with how to supervise young people’s use of technologies like smartphones and social media.

Social media platforms would be penalized for breaching the age limit, but under-age children and their parents would not.

“The onus will be on social media platforms to demonstrate they are taking reasonable steps to prevent access. The onus won’t be on parents or young people,” Albanese said.

Antigone Davis, head of safety at Meta, which owns Facebook and Instagram, said the company would respect any age limitations the government wants to introduce.

“However, what’s missing is a deeper discussion on how we implement protections, otherwise we risk making ourselves feel better, like we have taken action, but teens and parents will not find themselves in a better place,” Davis said in a statement.

She added that stronger tools in app stores and operating systems for parents to control what apps their children can use would be a “simple and effective solution.”

X did not immediately respond to a request for comment on Thursday. TikTok declined to comment.

The Digital Industry Group Inc., an advocate for the digital industry in Australia, described the age limit as a “20th Century response to 21st Century challenges.”

“Rather than blocking access through bans, we need to take a balanced approach to create age-appropriate spaces, build digital literacy and protect young people from online harm,” DIGI managing director Sunita Bose said in a statement.

More than 140 Australian and international academics with expertise in fields related to technology and child welfare signed an open letter to Albanese last month opposing a social media age limit as “too blunt an instrument to address risks effectively.”

Jackie Hallan, a director at the youth mental health service ReachOut, opposed the ban. She said 73% of young people across Australia accessing mental health support did so through social media.

“We’re uncomfortable with the ban. We think young people are likely to circumvent a ban and our concern is that it really drives the behavior underground and then if things go wrong, young people are less likely to get support from parents and carers because they’re worried about getting in trouble,” Hallan said.

Child psychologist Philip Tam said a minimum age of 12 or 13 would have been more enforceable.

“My real fear honestly is that the problem of social media will simply be driven underground,” Tam said.

Australian National University lawyer Associate Prof. Faith Gordon feared separating children from there platforms could create pressures within families.

Albanese said there would be exclusions and exemptions in circumstances such as a need to continue access to educational services.

But parental consent would not entitle a child under 16 to access social media.

Earlier this year, the government began a trial of age-restriciton technologies. Australia’s eSafety Commissioner, the online watchdog that will police compliance, will use the results of that trial to provide platforms with guidance on what reasonable steps they can take.

Communications Minister Michelle Rowland said the year-long lead-in would ensure the age limit could be implemented in a “very practical way.”

“There does need to be enhanced penalties to ensure compliance,” Rowland said.

“Every company that operates in Australia, whether domiciled here or otherwise, is expected and must comply with Australian law or face the consequences,” she added.

The main opposition party has given in-principle support for an age limit at 16.

Opposition lawmaker Paul Fletcher said the platforms already had the technology to enforce such an age ban.

“It’s not really a technical viability question, it’s a question of their readiness to do it and will they incur the cost to do it,” Fletcher told Australian Broadcasting Corp.

“The platforms say: ’It’s all too hard, we can’t do it, Australia will become a backwater, it won’t possibly work.’ But if you have well-drafted legislation and you stick to your guns, you can get the outcomes,” Fletcher added.

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A tiny grain of nuclear fuel is pulled from ruined Japanese nuclear plant, in a step toward cleanup

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TOKYO (AP) — A robot that has spent months inside the ruins of a nuclear reactor at the tsunami-hit Fukushima Daiichi plant delivered a tiny sample of melted nuclear fuel on Thursday, in what plant officials said was a step toward beginning the cleanup of hundreds of tons of melted fuel debris.

The sample, the size of a grain of rice, was placed into a secure container, marking the end of the mission, according to Tokyo Electric Power Company Holdings, which manages the plant. It is being transported to a glove box for size and weight measurements before being sent to outside laboratories for detailed analyses over the coming months.

Plant chief Akira Ono has said it will provide key data to plan a decommissioning strategy, develop necessary technology and robots and learn how the accident had developed.

The first sample alone is not enough and additional small-scale sampling missions will be necessary in order to obtain more data, TEPCO spokesperson Kenichi Takahara told reporters Thursday. “It may take time, but we will steadily tackle decommissioning,” Takahara said.

Despite multiple probes in the years since the 2011 disaster that wrecked the. plant and forced thousands of nearby residents to leave their homes, much about the site’s highly radioactive interior remains a mystery.

The sample, the first to be retrieved from inside a reactor, was significantly less radioactive than expected. Officials had been concerned that it might be too radioactive to be safely tested even with heavy protective gear, and set an upper limit for removal out of the reactor. The sample came in well under the limit.

That’s led some to question whether the robot extracted the nuclear fuel it was looking for from an area in which previous probes have detected much higher levels of radioactive contamination, but TEPCO officials insist they believe the sample is melted fuel.

The extendable robot, nicknamed Telesco, first began its mission August with a plan for a two-week round trip, after previous missions had been delayed since 2021. But progress was suspended twice due to mishaps — the first involving an assembly error that took nearly three weeks to fix, and the second a camera failure.

On Oct. 30, it clipped a sample weighting less than 3 grams (.01 ounces) from the surface of a mound of melted fuel debris sitting on the bottom of the primary containment vessel of the Unit 2 reactor, TEPCO said.

Three days later, the robot returned to an enclosed container, as workers in full hazmat gear slowly pulled it out.

On Thursday, the gravel, whose radioactivity earlier this week recorded far below the upper limit set for its environmental and health safety, was placed into a safe container for removal out of the compartment.

The sample return marks the first time the melted fuel is retrieved out of the containment vessel.

Fukushima Daiichi lost its key cooling systems during a 2011 earthquake and tsunami, causing meltdowns in its three reactors. An estimated 880 tons of fatally radioactive melted fuel remains in them.

The government and TEPCO have set a 30-to-40-year target to finish the cleanup by 2051, which experts say is overly optimistic and should be updated. Some say it would take for a century or longer.

Chief Cabinet Secretary Yoshimasa Hayashi said there have been some delays but “there will be no impact on the entire decommissioning process.”

No specific plans for the full removal of the fuel debris or its final disposal have been decided.

The Canadian Press. All rights reserved.

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Strong typhoon threatens northern Philippine region still recovering from back-to-back storms

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MANILA, Philippines (AP) — A strong typhoon was forecast to hit the northern Philippines on Thursday, prompting a new round of evacuations in a region still recovering from back-to-back storms a few weeks ago.

Typhoon Yinxing is the 13th to batter the disaster-prone Southeast Asian nation this season.

“I really pity our people but all of them are tough,” Gov. Marilou Cayco of the province of Batanes said by telephone. Her province was ravaged by recent destructive storms and is expected to be affected by Yinxing’s fierce wind and rain.

Tens of thousands of villagers were returning to emergency shelters and disaster-response teams were again put on alert in Cagayan and other northern provinces near the expected path of Yinxing. The typhoon was located about 175 kilometers (109 miles) east of Aparri town in Cagayan province on Thursday morning.

The slow-moving typhoon, locally named Marce, was packing sustained winds of up to 165 kilometers (102 miles) per hour and gusts of up to 205 kph (127 mph) and was forecast to hit or come very near to the coast of Cagayan and outlying islands later Thursday.

The coast guard, army, air force and police were put on alert. Inter-island ferries and cargo services and domestic flights were suspended in northern provinces.

Tropical Storm Trami and Typhoon Kong-rey hit the northern Philippines in recent weeks, leaving at least 151 people dead and affecting nearly 9 million others. More than 14 billion pesos ($241 million) worth of rice, corn and other crops and infrastructure were damaged.

The deaths and destruction from the storms prompted President Ferdinand Marcos Jr. to declare a day of national mourning on Monday when he visited the worst-hit province of Batangas, south of the capital, Manila. At least 61 people perished in the coastal province.

Trami dumped one to two months’ worth of rain in just 24 hours in some regions, including in Batangas.

“We want to avoid the loss of lives due to calamities,” Marcos said in Talisay town in Batangas, where he brought key Cabinet members to reassure storm victims of rapid government help. “Storms nowadays are more intense, extensive and powerful.”

In 2013, Typhoon Haiyan, one of the strongest recorded tropical cyclones, left more than 7,300 people dead or missing, flattened entire villages and caused ships to run aground and smash into houses in the central Philippines.

The Canadian Press. All rights reserved.

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