“There are three issues,” the man who would become Prime Minister Brian Mulroney told a roaring crowd in Nova Scotia 38 years ago. “The first is jobs, the second is jobs, and the third is jobs.”
After a decade fighting inflation and the high interest rates that required, the focus on “jobs, jobs, jobs” took Mulroney and his Progressive Conservative Party to a sweeping victory over the Liberals in the next year’s election.
Nearly four decades later, the Bank of Canada — and very likely Finance Minister Chrystia Freeland in her fiscal update next week — appear to agree that jobs and the economy are more important to Canadians than their fear of inflation.
Canadians like jobs and incomes
“It’s largely a good news story for many Canadians — many Canadians are getting jobs,” said Bank of Canada deputy governor Toni Gravelle, presenting the central bank’s economic progress report on Thursday to the Surrey Board of Trade in B.C.
“And them having jobs and incomes means there’s more demand for all the goods and all the businesses out there.”
Gravelle’s comments came in the context of an imminent decision by the federal government to renew the authority of the central bank to hold inflation within a target range by either raising or cutting interest rates.
Some analysts have said the fact that the government has delayed the decision so close to the January 2022 deadline, when the old mandate runs out, means the Liberals are considering making changes.
One possibility is that it could move toward U.S. rules, or the so-called dual mandate, which declares the central bank there must consider both the employment rate and inflation in making its interest rate decisions.
Bank of Canada deputy governor Toni Gravelle suggested Thursday that a strong economy was more important to Canadians than short-term inflation. (Bank of Canada)
Critics fear such a move could confuse markets.
And the longer inflation is allowed to run hot, the more likely wage-earners and businesses would expect inflation to continue, thus pushing wages and prices even higher — something Gravelle said he wanted to avoid.
When asked directly by reporters whether the new mandate would include a provision on jobs, and whether there had been any disagreement between the bank and the government, Gravelle smiled and refused to be drawn.
But he did say that employment had become an important consideration in recent bank thinking.
“I won’t speak to the mandate question at all. I just wanted to highlight that in terms of our labour market discussions, it’s not really new that we talk about labour markets,” said Gravelle.
“I think the new part, in some respects, is that we’re looking at a vast array of indicators given that this … pandemic is quite unique and has generated a kind of a complex recovery — one that we’ve never seen before.”
WATCH | Canada’s food prices expected to rise 5-7% in 2022:
Canadian food prices expected to rise 5-7% in 2022, report says
1 day ago
Duration 8:01
Canada’s Food Price Guide, an annual report published by Dalhousie University and the University of Guelph, suggests that next year could see the biggest annual increase in food bills on record. Sylvain Charlebois is the chief researcher on the report and a professor studying food distribution and security at Dalhousie University in Halifax. 8:01
Analysts who listened in on Gravelle’s speech, including TD economist Sri Thanabalasingam, describe him as taking a more “hawkish” point of view, meaning that he was in favour of cutting stimulus and raising interest rates more quickly than what was implied in Wednesday’s policy statement from the Bank of Canada.
Despite repeated worries about inflation, including a report out Thursday saying a Canadian family of four would likely pay $1,000 more for food next year, the Bank of Canada announced it would let things ride for a while yet.
But after hearing Gravelle’s remarks, Thanabalasingam said: “It appears the bank is setting the stage for more hawkish sentiment come January. Interest rate increases could follow soon after.”
Inflation risk remains
In responding to reporters’ questions, Gravelle, who sits on the governing council that makes interest rate decisions, admitted that the bank had become more focused on “upside risk” — meaning the risk of higher-than-expected inflation — because inflation was already so high.
“Because it is already above our one to three per cent range, we’re much more concerned,” he said.
Asked whether the Bank of Canada had abandoned the idea that inflation was transitory following U.S. Federal Reserve chair Jerome Powell’s declaration he was “retiring” the term, Gravelle insisted that whatever it is called, Canada’s central bank remains convinced current high levels of inflation will disappear by the end of 2022.
The deputy governor spent most of his speech reiterating the bank’s view that current inflation was not caused by rates that are too low but by distortions caused by the pandemic and its recovery. A consumer shift back to buying services, such as flights and restaurant meals, would relieve price pressure on physical goods, Gravelle said, and businesses would find ways to get the kinks out of supply chains.
It would just take time.
Waiting for Washington
If that does not happen, Gravelle insisted that the bank would use its tools — read interest-rate hikes — to pull inflation back down toward its two-per-cent target range.
But independent of any action by Ottawa to change the central bank’s mandate, Gravelle and his governing council have another constraint: Inflation is an international phenomenon.
Despite repeated insistence that it operates independently, the Bank of Canada simply cannot act alone to defeat what is a global problem. Hiking rates significantly before the U.S. central bank decides to do the same thing would distort the price of the loonie, and thus trade — without solving the problem.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
