Prices in Canada are rising — and they’re rising fast.
Statistics Canada released its measure of inflation, the Consumer Price Index (CPI), earlier this week. It reported that prices are now 6.7 per cent higher than they were this time last year.
It’s the largest spike in the CPI since January of 1991, the year the government introduced the GST.
“Prices increased against the backdrop of sustained price pressure in Canadian housing markets, substantial supply constraints and geopolitical conflict, which has affected energy, commodity and agriculture markets,” StatsCan said.
The Bank of Canada has raised its benchmark interest rate by 0.5 per cent to 1 per cent, citing the need to curb inflation.
The rising cost of living has caught the attention of many prominent politicians. But is what they’re saying about it all true?
Is the federal government causing inflation?
Conservative leadership candidate Pierre Poilievre, a former finance critic who is widely considered to be the front-runner in the race, has made inflation a central part of his campaign.
Poilievre claims the Trudeau government’s approach to spending and taxation is a major force driving inflation.
“Trudeau’s big spending, deficits and taxes have driven up inflation, which in turn is now driving up interest rates,” Poilievre said in a recent news release.
Pierre Poilievre speaks at a press conference at Brandt Tractor Ltd. in Regina on Friday, March 4, 2022. Poilievre has often blamed the Trudeau government’s fiscal policies for rising prices. (Michael Bell/The Canadian Press)
“I would reverse JustinFlation with common sense policy, including: axing the carbon tax, phasing out inflationary deficits by ending wasteful spending and cancelling new promises and removing the gatekeepers to make more of what cash buys — energy, food and housing.”
Is Poilievre right? Is government fiscal policy driving up prices?
Jean-Paul Lam, an economics professor at the University of Waterloo and a former assistant chief economist at the Bank of Canada, said government spending is one of many factors pushing prices up — but it’s a relatively modest one.
Jean-Paul Lam, a professor of economics at the University of Waterloo, said he expects inflation will get worse in the months to come. (Jean-Paul Lam/Submitted)
Economic support programs related to the pandemic are a significant reason the federal deficit is so large now; the deficit was projected at $53 billion in the latest budget. But that doesn’t come close to explaining the rate of inflation we’re seeing now, he added.
“This is a minor factor … I don’t think the fiscal position of the government, although it has deteriorated significantly over the last two years, is a key factor to inflation right now,” he said.
Trevor Tombe, a professor of economics at the University of Calgary and a research fellow at the university’s School of Public Policy, said Poilievre is correct in the sense that government spending and taxation can be a factor in inflation.
“Fiscal policy can indeed matter for price levels if central banks don’t respond to that spending,” he said.
Trevor Tombe, a professor of economics at the University of Calgary, said there isn’t much Canada can do to address the main factors driving inflation. (Erin Collins/CBC)
But the federal government’s decisions on spending and taxation don’t have much of a relationship to the other, more important forces pushing prices up, he said.
“It really doesn’t matter what Canada’s government spends. Oil prices are going to rise and fall due to much larger global forces that are beyond our control,” he said.
“And even real estate prices being as high as they are, this is not a uniquely Canadian phenomenon. And we’re seeing home costs rising by roughly the same amount throughout the developed world that we’re seeing here in Canada.”
What about those big corporate profits?
NDP Leader Jagmeet Singh took to Instagram Wednesday to talk about the rising cost of living.
He argued that inflation is being driven not by supply issues, nor by government stimulus programs, but by big companies looking to boost profits.
“It’s because of greed,” Singh said. “When the cost of things goes up, it hurts some people, but it benefits those at the very top.”
NDP Leader Jagmeet Singh rises during question period in the House of Commons on April 6, 2022. Singh says corporate greed is responsible for rising prices, but economist Trevor Tombe said Singh is simplifying a complex issue for political gain. (Sean Kilpatrick/The Canadian Press)
There’s some truth to the picture Singh paints, Lam said.
The pandemic has wiped out many smaller businesses, which means some bigger firms are facing less competition now. Businesses often raise prices when this happens, he said.
Some businesses also have faced increasing costs for raw materials and supplies, he said, and have passed those costs onto customers by raising prices.
But that doesn’t mean Singh’s reasoning is sound, he added.
“I think it’s a bit too simplistic in terms of [an] explanation of inflation,” Lam said. Pricing decisions being made by corporations now are largely responses to inflationary pressures coming from other factors, such as global supply constraints, he said.
Tombe agreed.
“This is, again, an example of political language oversimplifying complex issues like inflation,” he said.
Tombe points to the auto industry, where a severe shortage of car parts has gutted supply and pushed up prices — but not necessarily profits.
“And so there’s a lot of factors here that have nothing to do with greed, with market power, with corporate profits,” Tombe said.
Lam and Tombe both said, however, that Singh has put his finger on an important point: inflation doesn’t affect everyone the same way.
The well-off don’t necessarily benefit from inflation — prices are rising for everyone, after all, including the rich — but the poor have a harder time dealing with more expensive essential goods. The price of groceries, for example, has increased 8.7 per cent compared to last year, according to the CPI.
And those with certain types of assets may benefit from inflation if the value of what they own goes up. Real estate is a good example of this, Lam said.
How about the Bank of Canada?
The bad news for people in financially precarious positions may not end with rising prices, Lam said.
Canada’s central bank is likely to continue raising interest rates to address inflation, he said. That means debt loads will be more expensive to service.
“So you can see that the young people who’ve just got in the housing market, the people who have a lot of debt and coping with high mortgage debt, they are the one who are going to be hurt disproportionately compared to the people who have a massive amount of wealth,” Lam said.
The Bank of Canada building in Ottawa on Tuesday, Jan. 25, 2022. The bank has raised interest rates in response to rising inflation. (David Kawai/Bloomberg)
The Bank of Canada has also been in Poilievre’s crosshairs. He has criticized its approach to monetary policy and accused it of driving inflation.
Tombe said that while Canada’s central bank hasn’t always performed flawlessly, it would be unfair to expect perfection given the unprecedented disruptions the global economy has faced in recent years.
“While I think, in retrospect, central banks ought to have been tightening earlier, I don’t think that means they made a mistake given what they knew at the time, and given what was reasonable and all of the uncertainties involved,” he said.
Lam’s assessment of the bank’s response to inflation is less forgiving.
“I think they’ve been very slow to react to inflation,” he said.
“Their main message was, ‘Don’t worry, it’s transitory. It’s going to go back to two per cent, etc.’ They, I think, made a mistake by sticking to that message for too long.”
So what is driving inflation?
If the federal government, big business and the central bank aren’t the primary culprits, what is causing prices to spike?
The answer to that question may be frustrating for the government — and for those seeking to lead it, like Poilievre and Singh. This current wave of inflation is mostly the result of global supply chain issues and geopolitical tensions — things over which Canada has little influence.
The Russia-Ukraine war has affected energy and food prices. Supply chain issues — especially in China, thanks to pandemic restrictions — are major factors, Lam said.
Demand for goods and services is also higher right now than many analysts predicted it would be earlier in the pandemic, he added.
“I think the bad news for Canadians is probably [inflation] is going to go higher in the months to come,” he said.
Lam said raising interest rates is the most effective way of bringing inflation down, but it will be a difficult balance for the Bank of Canada to strike.
Tombe agreed with Lam’s assessment of Canada’s vulnerability. As a small trading nation, he said, Canada is exposed to global supply and geopolitical shocks but has few tools to fight back.
The situation calls for a cautious approach, he added.
“We don’t want to overreact to what are potentially temporary factors,” he said.
“If energy prices don’t continue to rise, if home prices don’t continue to rise at the rapid pace that we’ve seen, then inflation should get back closer to what we consider normal later this year and early next.”
Nova Scotia RCMP say their investigation into two suspicious deaths earlier this month has concluded that one man died by homicide and the other by suicide.
The bodies of two men, aged 40 and 73, were found in a home in Windsor, N.S., on Sept. 3.
Police say the province’s medical examiner determined the 40-year-old man was killed and the 73-year-old man killed himself.
They say the two men were members of the same family.
No arrests or charges are anticipated, and the names of the deceased will not be released.
RCMP say they will not be releasing any further details out of respect for the family.
This report by The Canadian Press was first published Sept. 16, 2024.
For the first time in their history, members of the Cree community of Nemaska received a visit from a sitting Quebec premier on Sunday and were able to share first-hand the story of how they were displaced by a hydroelectric project in the 1970s.
François Legault was greeted in Nemaska by men and women who arrived by canoe to re-enact the founding of their new village in the Eeyou Istchee James Bay region, in northern Quebec, 47 years ago. The community was forced in the early 1970s to move from its original location because members were told it would be flooded as part of the Nottaway-Broadback-Rupert hydro project.
The reservoir was ultimately constructed elsewhere, but by then the members of the village had already left for other places, abandoning their homes and many of their belongings in the process.
George Wapachee, co-author of the book “Going Home,” said community members were “relocated for nothing.”
“We didn’t know what the rights were, or who to turn to,” he said in an interview. “That turned us into refugees and we were forced to abandon the life we knew.”
Nemaska’s story illustrates the challenges Legault’s government faces as it looks to build new dams to meet the province’s power needs, which are anticipated to double by 2050. Legault has promised that any new projects will be developed in partnership with Indigenous people and have “social acceptability,” but experts say that’s easier said than done.
François Bouffard, an associate professor of electrical engineering at McGill University, said the earlier era of hydro projects were developed without any consideration for the Indigenous inhabitants living nearby.
“We live in a much different world now,” he said. “Any kind of hydro development, no matter where in Quebec, will require true consent and partnership from Indigenous communities.” Those groups likely want to be treated as stakeholders, he added.
Securing wider social acceptability for projects that significantly change the landscape — as hydro dams often do — is also “a big ask,” he said. The government, Bouchard added, will likely focus on boosting capacity in its existing dams, or building installations that run off river flow and don’t require flooding large swaths of land to create reservoirs.
Louis Beaumier, executive director of the Trottier Energy Institute at Polytechnique Montreal, said Legault’s visit to Nemaska represents a desire for reconciliation with Indigenous people who were traumatized by the way earlier projects were carried about.
Any new projects will need the consent of local First Nations, Beaumier said, adding that its easier to get their blessing for wind power projects compared to dams, because they’re less destructive to the environment and easier around which to structure a partnership agreement.
Beaumier added that he believes it will be nearly impossible to get the public — Indigenous or not — to agree to “the destruction of a river” for a new dam, noting that in recent decades people have come to recognize rivers as the “unique, irreplaceable riches” that they are.
Legault’s visit to northern Quebec came on Sept. 15, when the community gathers every year to remember the founding of the “New Nemaska,” on the shores of Lake Champion in the heart of the boreal forest, some 1,500 kilometres from Montreal. Nemaska Chief Clarence Jolly said the community invited Legault to a traditional feast on Sunday, and planned to present him with Wapachee’s book and tell him their stories.
The book, published in 2022 along with Susan Marshall, is filled with stories of Nemaska community members. Leaving behind sewing machines and hunting dogs, they were initially sent to two different villages, Wapachee said.
In their new homes, several of them were forced to live in “deplorable conditions,” and some were physically and verbally abused, he said. The new village of Nemaska was only built a few years later, in 1977.
“At this time, families were losing their children to prison-schools,” he said, in reference to the residential school system. “Imagine the burden of losing your community as well.”
Thomas Jolly, a former chief, said he was 15 years old when he was forced to leave his village with all his belongings in a single bag.
Meeting Legault was important “because have to recognize what happened and we have to talk about the repercussions that the relocation had on people,” he said, adding that those effects are still felt today.
Earlier Sunday, Legault was in the Cree community of Eastmain, where he participated in the official renaming of a hydro complex in honour of former premier Bernard Landry. At the event, Legault said he would follow the example of his late predecessor, who oversaw the signing of the historic “Paix des Braves” agreement between the Quebec government and the Cree in 2002.
He said there is “significant potential” in Eeyou Istchee James Bay, both in increasing the capacity of its large dams and in developing wind power projects.
“Obviously, we will do that with the Cree,” he said.
This report by The Canadian Press was first published Sept. 16, 2024.
NEMASKA – For the first time in their history, members of the Cree community of Nemaska received a visit from a sitting Quebec premier on Sunday and were able to share first-hand the story of how they were displaced by a hydroelectric project in the 1970s.
François Legault was greeted in Nemaska by men and women who arrived by canoe to re-enact the founding of their new village in the Eeyou Istchee James Bay region, in northern Quebec, 47 years ago. The community was forced in the early 1970s to move from their original location because they were told it would be flooded as part of the Nottaway-Broadback-Rupert hydro project.
The reservoir was ultimately constructed elsewhere, but by then the members of the village had already left for other places, abandoning their homes and many of their belongings in the process.
George Wapachee, co-author of the book “Going Home,” said community members were “relocated for nothing.”
“We didn’t know what the rights were, or who to turn to,” he said in an interview. “That turned us into refugees and we were forced to abandon the life we knew.”
The book, published in 2022 by Wapachee and Susan Marshall, is filled with stories of Cree community members. Leaving behind sewing machines and hunting dogs, they were initially sent to two different villages, 100 and 300 kilometres away, Wapachee said.
In their new homes, several of them were forced to live in “deplorable conditions,” and some were physically and verbally abused, he said. The new village of Nemaska was only built a few years later, in 1977.
“At this time, families were losing their children to prison-schools,” he said, in reference to the residential school system. “Imagine the burden of losing your community as well.”
Legault’s visit came on Sept. 15, when the community gathers every year to remember the founding of the “New Nemaska,” on the shores of Lake Champion in the heart of the boreal forest, some 1,500 kilometres from Montreal. Nemaska Chief Clarence Jolly said the community invited Legault to a traditional feast on Sunday, and planned to present him with Wapachee’s book and tell him their stories.
Thomas Jolly, a former chief, said he was 15 years old when he was forced to leave his village with all his belongings in a single bag.
Meeting Legault was important “because have to recognize what happened and we have to talk about the repercussions that the relocation had on people,” he said, adding that those effects are still felt today.
Earlier Sunday, Legault had been in the Cree community of Eastmain, where he participated in the official renaming of a hydro dam in honour of former premier Bernard Landry.
This report by The Canadian Press was first published Sept. 16, 2024.
