Freeland commits to 'fiscal responsibility' to combat inflation

THE CANADIAN PRESS/Nathan Denette

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Deputy Prime Minister Chrystia Freeland claimed the federal Liberals would be fiscally responsible moving forward following a meeting with finance ministers to discuss Canada’s future.

"Any new spending has to be targeted," she said. "We know that one of the most important things the federal government can do to help Canadians today is […] not to pour fuel on the fire of inflation."

The country's annual inflation rate peaked last summer at 8.1% and slowly fell to 6.8% in November. However, the average inflation rate in 2022 topped a four-decade high at 6.8% and doubled that of the previous year.

Statistics Canada unveiled that grocery prices soared precipitously last month over one year. Grocery prices rose 9.8%, marking the fastest pace since 1981.

Consumers also paid 28.5% more for gasoline in 2022 annually. 

On Friday, Freeland said the government is faced with high-interest rates and a slowing global economy, which constrain the government’s ability to spend.

The Bank of Canada raised its benchmark rate on interbank loans by a quarter point to 4.5% in January, up from 0.25% in the same period last year.

In mid-January, Governor Tiff Macklem claimed that another increase in the bank’s prime rate would lead to a recession.

The Bank of Canada confirmed that 2023 is "not going to feel good" for taxpayers.

"The economy is slowing, and we expect it will continue to slow," said Macklem. "We expect growth through the next two, three quarters to be close to zero."

"That is an economy that is stalled. It is not going to feel good. That is no growth."

Despite these constraints, Freeland said, two significant areas need investment: healthcare and a "clean economy."

The finance minister's comments come two days after a public opinion poll showed Canadians are concerned about federal priorities.

In the Abacus Data poll, seven-in-ten Canadians said the feds are neglecting the rising costs of living and housing.

Freeland, in a November 3 Fall Economic Statement, confirmed a probable recession. 

"Our economy is slowing down," Freeland told the House of Commons.

She remained convinced in the Fall Economic Statement that the federal government is "building an economy that works for everyone — an economy that creates good jobs and makes life more affordable for Canadians."

In addressing affordability and green energy initiatives, the finance minister claimed, "The investments we are making today will make Canada more sustainable and prosperous for generations to come."

In December, Freeland asked for $2 billion for Bill C-32 without providing details other than it calls for creating the Canada Growth Fund.

According to the feds, the goal of the Canada Growth Fund is to "attract the significant private capital required to accelerate the deployment of technologies required to decarbonize and grow their economies."

In front of the Senate finance committee, Freeland explained that the federal government needs to spend that money on a company that doesn't exist to combat climate change.

According to the Canadian Taxpayers Federation (CTF), the federal Liberals incurred a $36.4 billion deficit. They spent $20.2 billion more than estimated in Budget 2022, despite amassing an extra $129.1 billion in revenue since the beginning of the fiscal year.

"The government received a boatload of extra cash from taxpayers and is still racking up more credit card bills," said Terrazzano. "Canadians can't afford gasoline or groceries because the government is spending like crazy and raising taxes." 

He urged Freeland to stop spending and cut taxes.

According to the Parliamentary Budget Officer's revenue calculator, reducing the GST by one percentage point would reduce the government's revenue by about $9 billion. That means the finance minister could cut the sales tax from five to three percent and lower the deficit by keeping spending at April's budgeted levels.

"Instead of giving some Canadians some money back through rebates, Freeland could provide meaningful relief to all Canadians by cutting the GST," added Terrazzano. "The government could make life more affordable by cutting the sales tax."

In a Monetary Policy report, the Bank of Canada forecasts inflation and interest rates will remain above pre-pandemic levels well into 2024. 

"Higher unemployment could undermine homebuyer sentiment and lead to a larger than expected drop in house prices," said the report. "This, in turn, could reduce household wealth, access to credit, and consumer confidence."

As a result, the Bank of Canada said consumer spending is expected to remain down through much of 2023.

"The rise in borrowing costs is expected to continue to strain many household budgets."