Last Updated On 19 October 2022, 8:15 PM EDT (Toronto Time)
Canada prime minister Justin Trudeau and deputy prime minister as well as finance minister Chrystia Freeland acknowledged expectation of economic slowdown ahead. They are not using the word “recession,” but verbatim indicates in the same direction.
Today, Chrystia Freeland warned people in Canada, that the coming months will be difficult. The rising interest rates may cool down the economy but force several out of their jobs.
According to Freeland, recent rate hikes by the Bank of Canada to fight sky-high inflation will increase the borrowing cost for businesses and consumers, and its impact will run throughout the economy.
Immigrants already in Canada and future immigrants planning on moving to Canada should be aware of this slowdown. So, this article will shed light on latest developments as listed below so that our patrons have heads up on what to expect in coming months and new year:
- What to expect ahead in Canada?
- New Inflation Numbers – October 19
- Canada Prime Minister Justin Trudeau Expecting The Same
- What’s next in 2023?
- Available government assistance
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What to expect ahead in Canada?
While speaking at an auto industry conference in Windsor, Ontario, Freeland promised to be open and honest with Canadians about the challenges ahead. These challenges include the risk of rising mortgage rates and growing unemployment, all of which may harm many households.
Freeland said “Our economy will slow. There will be people whose mortgage rates will rise. Businesses will no longer be booming. Our unemployment rate will no longer be at its record low. That’s going to be the case in Canada. That will be the case in the U.S. and that will be the case in economies big and small around the world.”
The Canadian economy will still face some challenging times. However, saying anything else would be “misleading,” she says.
To attain price stability and its 2% inflation objective this year, the Bank of Canada has aggressively increased rates, as have other central banks, such as the U.S. Federal Reserve.
However, it has had little impact on relieving rising basic food prices. On Wednesday, Statistics Canada’s report showed that the Consumer Price Index (CPI) increased 6.9 percent in September. It is slightly lower than the 7.0 percent increase seen the previous month.
New Inflation Numbers
During September, the food prices from stores grew (+11.4%), the fastest year or year since August 1981 (+11.9%). Moreover, food prices from stores continue to increase at a fast rate than the all-time Consumer Price Index (CPI) for ten consecutive months since December 2021.
The contributors to increasing food and beverage prices include:
- Unfavourable weather conditions.
- Increased costs for critical inputs such as fertilizer and natural gas.
- Geopolitical instability caused by Russia’s invasion of Ukraine.
Additionally, the food price rise remained broad-based in September. Canadians spent more on meat (+7.6%), dairy goods (+9.7%), bakery products (+14.8%), and fresh vegetables (+11.8%) on a year-over-year basis.
Furthermore, price of passenger vehicles and furniture is also rising. This is expected to affect common people. Prices for durable goods increased faster in September (+6.7%) than in August (+6.0%) year on year.
The purchase of passenger vehicles index contributed the most to the increase, rising 8.4% in September. The increase was due in part to the ongoing shortage of semiconductor chips.
Prices for furniture increased at a faster rate year on year in September (+13.3%) than in August (+12.2%), owing primarily to higher prices for other furniture (+10.3%), particularly mattresses.
Tuition fees increased 2.3% year over year in September compared to September 2021 (+1.9%), with Alberta experiencing the greatest increase (+7.7%). Tuition in Newfoundland and Labrador increased 6.8% in September, after a tuition freeze that had been in place since 1999 was lifted.
Canada Prime Minister Justin Trudeau Expecting The Same
Yesterday, Prime Minister Justin Trudeau in an encounter with media acknowledged the same and explained doubling of GST to deal with the same. Answering to a reporter’s question “Finance Minister yesterday flirted almost with the word recession. Do you share those sobering thoughts about the economy and do you want to start telling Canadians that so they can prepare”
PM Trudeau said, “I think Canadians know that there are headwinds ahead. We’ve seen rising interest rates, We’ve seen rising cost of living. That’s why we’ve been acting concretely the dental, the sort of the GST credit is going to be flowing in the coming weeks to Canadian families. 11 million Canadian families who will get close to 500 dollars in extra support this fall. It will make a big difference.“
He further added, We are pleased that the conservatives reversed their position and actually supported that help for low-income families. At the same time, we’re right now talking about dental support for low-income families with kids and support for low-income renters right now.”
PM also pointed out, “The conservatives are not only not supporting it but purposely blocking that from passing in the house. And the fact is, we need to make sure we’re continuing to be there to support Canadians if the conservatives are serious about that. They should be supporting this legislation not blocking it.“
What’s next in 2023?
Economic experts anticipate further interest rate increases to lower demand and cool the economy because inflation is persistent. It may result in a recession in 2023.
As energy costs have stabilized recently, inflation has slowed down a little. However, Freeland warned the government would not be able to assist everyone through the inflationary wave.
Freeland says the government cannot compensate everyone for all of the expenses of inflation brought on by a pandemic throughout the world and Putin’s invasion of Ukraine.
However, she promises to help the poorest Canadians, who are most susceptible to unexpected increases in the price of food and rent, receive help.
Available government assistance
Minister Freeland mentioned passing Bill C-30, government legislation that temporarily doubled the GST credit granted to low-income people.
According to projections from the government, this measure will provide qualified individuals without children with an additional $234 this year. And couples with two children with an additional $467 to help offset escalating costs.
The House of Commons is now considering the C-31 bill, which would send parents checks to pay for their kids’ dental insurance and offer rent relief.
Further, employment insurance (EI) will be one of the social programs available to assist those who lose their jobs due to the approaching economic upheaval, says Freeland.
Critics, such as Conservative Leader Pierre Poilievre, claim that excessive government spending in response to the pandemic is also to blame for the spike in inflation in Canada. Other issues include supply chain disruptions brought on by the pandemic.
Will there be any more government assistance?
Freeland stated that the federal government would continue to tighten its finances in the coming months to prevent Ottawa from unintentionally fuelling inflation.
Both Canadians and our government are making financial savings. However, she explained that our responsibility is to prevent inflation from worsening and lasting longer.
When asked by reporters later if the government had other plans to combat inflation, Freeland responded that now was a time for budgetary restraint.
As with the emergency relief benefits Ottawa provided during the worst of the pandemic, she said that flooding the nation with government assistance would be like “pouring fuel on the inflationary fires, and we’d simply make the Bank of Canada’s work harder, and inflation persists longer.”
According to Freeland, increased demand for a limited supply of goods and services due to more stimulus money in circulation would drive up prices and trigger yet another inflation war.`
Recent efforts by the federal government to draw significant foreign investment have been somewhat successful in several economic areas, particularly the production of electric vehicles and the extraction of essential minerals. Freeland expressed that she would like to see more of such investments.
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