Deputy Prime Minister and Minister of Finance Christia Freeland says the Canadian government is well aware of inflationary fears and as such is committed to controlling federal spending.
“Our budget, which I submitted in April, was a very fiscally responsible budget. In fact, the pace of fiscal consolidation in Canada, the rate at which our deficits and debt are declining, is tied to first place in the G7, “Freeland said.
The finance minister spoke with US Treasury Secretary Janet Yellen during a visit to Toronto on Monday, where the two highlighted their countries’ strong economic ties.
Her comments came when one of Canada’s largest commercial banks argued that the Bank of Canada could not be the only organization to fight inflation by raising interest rates and that lower government spending would take some of the “burden of the adjustment ”by the private sector.
“In Canada, as elsewhere, the Bank of Canada is struggling with the lagging and continuing impact of fiscal support measures, along with a number of other drivers of inflation. With this in mind, the production losses that the Bank of Canada must create to curb inflation are falling disproportionately on the private sector, “said Scotiabank chief economist Jean-Francois Perot and modeling and forecasting director Rene. Lalonde.
It is further stated that high levels of fiscal spending will require an “unnecessarily large” push for private spending.
“Lower government consumption would lead to a lower interest rate path and take away some of the burden of the private sector adjustment,” it said.
Freeland said Ottawa’s commitment to fiscal tightening was illustrated last week during her speech on inflation, when the government could introduce new spending measures but instead stuck to the issue of affordability.
The United States is also not immune to rising living costs.
Yellen said Monday that the gas tax holiday is a measure worth considering to ease daily expenses for families.
“Consumers are really suffering from higher gas prices. This was a significant burden on American households. And I think that while it’s not perfect, it’s something that should be considered as a policy to deal with it, “she said.
The Conservative Party of Canada has long called on the government to consider such a move, but Freeland said the situation in Canada is different.
“Our price for pollution really includes an element where we return the money to Canadian families, and the amount returned to Canadian families has increased this year,” she said.
However, the finance minister clarified that Ottawa is not closing its doors to measures that could help reduce the cost of living in the future.
Asked on CTV News Channel’s Power Play whether this type of policy would cool inflation, Perot said that although it had a temporary impact, it would meet its target.
“It’s not what we think of as core inflation. Usually, when we think about trend inflation, we subtract those elements that are the most volatile and gasoline is one of them. But certainly, if you’re helping to deal with higher inflation, what you can do is reduce gas taxes, “he said Monday.
Perot said that while he agreed with the Canadian government that inflation has a global component, there are internal forces at work, such as high rents and house prices and low wages, which can be overcome in part by fiscal policy.
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