As Prime Minister Justin Trudeau convenes with his cabinet for a meeting ahead of his return to Parliament to outline his priorities for 2023, a large focus of the conversation is on concerns about the cost of living for Canadians.
Also, the question circulating at the ministerial meeting is how the Liberals plan to pay for their domestic and international commitments, as well as a potential multibillion-dollar health deal with the provinces, while keeping in mind the risk of a recession.
As Trudeau meets with his front office, a new report from the Business Council of Canada and Bennett Jones warns there is a “high risk” the Liberals will not be able to deliver on all of their spending plans without veering off a more prudent fiscal path.
Helping cabinet assess the economic landscape on Tuesday, ministers heard from a trio of top economic minds ahead of what is expected to be another rate hike from the Bank of Canada on Wednesday.
So what is being said about all this at the federal cabinet meeting?
Here are some of the key quotes.
DEPUTY PRIME MINISTER AND FINANCE MINISTER CHRISTIA FREELAND
“We talked a lot about the work we’re doing as a government, what Canadians, Canadians, Canadian businesses are doing to increase Canada’s economic capacity to increase growth and to drive the creation of more good jobs for Canadians. We talked a lot about the challenges ahead. There is a lot of uncertainty, a lot of volatility in the global economy. And we also talked about the position of strength that Canada is entering this difficult period from,” Freeland said during a huddle with reporters at a retreat on Tuesday.
“We must continue to adopt a fiscally prudent approach. We still don’t know for sure how the plane will land. We don’t know for sure how the COVID recession will ultimately play out… So some challenging things for everybody to do at the same time and that’s the balance we’re going to have to find in the budget,” she said.
ASSISTANT SECRETARY OF FINANCE RANDY BOISSONTO
“We’re already seeing a slowdown in the economy and that means we’re going to have to make some really tough choices about how to invest in Canadians, how to grow the economy.” Where do we actually direct the fiscal space we have, the money we have to invest in the budget [2023] so we’re making smart choices for the future… Because of what we’re seeing with inflation still around 6.3 percent, three times higher than we want to see it, that we’re going to continue to see a slowdown in the economy. So 2023 is going to be a tumultuous economic year,” Boissonnault said in an interview on CTV News Channel’s Power Play with Vassi Kapelos, live from Tuesday’s retreat.
“That means we’re going to face some tough times as Canadians.” And so our support for Canadians will continue. We’ve been through this before and the economic fundamentals of the economy are good… Beyond 2023, the future is very bright for Canada. We can get into the international reasons for that, but the underlying message is that we’re going to have to make some really clear choices for Canadians in this budget,” he said.
FORMER BANK OF CANADA SENIOR DEPUTY GOVERNOR CAROLYN WILKINS
“You know, what people have in the back of their minds is, ‘Where are interest rates going to level off?’ And if or when they fall, how quickly and by how much?” … There are risks on the downside of the economic outlook. Obviously, we haven’t seen the full effects of interest rates yet because they take time to work. And many, many forecasters are saying that it’s really going to be in the first three quarters of this year that we see the effects on GDP growth and on employment,” Wilkins said during a scramble with reporters at Tuesday’s meeting.
“And that will reduce inflation even more.” On the other hand, we’re seeing China opening up, we’re still seeing some tightening of labor markets here in Canada, in the US and in other countries. And that may mean that inflation remains slightly higher or stable at a level that is lower than today but still higher than the two percent inflation targets that many of us have, and that because interest rates will either have to rise more or stay higher for longer,” she said.
UNIVERSITY OF BRITISH COLUMBIA KEVIN MILLIGAN PROFESSOR OF ECONOMICS
“Right now, as we look at the new commitments that are being made, we have to wait and see what comes out of the health agreement.” You know, my suspicion is that there’s not going to be a lot of advance information on this, it’s going to be a long-term deal, so it’s not going to have as much of an impact on short-term considerations… We’re still in a situation where the Bank of Canada is turning attention to what is happening with fiscal policy. too far, too fast, the Bank of Canada is just going to tighten things up and make the interest rate environment more challenging,” Milligan said during a scramble with reporters at the Tuesday retreat.
“I think it’s most likely that there will be a soft footing in the economy next year.” And I think all politicians should keep this in mind. another round of income transfers to lower income earners in a targeted way, these are the kinds of policy measures you can consider when the economy hits a slow stage,” he said.
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