Latest news with #Trudeau
Calgary Herald
4 hours ago
- Business
- Calgary Herald
The pandemic drove up inflation. How come, years later, we're still paying more?
Article content A new report from the C.D. Howe Institute concluded that the Trudeau government's spending splurges played a major role in fuelling inflation during the pandemic. The report pointed the finger at Ottawa's unfunded spending spree — more than the Bank of Canada's monetary policies — that acted as 'helicopter drops' of money for the private sector. Article content In 2020, about 20.7 million Canadians out of an adult population of 30.3 million received income from one of the federal pandemic-related programs, according to a 2022 report. During that year alone, the programs are estimated to have cost $270 billion — about 12.5 per cent of Canada's gross domestic product (GDP) — and cumulatively have cost about $360 billion to date. Article content While the programs broadly succeeded in providing relief to individuals and businesses and creating a cushion for the economy during a crisis, the C.D. Howe Institute noted that injecting that much extra money into an economy while unemployment is low results in inflation. Article content Article content David Andolfatto, chair of the department of economics at the University of Miami and an international fellow at the C.D. Howe Institute, said inflation should be expected when governments add that much extra demand to the economy. 'Of course prices went up,' he said. 'There's no such thing as a free lunch. Somebody will have to pay.' Article content And not only do consumers pay higher prices but they must then pay again with the higher interest rates the central bank then implemented to try bringing those prices back down. In 2020, interest rates were down to 0.25 per cent as the Bank of Canada aimed to cushion the blow from the pandemic; by 2023, the rate had risen 20-fold, to five per cent. Article content Jean-Francois Perrault, chief economist at the Bank of Nova Scotia, estimated in a November 2023 report that government spending and pandemic-era transfers to Canadians were responsible for about 42 per cent (200 of the 475 basis points) of the increase in the Bank of Canada's prime interest rate during that period. About one-third of those interest rate hikes can be traced back to provincial governments, he calculated. Article content Article content Since the start of 2023, inflation has remained at less than four per cent, just over the Bank of Canada's preferred band of between one and three per cent, but a big decrease from the peak of pandemic-era inflation. Article content And, at least for now, it's largely under control. Statistics Canada reported last week that Canada's inflation rate accelerated to 1.9 per cent in June, up from 1.7 per cent the previous month. Article content Why have some prices kept rising since the pandemic? Article content When the pandemic subsided, it removed a number of shocks and disruptions to markets. But not all of them. Article content The Russian invasion of Ukraine, for example, still hasn't been resolved. Many of the people who started working from home during the pandemic still do so, either part-time or full-time, which puts a little more money in most of their pockets. The glut of baby boomers is also at the stage of life where many are retiring, having saved up their money, and now want to spend it.
Edmonton Journal
4 hours ago
- Business
- Edmonton Journal
The pandemic drove up inflation. How come, years later, we're still paying more?
Article content Gasoline was among the products hit hardest by inflation, with a price increase of more than 50 per cent over that two-year period. Food and transportation jumped between 15 and 20 per cent, while appliances and rent each increased by between 10 and 15 per cent. Article content Prices at any time are, in general terms, a function of supply and demand. In short, the pandemic caused both simultaneous supply shocks and increased consumer demand. Article content Barring innovation that leads to productivity improvements and lower costs, that formula will almost always mean price hikes. Article content On the supply side, some products were being produced less or not at all due to factories being closed or experiencing reduced hours, particularly in Asia. There were also shortages of some raw materials, such as lumber and metals, which also contributed to inflation. Article content Article content And costs for many suppliers went up because transportation became more expensive due to shipping delays, congestion at many ports and the rising cost of fuel, which affects the prices of most products. Article content There were also supply problems that had little or nothing to do with the pandemic. Article content Russia invaded Ukraine in early 2022, reducing the global supply of energy products, fertilizer and some grains. Article content Some important agricultural areas also suffered from poor weather. In 2021, Western Canadian farmers were hit with the worst drought in 19 years, leading to wheat stocks to drop 38.7 per cent compared to the previous year. By April 2022, food manufacturers were paying more than double for wheat than they had been paying just two years earlier. Article content And as usual, those costs were borne by consumers. According to Statistics Canada, consumers had to spend considerably more on bread (+12.2 per cent), pasta (+19.6 per cent) and cereals (+13.9 per cent) than they had a year earlier. Article content Article content On the demand side, consumers' lives had changed because many started working from home, going out less and not travelling. That meant they were unintentionally saving money. Lower interest rates and billions of dollars in government support programs also put more money into consumers' pockets. Article content Some employees, meanwhile, were getting fatter paycheques because there was greater demand for their services. Health care workers were pulling overtime shifts, for example. Also, as people adjusted to staying at home and renovated or bought new houses, construction workers were in high demand. Article content As consumers responded to the shapes of their new lives there was increased demand for real estate, furniture, exercise equipment and home entertainment gadgets . Article content A new report from the C.D. Howe Institute concluded that the Trudeau government's spending splurges played a major role in fuelling inflation during the pandemic. The report pointed the finger at Ottawa's unfunded spending spree — more than the Bank of Canada's monetary policies — that acted as 'helicopter drops' of money for the private sector. Article content In 2020, about 20.7 million Canadians out of an adult population of 30.3 million received income from one of the federal pandemic-related programs, according to a 2022 report. During that year alone, the programs are estimated to have cost $270 billion — about 12.5 per cent of Canada's gross domestic product (GDP) — and cumulatively have cost about $360 billion to date. Article content While the programs broadly succeeded in providing relief to individuals and businesses and creating a cushion for the economy during a crisis, the C.D. Howe Institute noted that injecting that much extra money into an economy while unemployment is low results in inflation. Article content David Andolfatto, chair of the department of economics at the University of Miami and an international fellow at the C.D. Howe Institute, said inflation should be expected when governments add that much extra demand to the economy. 'Of course prices went up,' he said. 'There's no such thing as a free lunch. Somebody will have to pay.' Article content And not only do consumers pay higher prices but they must then pay again with the higher interest rates the central bank then implemented to try bringing those prices back down. In 2020, interest rates were down to 0.25 per cent as the Bank of Canada aimed to cushion the blow from the pandemic; by 2023, the rate had risen 20-fold, to five per cent. Article content Jean-Francois Perrault, chief economist at the Bank of Nova Scotia, estimated in a November 2023 report that government spending and pandemic-era transfers to Canadians were responsible for about 42 per cent (200 of the 475 basis points) of the increase in the Bank of Canada's prime interest rate during that period. About one-third of those interest rate hikes can be traced back to provincial governments, he calculated. Article content Since the start of 2023, inflation has remained at less than four per cent, just over the Bank of Canada's preferred band of between one and three per cent, but a big decrease from the peak of pandemic-era inflation. Article content Why have some prices kept rising since the pandemic? Article content The Russian invasion of Ukraine, for example, still hasn't been resolved. Many of the people who started working from home during the pandemic still do so, either part-time or full-time, which puts a little more money in most of their pockets. The glut of baby boomers is also at the stage of life where many are retiring, having saved up their money, and now want to spend it. Article content Katherine Judge, senior economist at CIBC Capital Markets said consumer markets are also still getting a boost from pent-up demand and extra savings that consumers accumulated during the pandemic. Article content Wages, meanwhile, have actually been growing faster than inflation since mid-2024, so household purchasing power has also increased. Article content In recent months, the tariff wars launched by U.S. President Donald Trump have started to put upward pressure on inflation in both components and finished goods and will continue to do so unless they are resolved. Article content Economists say that prices don't normally drop — or even approach inflation of less than one per cent — unless demand falls because the economy is in a recession or governments adopt severe cost-cutting measures. Article content Neither has happened since the pandemic. The federal government kept running large deficits in spending. And while it has spoken recently about cutting costs in the bureaucracy, it also plans to boost outlays on defence and infrastructure projects. Article content Article content As poor weather played a role in fuelling inflation during the pandemic, it's still a major factor. Article content A new study by a team of international scientists led by Maximillian Kotz, a postdoctoral fellow at the Barcelona Supercomputing Center, found that foods affected by heat, drought, floods and other climatic extremes contributed directly to higher consumer prices. Article content This summer, for example, farmers in southwestern Saskatchewan have been hit by wildfires, heat waves and drought, driving up prices in the wheat market. But weather isn't just affecting the Canadian Prairies. Article content Severe weather events are also causing higher prices for Japanese rice and Spanish olive oil. In a phenomenon dubbed 'heatflation,' the report also documents that South Korean cabbage prices rose 70 per cent last year after a period of hot weather and drought, and that seafood prices increased because rising water temperatures has meant fishermen have had smaller catches. Article content Article content Is there a chance that some of the pandemic spike in prices could still be eliminated if the world enjoys a period of relative peace, with no disruptive shocks? Article content Andolfatto, at the University of Miami, said prices could in theory still come down in some markets, but that would be a function of changes in supply and demand at that time, not anything to do with what occurred during the pandemic. Article content Article content Article content
National Post
5 hours ago
- Business
- National Post
Geoff Russ: The data is in — fewer newcomers in Canada means lower rent
Article content The supposed negligible impact on affordability was one of many myths used by the Trudeau government and its supporters to justify its immigration policy. Another myth was that mass immigration would 'raise living standards for all Canadians,' as stated by Century Initiative co-founder Mark Wiseman in 2016. Article content On July 7, the Conference Board of Canada released a report that found the slowing rates of immigration could help accelerate wage growth across the country, as businesses are forced to compete for labour. It has been a long time since blue-collar Canadian workers were treated as valuable. Article content Simply put, many business owners hire newcomers for low-skilled, low-wage jobs. Michael Bonner, who worked as a policy advisor in the Harper government and later as Director of Policy for the Government of Ontario, has written that, 'wages and prices are kept artificially low, and Canadians — usually young people — are priced out.' Article content The market economy is the greatest engine for creating prosperity. However, business owners break the social contract when they deliberately exploit immigration to suppress wage growth. Article content Right now, young Canadians are feeling the worst effects of the government's policies. The rate of youth unemployment stood at 8.2 at per cent at the beginning of 2020, but now it has risen to an alarming 11.2 per cent nationwide for those aged 15 to 24. Article content University graduates, born and raised in Canada, are spending their dwindling summers desperately churning out resumes in the hopes they can secure any meaningful employment before returning to school. The fortunate among them receive a polite rejection, and many have been forced to compete with temporary workers (TFWs) for low-skilled, minimum-wage jobs. Needless to say, Canada's standard of living has not improved. In fact, it has steadily fallen since 2019. Article content Another myth of modern immigration policy is the canard that Canadians will not work the same jobs as foreign workers. This is true in some sectors, such as manual agricultural labour, but these are the exceptions. Article content Canada may have a low birth rate, but young people did not suddenly disappear between 2019 and today. When nobody else is available, native-born citizens are perfectly capable of taking these allegedly undesirable jobs. Article content Article content Last year in the Globe and Mail, Christopher Worswick, an economist at Carleton University, wrote that the TFW program should be abolished completely. He outlined how many companies deliberately keep wages low and avoid improving working conditions, adding that, as foreign workers often cannot legally switch employers. Article content This system of mass, low-skilled immigration is cruel and disillusioning for all. Under the Trudeau model, per-person GDP growth languished below half a per cent annually. It was hardly worth the cost. Article content
Vancouver Sun
4 days ago
- Business
- Vancouver Sun
New report says Ottawa to blame for higher consumer prices after spending splurge
The Trudeau government's spending splurges — less than Bank of Canada interest rate policies — were largely responsible for soaring inflation during the pandemic, a new report has concluded. The report, conducted by two economists at the C.D. Howe Institute, points the finger at Ottawa's unfunded spending spree that acted as 'helicopter drops' of money for the private sector. In 2020, the report says, 20.7 million Canadians out of an adult population of 30.3 million received income from one of the federal pandemic-related programs. In 2020, the programs are estimated to have cost $270 billion — about 12.5 per cent of Canada's gross domestic product (GDP) — and have since grown to about $360 billion to date. Start your day with a roundup of B.C.-focused news and opinion. By signing up you consent to receive the above newsletter from Postmedia Network Inc. A welcome email is on its way. If you don't see it, please check your junk folder. The next issue of Sunrise will soon be in your inbox. Please try again Interested in more newsletters? Browse here. While the programs generally succeeded in providing relief to individuals and businesses, and buttressed the economy during a crisis, the think tank says injecting that much 'nominal wealth' into an economy while unemployment has been relatively low led to an inflation burst and permanently higher prices. 'Whether this wealth takes the form of new money or new debt is largely irrelevant,' the report says. Benjamin Tal, the deputy chief economist of CIBC World Markets, agreed that loose fiscal monetary policy contributed to the pandemic-era price hikes, but thinks the central bank's low interest rates also played a role. 'There is no question about the fact that very accommodating fiscal and monetary policies were behind the acceleration in inflation,' Tal said. According to the Consumer Price Index (CPI), prices rose 11.4 per cent between January 2020 and December 2022. Although the pandemic started in China in December 2019 and the first case was reported in Canada on January 25, 2020, inflation didn't spike for more than a year. In fact, prices were rising at relatively normal rates until May 2021, and didn't peak until June 2022 when inflation hit 8.1 per cent, the highest rate in almost four decades. But while the C.D. Howe economists, David Andolfatto and Fernando Martin, are critical of the spending, their assessment of the Bank of Canada's policies at that time are more nuanced. They agree with the Bank of Canada's own assessment that it can be faulted for not raising interest rates quickly enough to suppress inflation at that time. They also argued that it could be criticized for not doing a better job communicating how it intends to achieve its inflation targets. But they conclude that there was ultimately little the central bank could have done to curb the price spikes. The paper acknowledges that the pandemic was a unique situation that included a series of inflationary and deflationary pressures. Prices rose in part because the supply of some products tightened, for example, due to factories being closed or experiencing reduced hours. Transportation became more expensive due to shipping delays and congestion at many ports. There were also shortages of some raw materials, such as lumber and metals, which also contributed to inflation. There was also increased demand for certain things, such as real estate, furniture, exercise equipment and home entertainment gadgets. Some of that demand increase was due to consumers having more disposable incomes. Many were saving money from working from home and not being able to go out or travel, while others got wage increases or (especially those in health care) were working longer hours. Income from government supports added to the demand. The result of reduced supply and rising demand was increased costs. Gasoline was among the products hit hardest by inflation, with a price increase of more than 50 per cent over that two-year period. Food and transportation jumped between 15 and 20 per cent, while appliances and rent increased by between 10 and 15 per cent. Finance Canada, the federal department responsible for fiscal policy, was not immediately available for comment. Since the pandemic ended, however, prices have not come back down for a number of reasons. Katherine Judge, senior economist at CIBC Capital Markets, said inflation remained a challenge after the pandemic because many consumers had pent-up demand and excess savings, while long-term changes such as more people working from home and the retirement of many baby boomers also played a role. In recent months, she added in an email, import tariffs imposed by Ottawa amid trade disputes have raised prices. Statistics Canada reported earlier this week that Canada's inflation rate accelerated to 1.9 per cent in June , up from 1.7 per cent the previous month. National Post stuck@ Our website is the place for the latest breaking news, exclusive scoops, longreads and provocative commentary. Please bookmark and sign up for our daily newsletter, Posted, here .
Calgary Herald
4 days ago
- Business
- Calgary Herald
New report says Ottawa to blame for higher consumer prices after spending splurge
This advertisement has not loaded yet, but your article continues below. Parliament Hill reflected on the Bank of Canada building in Ottawa on Sept. 18, 2024. A new report blames the Trudeau government's spending — less than Bank of Canada interest rate policies — for soaring inflation during the pandemic. Photo by David Kawai / Bloomberg The Trudeau government's spending splurges — less than Bank of Canada interest rate policies — were largely responsible for soaring inflation during the pandemic, a new report has concluded. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY Subscribe now to read the latest news in your city and across Canada. Unlimited online access to articles from across Canada with one account. Get exclusive access to the Calgary Herald ePaper, an electronic replica of the print edition that you can share, download and comment on. Enjoy insights and behind-the-scenes analysis from our award-winning journalists. Support local journalists and the next generation of journalists. Daily puzzles including the New York Times Crossword. SUBSCRIBE TO UNLOCK MORE ARTICLES Subscribe now to read the latest news in your city and across Canada. Unlimited online access to articles from across Canada with one account. Get exclusive access to the Calgary Herald ePaper, an electronic replica of the print edition that you can share, download and comment on. Enjoy insights and behind-the-scenes analysis from our award-winning journalists. Support local journalists and the next generation of journalists. Daily puzzles including the New York Times Crossword. REGISTER / SIGN IN TO UNLOCK MORE ARTICLES Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account. Share your thoughts and join the conversation in the comments. Enjoy additional articles per month. Get email updates from your favourite authors. THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK. Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors The report, conducted by two economists at the C.D. Howe Institute, points the finger at Ottawa's unfunded spending spree that acted as 'helicopter drops' of money for the private sector. In 2020, the report says, 20.7 million Canadians out of an adult population of 30.3 million received income from one of the federal pandemic-related programs. In 2020, the programs are estimated to have cost $270 billion — about 12.5 per cent of Canada's gross domestic product (GDP) — and have since grown to about $360 billion to date. Your weekday lunchtime roundup of curated links, news highlights, analysis and features. By signing up you consent to receive the above newsletter from Postmedia Network Inc. Please try again While the programs generally succeeded in providing relief to individuals and businesses, and buttressed the economy during a crisis, the think tank says injecting that much 'nominal wealth' into an economy while unemployment has been relatively low led to an inflation burst and permanently higher prices. 'Whether this wealth takes the form of new money or new debt is largely irrelevant,' the report says. Benjamin Tal, the deputy chief economist of CIBC World Markets, agreed that loose fiscal monetary policy contributed to the pandemic-era price hikes, but thinks the central bank's low interest rates also played a role. 'There is no question about the fact that very accommodating fiscal and monetary policies were behind the acceleration in inflation,' Tal said. According to the Consumer Price Index (CPI), prices rose 11.4 per cent between January 2020 and December 2022. Although the pandemic started in China in December 2019 and the first case was reported in Canada on January 25, 2020, inflation didn't spike for more than a year. In fact, prices were rising at relatively normal rates until May 2021, and didn't peak until June 2022 when inflation hit 8.1 per cent, the highest rate in almost four decades. But while the C.D. Howe economists, David Andolfatto and Fernando Martin, are critical of the spending, their assessment of the Bank of Canada's policies at that time are more nuanced. They agree with the Bank of Canada's own assessment that it can be faulted for not raising interest rates quickly enough to suppress inflation at that time. They also argued that it could be criticized for not doing a better job communicating how it intends to achieve its inflation targets. But they conclude that there was ultimately little the central bank could have done to curb the price spikes. This advertisement has not loaded yet. This advertisement has not loaded yet, but your article continues below. The paper acknowledges that the pandemic was a unique situation that included a series of inflationary and deflationary pressures. Prices rose in part because the supply of some products tightened, for example, due to factories being closed or experiencing reduced hours. Transportation became more expensive due to shipping delays and congestion at many ports. There were also shortages of some raw materials, such as lumber and metals, which also contributed to inflation. There was also increased demand for certain things, such as real estate, furniture, exercise equipment and home entertainment gadgets. Some of that demand increase was due to consumers having more disposable incomes. Many were saving money from working from home and not being able to go out or travel, while others got wage increases or (especially those in health care) were working longer hours. Income from government supports added to the demand. The result of reduced supply and rising demand was increased costs. Gasoline was among the products hit hardest by inflation, with a price increase of more than 50 per cent over that two-year period. Food and transportation jumped between 15 and 20 per cent, while appliances and rent increased by between 10 and 15 per cent. Finance Canada, the federal department responsible for fiscal policy, was not immediately available for comment. Since the pandemic ended, however, prices have not come back down for a number of reasons. Katherine Judge, senior economist at CIBC Capital Markets, said inflation remained a challenge after the pandemic because many consumers had pent-up demand and excess savings, while long-term changes such as more people working from home and the retirement of many baby boomers also played a role. In recent months, she added in an email, import tariffs imposed by Ottawa amid trade disputes have raised prices. Statistics Canada reported earlier this week that Canada's inflation rate accelerated to 1.9 per cent in June, up from 1.7 per cent the previous month. Our website is the place for the latest breaking news, exclusive scoops, longreads and provocative commentary. Please bookmark and sign up for our daily newsletter, Posted, here.
