A new report from the Parliamentary Budget Officer (PBO) indicates that inflation and rising interest rates have eroded the purchasing power of Canadians since 2022, particularly for low-income households. On the other hand, wealthier households saw their purchasing power increase during this period.
Parliamentary Budget Officer Yves Giroux says government transfers, wage increases and net investment income have helped the disposable income of high-income households outpace inflation since 2019.
PBO report says investment income of the richest 20% of households grew faster than their debt interest payments, resulting in a net increase relative to inflation and strengthening power purchasing rate for this quintile in 2023.
For other households, increases in interest payments were on average higher than their investment income last year.
As a result, households in the third and fourth quintiles saw their purchasing power stagnate, while households with the lowest incomes saw their power deteriorate.
The PBO also emphasizes that purchasing power has evolved differently from one province to another. Quebec, Ontario and British Columbia are among the provinces that experienced an average increase in their purchasing power, while Newfoundland and Labrador, Nova Scotia and Alberta suffered from a deterioration of this index.
Between the last quarter of 2019 and the first quarter of 2024, the purchasing power index increased by 3.9 percentage points in Quebec, by 3.3 points in Ontario and by 1.3 points in New Brunswick .