It would be “very difficult” to “attribute inflation to federal government spending,” judges Ottawa, believing that it is rather the provinces which fueled it.
Earlier in the chamber this week, Conservative MP Dominique Vien, citing a Scotiabank report, argued that “excessive government spending adds 2 percentage points to interest rates in Canada.”
“The report my colleague cites says that COVID-related supports and provincial government spending are responsible for an increase, not federal government spending,” retorted Parliamentary Secretary to the Minister of Finance, Rachel Bendayan.
However, the author of the said report specifies Duty that the federal government cannot absolve itself of any responsibility for the growth in inflation in recent years, which has led to an increase in the key rate, and rather proves the conservatives right.
If “the provinces have more responsibilities than the federal government” in terms of spending, Jean-François Perrault emphasizes that we must not forget to add to the calculation the federal transfers that were made during the pandemic, for the PCU.
The two levels of government would, according to the economist, “roughly speaking” have the same responsibility. He added that some pandemic-related spending, even if it had an impact on inflation, was “necessary.” “It’s not really a question about the validity or otherwise of the tax policy that was implemented, but rather a question of did they overdo it, or did it last too long,” he questions at both levels of government.
During his intervention, Mme Bendayan did not blame the provinces for their spending. Instead, she questioned the opposition, asking if it was suggesting that it was necessary to “demand that the provinces spend less”.
Contacted by The duty to clarify his remarks, Mr.me Bendayan did not respond to an interview request. With its economic statement, the federal government “is not intentionally adding fuel to the fire of inflation,” however, indicated in writing the spokesperson for the Ministry of Finance, Katherine Cuplinskas.
In recent months, the Governor of the Bank of Canada, Tiff Macklem, has already indicated that the fiscal policy of governments, both provincial and federal, could complicate the task of the Bank of Canada.
With Clémence Pavic
This report is supported by the Local Journalism Initiative, funded by the Government of Canada.