(Ottawa) By sprinkling the country with billions of dollars in new measures over the past 10 days in anticipation of the federal budget, Prime Minister Justin Trudeau is adding fuel to the inflationary fire. At the same time, it risks unduly delaying a reduction in the key rate of the Bank of Canada which Canadians greatly need, believes the leader of the Conservative Party, Pierre Poilievre.
In an interview given to The PressMr. Poilievre argued that the Prime Minister is prolonging the misery of many Canadian households who are struggling to make ends meet by refusing to adopt the spending control measures that are necessary within the government system. the federal state.
In recent days, Justin Trudeau and his ministers have announced some $10 billion in new measures affecting housing, daycare, artificial intelligence and defense. These expenses will be formally confirmed in the next budget that Finance Minister Chrystia Freeland is due to table in the House of Commons on April 16. Mr. Trudeau and his cabinet plan to increase the number of announcements between now and the budget.
“The Prime Minister has no sense of what budgetary discipline means. Even though COVID is over, he continues to spend non-stop. […] But every dollar he spends comes from the pockets of people who have worked so hard. He is an arsonist who thinks he is a firefighter. He waters the fire not with water, but with oil. So, the inflationary fire continues to burn and it is too hot for families and seniors who are struggling,” argued the Conservative leader.
Mr. Poilievre said that some economists already fear that the budget plan that the Prime Minister and his cabinet are unveiling will breathe new life into inflation and force the Bank of Canada to postpone any reduction in the key rate. .
At least that’s the case for Derek Holt, vice-president and head of capital markets economics at Scotiabank in Toronto. The latter argued in an interview with Financial Post that the series of expenditures announced by the provinces in their budgets and those announced by the Trudeau government in recent days risk delaying any reduction in interest rates.
Testifying in February before the House of Commons finance committee, the Governor of the Bank of Canada, Tiff Macklem, also issued a warning to the federal government and those of the provinces, inviting them to control their spending so as not to fuel inflation in the country. A significant increase in spending could undermine the efforts that the Bank of Canada has been making for almost two years to bring the inflation rate within the target range of 1% to 3%.
“If governments were to increase their spending, it could start to hinder the reduction of inflation and that would be of no use,” he told members of the parliamentary committee.
The Bank of Canada is expected to announce its next policy rate decision on Wednesday. The consensus among economists is that the federal institution should maintain the key rate at 5%. But they believe that a cut in the key rate is on the cards for June, particularly following the slowdown in the economy and the rise in the unemployment rate last month.
Budgetary discipline
In an interview, Mr. Poilievre maintained that the Trudeau government must, urgently, impose new budgetary discipline on Ottawa. Already, public finances are in a precarious state, according to him, due to uncontrolled spending during eight years of Liberal government.
He said a big red light should be flashing brightly on the Finance Department’s dashboard: Ottawa will spend as much money this year paying interest costs on accumulated debt as it pays out. to the provinces in terms of health transfers.
In her November economic update, Minister Chrystia Freeland predicted that debt interest costs would reach $52.4 billion in 2024-2025 – an amount equivalent to federal health transfers.
And over the next few years, health transfers will increase essentially at the same rate as federal debt charges due to rising interest rates and the explosion of debt accumulated over the past eight years.
We are going to give more money to Wall Street bankers than to nurses and doctors because of Justin Trudeau’s enormous debts. Waste must be eliminated.
Pierre Poilievre, leader of the Conservative Party
Mr. Poilievre reaffirmed his intention, if he takes power after the next election scheduled for October 2025, to adopt a law requiring the cabinet to find a dollar of savings for each dollar of new spending.
To those who accuse him of wanting to impose austerity, Mr. Poilievre responds: “I find that ironic because Canadians are already experiencing austerity in their personal finances. The Trudeau government lives in abundance, but families and seniors live in austerity, just like the two million Canadians who go to a food bank every day. This is austerity. »