The Minister of Finance, Eric Girard, announced Wednesday a cap on the increase in school taxes after having revised upwards his forecasts of recession in Quebec.
Taxpayers will suffer average increases in their school taxes, which will vary between 2% and 3% this year, the minister said during a press briefing.
Without this intervention, the average increase would have been 17%, assured Mr. Girard, specifying that the expenses of the school service centers have increased due to an increase in hiring and remuneration.
“The government of Quebec will make an additional gesture to help Quebecers cope with rising inflation and rising interest rates,” he said.
The cost of this measure is 173 million. For example, for a house worth $350,000, a taxpayer will save $50.
Mr. Girard said that this announcement has nothing to do with the approach of the election campaign.
“We had to announce that today,” he said. The school tax rate will be published today, and the tax notices will be sent in July. »
Last week, Prime Minister François Legault said that, to avoid any appearance of electoralism, his ministers will cease all announcements from July.
Towards a recession?
Mr. Girard’s announcement came as the Federal Reserve decreed a 0.75% increase in its key rate on Wednesday, which will fluctuate in a range between 1.5% and 1.75%. The minister noted that the US central bank has lagged behind in raising its benchmark rate.
“So we can say that the Federal Reserve has revised significantly upwards the rate that will be necessary to contain inflation in the United States,” he said.
Mr. Girard admitted that he now foresees a higher risk of recession in Quebec next year. In March, he estimated that probability at 25%, compared to 35% now.
The impact of the war in Ukraine on energy prices and lockdowns in China disrupting supply chains are contributing factors to the rise, the minister explained.
“It was not anticipated that bottlenecks in supply chains would continue for so long with Shanghai completely shut down to contain the virus,” he said. Inflation is higher than we expected. Central banks have to tighten monetary conditions more significantly, and that will slow the economy. »
Despite this, the Minister was optimistic, hoping that inflation will have fallen sufficiently by the end of the year to avoid a recession.
“The probability of having positive growth is always twice as high as the probability of a recession,” he pointed out.
High risks
Liberal MP and ex-finance minister Carlos Leitão for his part judged that the risks of recession, even at 35%, are currently high. “A 35% risk, in the world of probability, is a lot,” he said.
Even if Quebec does not technically fall into recession, after two consecutive quarters of declining economic growth, Mr. Leitão foresees an effect to come.
“In everyday life, citizens and consumers, in October and November, are going to feel like we’re in a recession,” he said. People will put off spending and focus on essential spending, and it’s a vicious cycle. »
As for the effect of rate hikes on inflation, Leitão expects the cost of living to continue accelerating at a rate of 5-6% by the end of the year. “It’s still way too high,” he said.