Chrystia Freeland outlines $8.9 billion plan to fight inflation

Measures include more money for low-income workers, seniors, parents and renters struggling with housing costs

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Deputy Prime Minister Chrystia Freeland on Thursday presented the federal government’s $8.9 billion ‘affordability plan’ that is supposed to help Canadians with the rising cost of living as inflation spikes of several decades.

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“Because of the investments we’ve already made in the last two federal budgets, a new set of measures is taking effect now to help Canadians who need it most,” Freeland said during a keynote address at the ‘Empire Club of Canada. “That’s $8.9 billion in new support for Canadians this year. This is our affordability plan.

The Affordability Plan provides $1.7 billion in new support for workers. It includes improvements to the Canada Workers Benefit, providing $2,400 to low-income workers starting this year; a 10% increase in Old Age Security for seniors over 75, which should give three million seniors $766 or more; and a one-time payment of $500 to one million Canadian renters struggling with housing costs.

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It will also reduce childcare costs by an average of 50%; provide a dental plan for Canadians earning less than $90,000 starting with children under 12; and indexing the federal minimum wage by $15 an hour to inflation.

Freeland said the new support could rub some hawkish economists the wrong way.

“But for the tax hawks among you, fear not,” she said in her speech. “This is new money for the Canadians receiving it this year, but we have incorporated these measures into our last two budgets.

The affordability plan is one part of a five-part strategy to help the economy recover from the COVID-19 recession that Freeland outlined during his speech on the economy. Other elements of the plan included a focus on the role of the Bank of Canada, fiscal restraint, addressing labor shortages and creating good jobs.

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The Deputy Prime Minister highlighted the role that the country’s central bank plays in inflation targeting as part of its mandate, adding that it will need government policy assistance to deal with economic constraints. ‘supply. She also hit back at criticism the central bank has received from opposition parties in recent months.

“In this time of global economic and political volatility, undermining Canada’s fundamental institutions – including the Bank of Canada – is highly irresponsible, let alone economic illiteracy,” she said.

Freeland also spoke of fiscal restraint, noting that the federal government has spent an “extraordinary amount of money” to get through the pandemic. She pointed out that Canada has the lowest debt-to-GDP ratio among its G7 peers, and added that the Bank of Canada and the government are working to withdraw monetary and fiscal stimulus.

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“I am determined to see our debt-to-GDP ratio continue to decline and our deficits continue to shrink,” she said. “Our pandemic debt must – and will – be repaid. In tabling the budget in April, I reaffirmed that this is our fiscal anchor, and committed to reviewing and reducing government spending, as it is the responsible thing to do.

The April 7 budget included less spending than expected at $452 billion, following a massive response to the pandemic in recent years. Fiscal balance sheets are steadily improving, so much so that the government is forgoing revenue-generating strategies such as its ultra-long bond issuance, which was canceled last week.

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Freeland also highlighted the importance of addressing labor shortages through the government’s plan to invest in immigration, skills and training, affordable childcare to help women participate in the labor market, as well as affordable housing. The federal government’s plan also includes making sure there are enough good jobs for middle-class families.

Randall Bartlett, senior director of the Canadian economy team at Desjardins Group, said the new measures are positive for households struggling with inflation.

“First and foremost, that’s number one, acknowledging that it’s a problem and making sure they demonstrate to Canadians that they take it seriously and do something about it.” , he said, adding that his second biggest conclusion was to recognize the independence of the Bank of Canada.

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“In the context of the high inflation that we’re seeing right now, providing this kind of targeted support as a bit of a bridge for low-income households to shore up their finances to some degree through this period of High inflation and rising interest rates are going to be a welcome development for many of these households.

Bartlett also highlighted Canada’s AAA rating as an important highlight of his speech.

As the country faces a new wave of global challenges, former Bank of Canada Governor David Dodge noted this week that achieving a soft landing with the least amount of pain for the Canadian economy will be a challenge that policy makers will have to take up. In Thursday’s remarks, Freeland echoed those sentiments, but said a soft landing isn’t guaranteed.

“We’ve been through two remarkable turbulent years,” she said. “Our challenge now is to land the plane. A soft landing is not guaranteed. But, fortunately for us, there is no country in the world better positioned than Canada to achieve this.

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