QUESTION PERIOD — Finance
Canada's Inflation Rate
June 22, 2023
My question is for the government leader in the Senate. Shortly after Minister Freeland delivered a budget full of inflationary spending, the inflation rate went up again. In its April report, Statistics Canada said Canadians paid over 28% more in mortgage interest costs that month, year over year. The International Monetary Fund, IMF, says Canada has the highest risk of mortgage defaults among advanced economies. This warning was delivered before the Bank of Canada raised the benchmark rate again, to 4.75%.
On Tuesday, our banking regulator told the banks to put aside more money in their “rainy-day funds” to cover defaults amid high household debt and high interest rates.
Leader, why doesn’t the Trudeau government recognize that spending fuels higher inflation and interest rates, which are sending mortgage payments sky-high?
Thank you for your question. Respectfully, the government is not of the view that its spending has, in fact, had those results. Paul Vieira reported that the economists at Desjardins Securities were quite clear in their analysis of the budget that the spending announced in the budget was not especially inflationary.
It is true that Canadians are suffering from high mortgage costs and high interest rates. This is a function of factors that go far beyond the government’s spending. Again, in the interest of respecting that my answers be short, I will refrain from citing all the examples that Mr. Vieira cited of why the economy of Canada is on a very sustainable and good track, despite the problems.
A National Bank of Canada report from earlier this month showed the average mortgage payments as a percentage of income in Canada are just under 61%. In Toronto, it’s 82.8%, and in Vancouver, it’s a whopping 94.9%. Again, this report came before the Bank of Canada increased rates to the highest level in 22 years. Canadians were already carrying the highest household debt in the G7. Now, many families are facing a crisis, as their mortgage payments could increase by up to 40%.
Leader, that number is not a partisan talking point. It’s taken from the Bank of Canada report released in May. How can you possibly say the Trudeau government’s economic strategy is a success, as you recently claimed?
My responses to your earlier question and to this question are not responses to “partisanship.” It’s simply to provide an accurate economic analysis. The fact is that mortgage rates are a function of not only interest rates but also house prices or the amount that one pays.
Canadians are suffering with higher interests rates and facing challenges with affordable housing, but as I have said on many occasions, that is a function of many factors that have nothing to do with the government’s monetary or fiscal policy.
The government has provided assistance to individuals in this country and is providing support for the building of more low-cost housing. It is simply incorrect to attribute the increasing share which Canadians unfortunately have to pay to sustain their mortgages to government spending alone. It is a function of far more market forces and others than anyone can fairly see.
