(Ottawa) Finance Minister Chrystia Freeland is due to deliver an economic and fiscal update in early November. For the past week, she has carefully prepared the ground for the announcement of bad news. Without pronouncing the word that begins with an R (recession), she foresees difficult months.
“The next few months will be demanding. It’s important that Canadians hear me say that,” the Minister of Finance repeated in each of her three speeches delivered last week in Gatineau, Windsor (Ontario) and Edmonton.
Strong gusts will blow in the faces of families, workers and owners of small and medium-sized businesses over the next 18 months, she said.
But the Trudeau government will not be able to help everyone, as was the case during the pandemic. Ottawa will have to be disciplined so as not to throw inflationary oil on the fire, she said. She is thus embarking on a crusade in favor of budgetary rigor – a notion set aside by the Liberals since they came to power in 2015.
Even if inflation declines in the coming months, the situation will remain difficult. Difficult for our friends. For our family. For our neighbors. And for our communities. Our economy will slow down as the central bank has to tackle inflation.
Chrystia Freeland, Minister of Finance of Canada
“Many people will see their mortgage payments increase. Business will no longer be as good as it has been since deconfinement. And the unemployment rate will no longer be at a historic low, ”she added in a rare burst of candor from a finance minister.
Two questions arise from these speeches. First, will she be able to resist pressure from Prime Minister Justin Trudeau if, on the contrary, he deems that spending must be increased to support families in difficulty? These pressures could be enormous if the Liberals’ approval ratings, in power since 2015, were to plummet as the Canadian economy sank.
Second, will she be able to stand up to the New Democratic Party (NDP) if the situation gets even worse on the economic front and the troops of Jagmeet Singh demand costly new measures to continue supporting the minority Liberals in the House of Commons until June 2025, as stipulated in the agreement between the Liberal camp and the NDP camp reached in March?
In the first case, there cannot be even the semblance of a divergence between the Prime Minister and his Minister of Finance on budgetary matters.
When that happens, the Minister of Finance has to pack his bags.
It has happened to a few big money makers in the past. Former minister Bill Morneau is the latest in the running. In August 2020, he resigned from his post amid the COVID-19 pandemic. The official reason: he did not intend to seek the votes in federal elections which were not yet on the radar. They finally took place a year later. But the real cause of his departure was the dispute between him and Justin Trudeau over the extent of federal spending to revive the economy after the pandemic.
In the case of the NDP, its leader Jagmeet Singh sent a letter to Prime Minister Justin Trudeau on Friday urging him to take further action as soon as the economic and fiscal update is issued to “protect Canadians from the effects of inflation and an impending recession.
In particular, he calls for the establishment of a tax on the “exceptional profits” of companies and to redistribute the fruits of it to the people who are struggling. This has been done in other countries, according to Singh.
The NDP leader also wants to see measures taken to tackle the main structural factors that are fueling inflation and increasing the risk of recession, including new investments in infrastructure such as ports and roads. railway where the goods are transported.
And he proposes an immediate reform of the employment insurance program that would take into account the concerns of the unions and the central unions. At a minimum, he believes Ottawa needs to reinstate pandemic-era EI rules by the time comprehensive reform is enacted.
“After a pandemic, a cost of living crisis and now a looming recession – caused in part by the overly aggressive measures of the Bank of Canada and the indifference of your government – Canadians desperately need us to act. to prepare us for the economic storm that is coming,” he pleaded in his letter to the Prime Minister.
On Wednesday, the Bank of Canada is expected to announce another major interest rate hike. Most observers are expecting another hefty increase of 75 percentage points.
Since last March, the Bank of Canada has raised its key interest rate from 0.25% to 3.25% – the highest increase among the G7 countries. This increase has obviously increased borrowing costs for families and businesses.
Although inflation has slowed somewhat in recent months, Bank of Canada Governor Tiff Macklem has made it clear that it is too early to take a break.
“Put simply, there is still a lot to do,” Macklem said during a speech in Halifax on October 6th.
His work is not finished. And the political pressure on Chrystia Freeland is just beginning.