Freeland’s restraint the right choice
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There’s an old saying — commonly attributed (erroneously) to U.S. founding father Benjamin Franklin but more likely first intoned by 17th-century British parliamentarian/statesman Edwin Sandys — that advises “honesty is the best policy.” By laying out a straightforward assessment of how Canadians might endure the current inflation-driven fiscal stresses, Finance Minister Chrystia Freeland seems determined to demonstrate the general advice applies specifically to economic policy, as well.
Freeland leaves door open to more economic action
TORONTO - The federal government is prepared to take further action to address more severe economic volatility, but Finance Minister Chrystia Freeland wouldn't say if a hard landing for Canada's housing market would be the trigger for such moves.
Freeland told reporters Thursday that achieving a soft landing is going to be challenging, but Canada has a better shot at it than other countries.
"We understand we need to be agile, we need to be open to further action as the situation develops," she said after addressing the Empire Club of Canada.
When asked if that includes reducing the gas tax to provide some relief at the pumps, Freeland said the government is "very much leaving the door open to further action."
In a speech this week to Toronto’s Empire Club, Ms. Freeland opted not to announce any bold measures or big-money initiatives aimed at buttressing the nation against the current inflationary storm. Instead, she essentially told Canadians to hang onto their hats.
“I think it’s important for us to be candid with each other, with Canadians, that this is a volatile economic time and an uncertain economic time,” she said. “And for that reason, I can’t make any promises to Canadians about how the next weeks and months are going to unfold, and I want to be honest about that.”
Rather than using the occasion of her address to some of central Canada’s business and financial leaders to unveil sweeping programs aimed at stimulating the struggling economy, the finance minister instead outlined a package of already-announced initiatives, including enhanced benefits for workers, increased funding for rent-support and child-care programs and an Old Age Security top-up for seniors over 75, which total almost $9 billion and could help Canadians make ends meet during the current crunch.
Ms. Freeland’s stay-the-course speech came on the heels of the U.S. Federal Reserve raising its benchmark interest rates by three-quarters of a percentage point, an attempt to rein in inflation that amounts to the most aggressive rate hike since 1994. The Fed’s chair, Jay Powell, indicated that another significant rate increase will likely be announced in July.
The Bank of Canada, which has raised its key interest rate three times this year in response to inflationary pressures, is expected to follow the U.S. agency’s lead. And based on Ms. Freeland’s remarks this week, it will be mostly up to the Bank of Canada to help this country’s economy navigate the coming months of global financial unrest.
“It’s basically all on the central bank now,” said Business Council of Canada vice-president of policy Robert Asselin, who criticized the finance minister’s speech as long on rhetoric but short on policy. “(The Bank of Canada) will be the one doing the heavy lifting on inflation.”
When one considers how the Trudeau government has often been accused of politically expedient policy decision-making and superfluous speechifying (such as the prime minister’s rapid gun-control response to recent mass shootings in the U.S.), Ms. Freeland’s absent-of-announcements address stands as something of a breath of fresh air.
It’s also the most prudent plan in the current economic climate. With the Liberals’ budget this spring having already projected a $52.8-billion deficit for the 2022-23 fiscal year, it would have been unwise to suddenly start throwing billions more into a doomed-to-fail domestic attempt to cool an inflationary trend that is being fuelled largely by events on the other side of the world.
And while there are doubtless some Canadians who would argue another support-program cheque from the government is what’s required, Ms. Freeland’s straight-talk/no-new-action approach is what the current financial moment demanded.
Honesty. A good financial policy. Imagine that.