A few days before the presentation of the next Girard budget, galloping inflation worries Quebecers more than ever. But the provincial government has few means to fight once morest this phenomenon, which is more a matter of the monetary policy of the Bank of Canada, argued several economists consulted by the QMI Agency. On the other hand, Quebec can put in place various measures to help the population cope with the increase in the cost of living, they argued. Overview of his “toolbox”.
Pay checks
This is the option chosen so far by the Legault government: send checks to households to allow them to offset the price increase. While the Prime Minister has already revealed that it will be a “one-time amount” larger than the $200 to $275 paid out at the start of winter (for those earning less than $53,000), he has no not specified whether they were intended for all Quebecers. According to the senior director of consulting services at Raymond Chabot Grant Thornton, Jean Philippe-Brosseau, these checks should however target people with low incomes, “those for whom the grocery basket counts for a large part”. However, this is a “short-term” solution for the government, which is betting that inflation will come down soon.
Index government benefits
One of the most appropriate options for combating the effects of inflation according to the experts consulted, the indexation of government benefits such as old age pensions, social assistance or the guaranteed income supplement, has not been discussed so far by parliamentarians. Unlike cheques, this measure persists over time and helps particularly the poorest people who depend on these benefits, explained the economist and former Minister of Finance, Nicolas Marceau.
Freeze prices?
Proposed by several parties, the freezing of various tariffs including the price of electricity to fight once morest the increase in costs is not recommended by the economists consulted who fear a possible “tariff shock”. “The government never does anything for nothing,” also argued the former Minister for Finance, Alain Paquet, according to whom freezing the rates of state corporations would lead to a reduction in their income and therefore ultimately in the money that they pay to the government.
Tax-free basic necessities
The Liberal Party of Quebec has suggested temporarily stopping the collection of Quebec sales tax (QST) on basic necessities such as toothbrushes, toothpaste, body soap and over-the-counter medications. However, this measure would have little real effect on the savings of Quebecers since the majority of these products, including basic foods, are already zero-rated, estimates Professor Stephen Gordon in the Department of Economics at Laval University.
Suspend gasoline tax
Implemented in Alberta, the suspension of the provincial gasoline tax has so far been ruled out by the Legault government. Conservative leader Éric Duhaime, who also called for the QST to be suspended on this matter, estimates that Quebecers might thus save nearly 20 cents per litre. But the economists consulted advise once morest going ahead with such a measure, which would ultimately deprive Quebec of significant revenue and which would undermine its objective of combating the production of greenhouse gases. “It is not by artificially reducing the price of gasoline, even if it pleased people, that we would achieve this long-term objective”, argued the economist and former Minister for Finance, Alain Paquet. .
Delay major projects
Seniors’ homes, schools, highways: the government will never have provided so much money to renovate or build in the next ten years with $135 billion included in the Quebec Infrastructure Plan (PQI). Could some of these projects be postponed in the hope of reducing the pressure on the price and availability of materials? If this option might be “justified” according to the senior director of consulting services at Raymond Chabot Grant Thornton, Jean Philippe-Brosseau, he advises once morest it given the advanced age of Quebec’s infrastructures.
Freeze the prices of certain products?
Worthy of the Soviet Union, this method is discouraged by absolutely all the economists consulted. Indeed, this might create a scarcity of products whose prices would be fixed, since they would no longer be interesting to sell, argued the professor in the economics department of Laval University, Stephen Gordon. “We would trade an inflation problem for a general shortage problem,” he explained.
Record inflation
- Inflation in Canada rose 5.7% in February 2022, the biggest increase since August 1991, according to the latest Statistics Canada data released on Wednesday.
- Excluding gasoline, the Consumer Price Index (CPI) rose 4.7% year-over-year in February, outpacing the increase recorded in January 2022 (+4.3%) which corresponded the largest increase in the index since 1999.
