LILLEY: Don’t expect a Trudeau victory lap as inflation rises again

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Inflation took a turn in the wrong direction again this past month: Statistics Canada said inflation hit 3.3% in July after dropping to 2.8%.

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Don’t expect to see Finance Minister Chrystia Freeland taking a victory lap this month, the way she did last month.

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In July, Freeland took a foolish and premature moment to celebrate inflation coming down, looking at just the topline number and not looking at the whole package before giving the Liberal government credit for slaying the inflation dragon.

“That is a significant moment. It should provide a lot of relief to Canadians,” Freeland told reporters in Delhi, India, after the news broke last month.

“Canada’s plan to bring down inflation is working,” she posted to social media.

Of course, the June numbers were lower because gas prices had fallen off a cliff compared to a year earlier and it is the same thing this month.

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In June 2022, the average price of a litre of gas across Canada was $2.07 compared to just $1.61 in June 2023. This past month, the average price of a litre nationally was $1.63 compared to $1.87 a year earlier.

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With gas prices rising again, we can expect the topline inflation figure to climb higher when the August figures are released. If that happens, expect the Bank of Canada to increase interest rates even further, one of the key drivers of inflation.

While gas is down, compared to a year earlier, absolute necessities are not, namely food and housing. Statistics Canada says that the mortgage interest cost index is up 30.6% compared to a year ago, and rents are climbing as well.

Food prices rose only 8.5% compared to a year ago after rising 9.1% in June, a figure that is far from sweet relief for anyone looking to put food on the table. Some prices were even higher: bakery products were up 9.8%, while the price for grapes — down 40% — will give some people smiles.

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Overall, inflation remains a problem for Canadians, one exacerbated by the Trudeau government and their out-of-control spending. It shouldn’t be lost on anyone that on the day the inflation report was scheduled to come out, a memo was leaked showing that newly minted Treasury Board President Anita Anand had told her cabinet colleagues they needed to find $15 billion in savings by October.

If only that were enough to control the firehose of money coming out of Ottawa, all sucked from your wallet.

In the 2022 budget, as the federal government had wound down financial supports for COVID-19, the projected spend for programs for the 2022-23 fiscal year was $425.4 billion. But by the next budget, spending for that same fiscal year was up to $435.9 billion.

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That $10.5 billion increase in a year is not insignificant or an anomaly.

Program spending in the first budget of the Trudeau government was $291 billion; we’ve increased that by 49% over the last eight years, a rate far higher than the combination of inflation and population growth in that time. Having Anand reduce spending by $15 billion, sadly, should be easy and painless since it amounts to a 3.4% cut after a 49% growth.

In the meantime, Canadians are stuck with the inflation that was made worse by Trudeau’s out-of-control spending. No one would argue services are 49% better today than in 2016 but we’ve paid for it by federal spending making the global inflationary pressures worse.

And with inflation likely to creep higher again in August, we can expect the Bank of Canada to keep hiking interest rates above and beyond the nine rate hikes they’ve put through over the last two years.

That, too, will push inflation higher. It’s a vicious cycle with no end in sight.

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