Documents give glimpse of Finance Department's outlook, warnings on inflation
Newly released documents show the Finance Department last year warned that the pace of price increases could gain speed, even as the Liberal government and central bank maintained that inflationary pressures were temporary.
In a briefing note to Finance Minister Chrystia Freeland from the spring, officials outlined "the case for runaway inflation" as part of a larger review of consumer prices.
While the majority of pressures at the time were the result of comparing prices to lows seen one year earlier during the first wave
of the COVID-19 pandemic, the briefing note says inflation readings could go up or there were "plausible upside risks to the inflation outlook over the medium-term."
The note was written after Statistics Canada reported the annual rate of inflation hit 3.6 per cent in May 2021. The rate has risen even higher since.
The document is one of many on inflation that the Finance Department created last year, and obtained by The Canadian Press under the Access to Information Act.
In a June presentation, Finance officials noted that inflation readings would remain elevated in 2021, relying on forecasters who figured supply chain issues inflating prices would dissipate to prevent runaway inflation.
The annual inflation rate hit 4.7 per cent in November. RBC senior economist Nathan Janzen said December's reading may be a touch higher when Statistics Canada releases its inflation report on Wednesday.
A Bank of Canada survey released Monday noted that inflation was the biggest economic concern among consumers, who also expect inflation to remain near five per cent for the year.
The inflation rate for 2021 is likely to be double what the Finance Department relied on in last year's first quarter survey of forecasters, said Stephen Tapp, chief economist with the Canadian Chamber of Commerce.
"That's probably one of the biggest misses you're going to have on record," Tapp said. "This has been the biggest positive shock to inflation that I can remember by far in my forecasting career. So it's huge."
Inflation rates are also now above where they would have been if the consumer price index had stayed on two-per-cent trajectory, meaning prices have now gone beyond just making up for the drops seen in 2020, said University of Calgary economist Trevor Tombe.
Wages haven't kept up at the same pace, creating a particular crunch for low-income households who can't as easily handle jumps in prices for things like gasoline and food, said Tu Nguyen, an economist with accounting firm RSM Canada.
Supply chain disruptions have been a key reason for rising prices.
In a question period note from June, the department suggested Freeland answer questions about inflation by saying that the government's budget would "help rebuild and boost supply capacity, increasing the space for the economy to grow without the risk of high inflation."
The start of 2022 has seen a backlog of ships unable to unload cargo -- supply logistics company Flexport counted more than 120 vessels waiting to dock at the busy ports of Los Angeles and Long Beach. Freight booking company Freightos also said shipping container costs remain eight to nine times above pre-pandemic levels, even with a recent decline.
Conservative finance critic Pierre Poilievre said Tuesday that the finance minister and government have done nothing to help counter inflation, and plenty to worsen it. He said he plans to ask Freeland about the department's views on inflation when the minister testifies at a Commons finance committee study on inflation.
"Instead of heeding the warnings of her own department, she has poured more inflationary fuel on the fire in the form of higher spending, deficits and taxes," Poilievre said.
The concern that Finance officials flagged in the spring was whether temporary issues affecting inflation, such as supply-chain issues, "will last long enough to be perceived to be permanent."
It's why the department underlined the need to monitor expectations lest they create a cycle of price increases, as companies pass on higher costs to consumers, that then puts pressure on wages to keep up.
Consumers and businesses in the Bank of Canada survey, conducted before the latest wave of COVID-19, expected high inflation over this year and next.
"That will be very important to keep an eye on this year: if people start to behave in a way that expects higher inflation," Tombe said. "If they do, then that may be a force that creates the very thing that they were worried about."
This report by The Canadian Press was first published Jan. 18, 2022.
IN DEPTH
Budget 2024 prioritizes housing while taxing highest earners, deficit projected at $39.8B
In an effort to level the playing field for young people, in the 2024 federal budget, the government is targeting Canada's highest earners with new taxes in order to help offset billions in new spending to enhance the country's housing supply and social supports.
'One of the greatest': Former prime minister Brian Mulroney commemorated at state funeral
Prominent Canadians, political leaders, and family members remembered former prime minister and Progressive Conservative titan Brian Mulroney as an ambitious and compassionate nation-builder at his state funeral on Saturday.
'Democracy requires constant vigilance' Trudeau testifies at inquiry into foreign election interference in Canada
Prime Minister Justin Trudeau testified Wednesday before the national public inquiry into foreign interference in Canada's electoral processes, following a day of testimony from top cabinet ministers about allegations of meddling in the 2019 and 2021 federal elections. Recap all the prime minister had to say.
As Poilievre sides with Smith on trans restrictions, former Conservative candidate says he's 'playing with fire'
Siding with Alberta Premier Danielle Smith on her proposed restrictions on transgender youth, Conservative Leader Pierre Poilievre confirmed Wednesday that he is against trans and non-binary minors using puberty blockers.
Supports for passengers, farmers, artists: 7 bills from MPs and Senators to watch in 2024
When parliamentarians return to Ottawa in a few weeks to kick off the 2024 sitting, there are a few bills from MPs and senators that will be worth keeping an eye on, from a 'gutted' proposal to offer a carbon tax break to farmers, to an initiative aimed at improving Canada's DNA data bank.
Opinion
opinion Don Martin: Gusher of Liberal spending won't put out the fire in this dumpster
A Hail Mary rehash of the greatest hits from the Trudeau government’s three-week travelling pony-show, the 2024 federal budget takes aim at reversing the party’s popularity plunge in the under-40 set, writes political columnist Don Martin. But will it work before the next election?
opinion Don Martin: The doctor Trudeau dumped has a prescription for better health care
Political columnist Don Martin sat down with former federal health minister Jane Philpott, who's on a crusade to help fix Canada's broken health care system, and who declined to take any shots at the prime minister who dumped her from caucus.
opinion Don Martin: Trudeau's seeking shelter from the housing storm he helped create
While Justin Trudeau's recent housing announcements are generally drawing praise from experts, political columnist Don Martin argues there shouldn’t be any standing ovations for a prime minister who helped caused the problem in the first place.
opinion Don Martin: Poilievre has the field to himself as he races across the country to big crowds
It came to pass on Thursday evening that the confidentially predictable failure of the Official Opposition non-confidence motion went down with 204 Liberal, BQ and NDP nays to 116 Conservative yeas. But forcing Canada into a federal election campaign was never the point.
opinion Don Martin: How a beer break may have doomed the carbon tax hike
When the Liberal government chopped a planned beer excise tax hike to two per cent from 4.5 per cent and froze future increases until after the next election, says political columnist Don Martin, it almost guaranteed a similar carbon tax move in the offing.
CTVNews.ca Top Stories
Bodies found by U.S. authorities searching for missing B.C. kayakers
United States authorities who have been searching for a pair of missing kayakers from British Columbia since the weekend have recovered two bodies in the nearby San Juan Islands of Washington state.
Amid concerns over 'collateral damage' Trudeau, Freeland defend capital gains tax change
Facing pushback from physicians and businesspeople over the coming increase to the capital gains inclusion rate, Prime Minister Justin Trudeau and his deputy Chrystia Freeland are standing by their plan to target Canada's highest earners.
'It's discriminatory': Individuals refused entry to Ontario legislature for wearing keffiyeh
Individuals being barred from entering Ontario’s legislature while wearing a keffiyeh say the garment is part of their cultural identity— and the only ones making it political are the politicians banning it.
Tom Mulcair: Park littered with trash after 'pilot project' is perfect symbol of Trudeau governance
Former NDP leader Tom Mulcair says that what's happening now in a trash-littered federal park in Quebec is a perfect metaphor for how the Trudeau government runs things.
Saskatchewan households will continue to receive carbon tax rebate: Trudeau
Households in Saskatchewan will continue to receive Canada Carbon Rebate payments, despite the province refusing to remit the federal carbon price on natural gas, Prime Minister Justin Trudeau said Tuesday.
'It's just so hard to let it go': Umar Zameer still haunted by death of Toronto police officer
“It's just so hard to let it go. I mean, everyone is telling me, ‘you have to move on,’ but I know someone is not here [anymore]. So I don't know how I will move on." That’s what Umar Zameer, the man recently acquitted in the death of a Toronto police officer, told CTV News Toronto in a sit-down interview on Tuesday.
Senate expenses climbed to $7.2 million in 2023, up nearly 30%
Senators in Canada claimed $7.2 million in expenses in 2023, a nearly 30 per cent increase over the previous year.
Canucks goalie Thatcher Demko won't play in Game 2
The Vancouver Canucks will be without all-star goalie Thatcher Demko when they face the Nashville Predators in Game 2 of their first-round playoff series.
Pedestrian, baby injured after stroller struck and dragged by vehicle in Squamish, B.C.
Police say a baby and a pedestrian suffered non-life-threatening injuries after a vehicle struck a baby stroller and dragged it for two blocks before stopping in Squamish, B.C.
Local Spotlight
Mystery surrounds giant custom Canucks jerseys worn by Lions Gate Bridge statues
The giant stone statues guarding the Lions Gate Bridge have been dressed in custom Vancouver Canucks jerseys as the NHL playoffs get underway.
'I'm committed': Oilers fan won't cut hair until Stanley Cup comes to Edmonton
A local Oilers fan is hoping to see his team cut through the postseason, so he can cut his hair.
'It's not my father's body!' Wrong man sent home after death on family vacation in Cuba
A family from Laval, Que. is looking for answers... and their father's body. He died on vacation in Cuba and authorities sent someone else's body back to Canada.
'Once is too many times': Education assistants facing rising violence in classrooms
A former educational assistant is calling attention to the rising violence in Alberta's classrooms.
What is capital gains tax? How is it going to affect the economy and the younger generations?
The federal government says its plan to increase taxes on capital gains is aimed at wealthy Canadians to achieve “tax fairness.”
UBC football star turning heads in lead up to NFL draft
At 6'8" and 350 pounds, there is nothing typical about UBC offensive lineman Giovanni Manu, who was born in Tonga and went to high school in Pitt Meadows.
Cat found at Pearson airport 3 days after going missing
Kevin the cat has been reunited with his family after enduring a harrowing three-day ordeal while lost at Toronto Pearson International Airport earlier this week.
Molly on a mission: N.S. student collecting books about women in sport for school library
Molly Knight, a Grade 4 student in Nova Scotia, noticed her school library did not have many books on female athletes, so she started her own book drive in hopes of changing that.
Where did the gold go? Crime expert weighs in on unfolding Pearson airport heist investigation
Almost 7,000 bars of pure gold were stolen from Pearson International Airport exactly one year ago during an elaborate heist, but so far only a tiny fraction of that stolen loot has been found.