Stimulus not the cause of Canada's inflation problem, says former Bank of Canada governor

OTTAWA -

Former Bank of Canada governor Stephen Poloz says government spending and stimulus are not to blame for increased inflation.

"I think that's not right," he said during an interview on CTV's Question Period airing Sunday. "In fact, what the stimulus did was to keep the economy from going into a deep hole in which we would have experienced persistent deflation."

Inflation has reached 4.7 per cent, according to the latest numbers released by Statistics Canada in October. The Bank of Canada expects it to peak at the end of this year and start to decline in the latter half of 2022.

"We have to accept the fact that policy [stimulus] response was in the right time, well intended and it did avert all the worst calls that people were making at that time," he said.

In response to affordability concerns, the federal government has repeatedly referenced their national childcare program, as a means to combat higher costs of living. Nine provincial and territorial governments have signed childcare deals with the federal government, while Ontario and New Brunswick have yet to sign on.

Families, Children and Social Development Minister Karina Gould said in a separate interview that the inflation problem is not a uniquely Canadian issue and can be attributed to global supply chain problems.

Conservative Finance Critic Pierre Poilievre says the federal government's fiscal spending is to blame for inflation.

The average inflation rate for member countries of the Organization for Economic Co-operation and Development is currently at 4.3 per cent but Poilievre says the problem is only a global issue as a result of other central banks around the world taking a similar approach to Canada on fiscal stimulus.

"I think those are the countries that did the best job of countering the downside risk that everybody was facing," said Poloz. "Read a book or two about the Great Depression in the 1930s and realize what was averted when we went through this."

Poloz says that while governments can try to address affordability concerns in the short-term, any government policy normally takes a year or two to have any effect on inflation.

But he expects housing inflation to persist and says those rising costs can be something the federal government can address immediately.

"What they can do there is get all the levels of government together and figure out a list of things that they should be doing in order to promote supply of housing, we're clearly short of supply and housing," he said.