Fresh Takes

Restoring Canadians’ Purchasing Power

Price increases seem to be calming down, but as far as our wallets are concerned, the damage is done.

Even though the inflation rate appears to be slowing—it’s at 5.9% according to January data—it’s not time to celebrate just yet. Slower price increases don’t mean a return to pre-pandemic living standards for Canadian households.

We need to understand that 5.9% inflation means that a dollar today only buys as much as 94.4 cents* did a year ago. So unless you got a raise of at least 5.9% this past year, you’ve lost ground.

To this must be added the non-negligible impact, past and future, of interest rate hikes on households in debt. While this increase was necessary too tame runaway inflation, its effects on citizens’ wallets is no less severe.

For the average Canadian household, these two factors combined represent $3,000 of lost purchasing power on an annualized basis, according to the Royal Bank’s estimates.

So how do we get our heads above water?

The most concrete solution is right under our noses. With budget season just around the corner, the different governments have to seize this opportunity to lower the tax burden in order to restore at least part of our purchasing power.

By taking less money out of our pockets, the federal and provincial governments would give people a bit of breathing room, at a time when they’re feeling squeezed financially.

Quebec, as the most-taxed jurisdiction in any North American country, has a lot of wiggle room in this regard.

Our families are crying out for help. They’re already neck-deep in water. Our governments can throw them a life preserver by gobbling up less of their taxes in the future. They just need to do it.

* 1.00 / 1.059 = 0.944

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