AI image
I find it shocking that we’re not talking about fiscal tightening more in the current environment.
In a way, it’s a much easier way to bring inflation into line than rate hikes and has far more long-term benefits. Today, Canadian finance minister Chrystia Freeland said the upcoming budget, which is due in March or April won’t be overly stimulative.
“We definitely are conscious as our priority, when it comes to economic policy, of acting in such a way that creates conditions that will make it possible for interest rates to come down,” Freeland told reporters in Ottawa.
What would be really beneficial is for something closer to austerity, or some right-sizing of government. Last week’s Canadian jobs report showed that the number of private sector employees
rose by only 7,000 in the month and only 1.6% on a year-over-year basis. That is in contrast to a 4.2% rise in public
sector payrolls.
Even just stopping that kind of bleeding of the public purse would be a gut-punch to inflation.