Treasury Secretary Freeland pledges fiscal prudence to avoid inflation

Treasury Secretary Freeland pledges fiscal prudence to avoid inflation

  • Post category:Economy

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Chrystia Freeland urges caution as Canadian economy threatens to slide into recession

Treasury Secretary Chrystia Freeland in Ottawa. Photo by Sean Kilpatrick/Canadian Press Files

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Treasury Secretary Chrystia Freeland said Canada has a “once in a generation” moment to invest in infrastructure that improves health care and helps fight climate change, but stressed she still has to exercise restraint as the economy threatened to slide into a recession.

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Freeland made the comments after meeting with provincial and territorial counterparts in Toronto on Feb. 3. The main topics on the agenda were investing in the green transition and provincial health funding, a long-standing issue that has sometimes caused tension. federal and state governments that have received more attention during the pandemic.

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Freeland acknowledged that the government is walking a very fine line in implementing these programs, arguing the need for very well-targeted support, as governments need to beware of spiraling inflation with too much fiscal stimulus. .

“We are very aware of the uncertainty in the global economy right now: inflation is high and interest rates are high – things are tough for many Canadians,” Freeland told reporters. “At the federal level, it’s a period of real budgetary constraints. We know that one of the most important things the federal government can do to help Canadians today is to recognize our responsibility not to fuel the inflationary fire and force them to raise interest rates.

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Still, Freeland acknowledged his Liberal Party campaigned on promises to spend more on health and the environment, saying “we will honor those commitments.”

Freeland said she presented nothing specific on the health care front and was transparent about budget constraints and pressures on federal government investments.

This comes after the federal government spent more than a year negotiating with the provinces over health transfers. Premiers wanted the federal government to increase provincial funding by $28 billion a year so that Ottawa would pay 35% of health care costs instead of the current 22%.

Healthcare has become a particular concern as hospitals are overwhelmed and continue to deal with ongoing COVID-19 cases. Quebec Finance Minister Eric Girard said many of those talks about transferring health care benefits depend on what the federal government brings to the table when the first ministers meet next week.

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“It’s time to see the numbers and start talking about the numbers and the metrics associated with the numbers,” Girard told reporters. “And as you know, we want health transfers in Canada.

Canada’s green transition and carbon neutralization was a major theme of the federal budget in 2022. The fiscal plan included promises to reduce carbon emissions and expand infrastructure for electric vehicles and renewable energy sources, among others.

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Headline inflation was around 6% in December, an improvement from the summer but still much faster than the Bank of Canada’s 2% target.

Bank of Canada Governor Tiff Macklem, also on hand to discuss the slowing economic outlook, raised interest rates by a total of 4.25 percentage points to 4.5% in a bid to calm the demand and contain price pressures.

“It’s really my responsibility, the federal government’s responsibility, not to do anything that fuels the flames of inflation and forces the Bank of Canada to act,” Freeland said. “So when you put those two things together: an environment of high inflation, high interest rates and a slowing economy – that’s a constrained fiscal environment, and that means we have to behave with real fiscal responsibility. , even if we have to.” these two big investments.

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