Canada’s Trudeau announces C$4.5 bln inflation relief package for low earners

Canadian Prime Minister Justin Trudeau announced C$4.5 billion ($3.43 billion) in measures on Tuesday intended to provide relief from high inflation to low-income families.

The measures include doubling a quarterly tax credit sent to individuals and families with low and modest incomes to offset sales tax, and a C$500, onetime top-up to a housing benefit that is provided to low earners who need help with rent, Trudeau said.

Trudeau’s Liberal government will also provide up to C$650 per year for dental care to children under 12 who do not have access to dental insurance.

“These are things that will make a difference in people’s lives right now but they are also sufficiently targeted, that we are confident that they will not contribute to increased inflation,” Trudeau told reporters in St. Andrews, New Brunswick.

While inflation cooled a bit in July from an almost four-decade high of 8.1%, the Bank of Canada is still concerned about rising prices and is promising further interest rate hikes after increasing them to their highest level in 14 years last week.

Derek Holt, head of Capital Markets Economics at Scotiabank, expects the stimulus will start being spent in the first and second quarter of 2023. “I would expect this to add to inflationary pressures into the start of the year,” he said, adding he anticipates that will “increase the pressure upon the Bank of Canada to go over 4% with its policy rate.”

The support package includes money previously allocated in the budget and C$3.1 billion in additional funding, which was earlier reported by Reuters citing a government source last week.

The payment to low-income renters and children’s dental care plan are part of an agreement Trudeau made with the opposition New Democrats Party (NDP) in March in exchange for its support to keep his minority government in power until 2025.

The setting up of a national dental care system was one of the keystones of the agreement, and Trudeau said his government was planning to expand dental benefits to more people by the end of next year, with the full program completed by 2025.

“I know so many families are overwhelmed by the soaring cost of groceries, rent, and gas, so this help right away is crucial,” NDP leader Jagmeet Singh said in a statement after Trudeau’s announcement.

($1 = 1.3121 Canadian dollars)