Freeland to present fall fiscal update Tuesday as cost-of-living dominates politics
Posted November 19, 2023 4:00 am.
Finance Minister Chrystia Freeland will table the fall fiscal update on Tuesday, which is expected to focus on housing and affordability as the Liberal government struggles to regain favour with Canadians feeling overwhelmed and angry about the rising cost of living.
But with little money to spend, Freeland has tried to temper expectations.
“We have to be sure that we make the investments Canadians need, provide them with the support they need, but do it within a fiscally responsible framework,” Freeland told reporters in Toronto on Thursday.
“We won’t be able to do everything.”
The finance minister has been relatively tight-lipped on the contents of the fall economic statement, but has repeatedly said measures will be geared toward addressing housing and affordability.
Prime Minister Justin Trudeau publicly renewed his government’s focus on these two issues after the Liberal caucus retreat in London, Ont., in September at the end of a rough summer for the party that saw the Conservatives surging in the polls.
Since then, the government has announced a trickle of new measures meant to boost housing supply, including lifting GST charges on rental developments, unlocking more low-cost financing for projects and making more federal real estate available for housing.
Freeland has signalled the government is looking at making more public land available and trying to address the strain short-term rentals are putting on housing supply.
Tim Richter, the co-chair of the National Housing Council that advises the federal housing minister, said he expects the Liberals to leave a lot of their major policies for the spring budget.
“My sense is they’re going to be making a bunch of announcements between the fall economic statement and the budget, leading to the budget being their big housing and homelessness document,” Richter said, adding that Tuesday may foreshadow some of the policies to come.
Housing Minister Sean Fraser has previously vowed to roll out new policies as soon as they’re ready instead of waiting for a specific date.
Richter, who also heads the Canadian Alliance to End Homelessness, was one of the co-authors of a report this summer that offered the federal government a blueprint for tackling the housing crisis. Among its recommendations is the creation of an industrial strategy for housing construction.
The Canadian Housing and Mortgage Corp. estimates Canada needs to build 5.8 million homes by 2030 to restore affordability, a goal that economists at CMHC have conceded will be very difficult to achieve.
Richter said the federal government’s window of opportunity to tackle the crisis is closing.
Federal opposition parties have laid out some of their expectations for the fall economic statement already.
On Friday, Conservative Leader Pierre Poilievre called on the Liberals to end the carbon price and “bring down interest rates and inflation by balancing the budget.”
He also wants the government to adopt his proposal of tying federal dollars to municipal housing results, rather than pursuing agreements with cities through the Housing Accelerator Fund program.
That program invites municipalities to apply for federal funding based on their plans to boost housing development by making changes to bylaws and regulations, including allowing denser housing construction.
Meanwhile, NDP Leader Jagmeet Singh has said he wants to see more action on affordable housing and grocery prices.
Cost-of-living issues have dominated federal politics as the rapid rise in inflation was followed by historic interest rate hikes from the Bank of Canada.
Both mortgage interest costs and rent prices have risen dramatically. These conditions have made it even harder for low-income Canadians to make ends meet and advocates have been warning about people being pushed into homelessness.
Richter said he’s been pushing for a rent supplement for people at risk of becoming homeless, and said the cost of homelessness on governments would exceed the cost of offering such a benefit.
Ray Sullivan, executive director of the Canadian Housing and Renewal Association, wants to see spending that expands the social housing stock for low-income Canadians.
But he’s not necessarily expecting big-ticket items Tuesday.
“I’m going to be watching for which things are addressed toward solving a housing problem, and which things progress toward solving a political problem whose theme is housing,” said Sullivan.
The Canadian economy is showing clearer signs of a slowdown, which ultimately affects federal finances as well.
Preliminary data from Statistics Canada suggests the economy shrank in the third quarter, the second consecutive contraction.
And while high interest rates have already begun to restrain the economy, more Canadians are expected to feel the squeeze as mortgages come up for renewal.
The federal government is also facing calls to restrain spending in order to avoid fuelling inflation and to help the Bank of Canada reduce interest rates faster.
Rebekah Young, an economist at Scotiabank, said the federal government’s priority should be to get inflation down, given that is the immediate challenge for people.
“We think right now that has to take priority over everything else. The fiscal authorities, federally and provincially, need to be part of the team that gets inflation under control,” Young said.
The federal government followed through with a promise from the spring budget to cut spending in the public service and recently announced $500 million in travel and professional services funding has been “refocused and removed” across 68 departments this fiscal year.
Bank of Canada Governor Tiff Macklem recently warned that government spending over the next year risks fuelling inflation and urged for fiscal policy to row in the same direction as monetary policy.
Tyler Meredith, a former head of economic strategy and planning for Freeland, said the government will want to signal to Canadians and financial markets that it’s restraining spending to do just that.
“That would probably be the quickest and fastest thing that would assist Canadians who are struggling with tough times right now,” he said.
At the same time, Meredith there are some things the Liberals could do to help alleviate the immediate affordability crunch.
“I think that we potentially could see some more action around competition in the grocery sector,” he said, adding it will be interesting to see whether the government follows through with any of its threats to tax grocers if they do not stabilize prices.
He also suggested the government could look at changing mortgage regulations to help Canadians facing higher interest rates upon renewal, and looking at ways to help with energy costs.
“The political challenge that the government faces isn’t so much about the question of who is best able to manage the economy. It’s a question of, are you making decisions that (are) in the best interest of me and my household?” Meredith said.