e-3969 (Economy and finance)

High inflation is a global economic challenge, made even worse by Russia’s full-scale invasion of Ukraine. To bring inflation down, central banks around the world have sharply raised interest rates in what has been one of the fastest and most synchronized monetary policy tightening cycles since the 1980s. After peaking at 8.1 percent in June 2022, consumer price inflation in Canada has come down meaningfully, to 4.3 percent as recently as March – a level well below the rates seen in many peer countries. The Bank of Canada projects that inflation will continue to fall, declining to around 3 percent this summer, 2.5 percent by the end of the year, and reaching 2 percent by the end of 2024.

Amid the challenge of high inflation, Canada’s labour market has been the strongest in decades. From the onset of the pandemic, the government’s relentless focus was on jobs – on keeping Canadians employed, and on keeping their employers afloat. And the government plan has worked – Canada’s economy has made a remarkable recovery from the COVID recession. Canada’s unemployment rate is near its record low, over 865,000 more Canadians are employed compared to when COVID-19 first hit, and Canada’s economic growth was the strongest in the G7 over the last year.

Despite an outlook of falling inflation, and Canada’s strong economic fundamentals, inflation is nonetheless high today and that means some Canadians are still struggling to manage the higher cost of living. That is why the government has made it a priority to make targeted investments to support Canadians and grow the economy. Budget 2023 builds on these efforts by providing inflation relief to the most vulnerable, and making investments that will play a meaningful role in Canada’s continued prosperity. In particular, among the many measures, Budget 2023 proposes to:

• introduce a onetime Grocery Rebate, providing $2.5 billion in targeted inflation relief for 11 million low- and modest-income Canadians and families;
• increase Canada Student Grants by 40 percent, providing up to $4,200 for fulltime students, as well as raise the interest-free Canada Student Loan limit from $210 to $300 per week of study;
• provide $13.0 billion over five years, starting in 202324, and $4.4 billion ongoing to Health Canada to implement the Canadian Dental Care Plan, providing dental coverage for uninsured Canadians with annual family income of less than $90,000, with no co-pays for those with family incomes under $70,000; and
• introduce an investment tax credit for clean electricity to help accelerate the investments needed to expand the capacity of Canada’s clean electricity grid and ensure it delivers more sustainable, more secure, and more affordable electricity across Canada.

These measures build on the significant efforts of the Government of Canada since 2015 to make life more affordable, such as introducing the tax-free Canada Child Benefit, reducing fees for regulated child care, and permanently eliminating interest on Canada Student Loans. These efforts are meaningful. For example:

• a family with one child in Ontario, with income of $85,000, in 2023 could benefit from about $11,300 as a result of reduced childcare costs, the Canada Child Benefit, the Canada Dental Benefit, tax relief from an increased Basic Personal Amount, and increased Climate Action Incentive payments;
• a single parent with one child in Newfoundland and Labrador, with income of $40,000 in 2023, could benefit from $7,300 as a result of reduced childcare costs, the Canada Child Benefit, enhancements to the Canada Workers Benefit, the Canada Dental Benefit, the proposed Grocery Rebate, tax relief from an increased Basic Personal Amount, and increased Climate Action Incentive payments;
• a 76year-old senior in British Columbia with a maximum Guaranteed Income Supplement (GIS) entitlement could receive more than $2,000 in additional support in 2023, thanks to the proposed Grocery Rebate, the GIS top-up increase for single seniors from 2016, and the increase in the Old Age Security pension for seniors aged 75 and older; and
• a low-income student in Manitoba could receive more than $5,600 in additional support in 2023 thanks to proposed enhancements to Canada Student Grants and Canada Student Loans, the proposed Grocery Rebate, and increased Climate Action Incentive payments. If they have a disability or dependents, they could receive an additional $12,800 in specialized student grants, plus an extra $640 per dependent. After graduating, all of their federal student loans will be interest-free, with repayment assistance if their income is below $40,000 per year.

Budget 2022 announced significant investments to make housing more affordable for Canadians, including by helping people buy their first home, tackling unfair practices that drive up costs, and working with provincial and territorial governments, municipalities, and both the private sector and non-profits to double the number of new homes that Canada will build by 2032. Budget 2023 proposes new measures to build on this plan, such as an additional $4 billion, over seven years, starting in 2024-25, to implement a co-developed Urban, Rural and Northern Indigenous Housing Strategy.