Why handing cash to people manage inflation only makes it worse

56
2
Why handing cash to people manage inflation only makes it worse

We apologize, but this video didn't load.

You can see other videos from our team by tapping here. Try refreshing your browser, or Why handing cash to people manage inflation only makes it worse. The tactic used by Alberta this week and B.C. The inflation in Quebec and earlier this year doesn't stop because extra money means people will spend more and demand for products and services will stay high, keeping decades-high inflation from budging.

Inflation dropped to 6.9 per cent last month, down from 8.1 per cent in June. Travis Shaw, senior vice-president of public finance at DBRS Morningstar, said that giving money to households is likely to solve the problem rather than solve it. He said that it does not match what the Bank of Canada is trying to take some heat out of the system and to bring down inflation.

His remarks came just a day after Alberta Premier Danielle Smith announced her Inflation Relief Act, which will give families with less than $180,000 for each child under the age of 18 or older. Smith will provide income support to inflation, provide additional $200 in consumer electricity bill rebates through the winter months and suspend the entire provincial fuel tax for at least the next six months. The plan includes an investment in food banks and an expansion of a public transit pass program for low-income earners. Too many moms and dads are having to choose between nourishing food for their children and making their rising mortgage payments. Many seniors are deciding between filling their prescriptions and fuel for their vehicles, Smith said during a Tuesday speech announcing the measures.

We can't solve the inflation crisis on our own, but we can offer substantial relief because Albertans and their families are better able to manage this storm because of our strong fiscal position and balanced budget. Shaw noted that Smith's announcement came ahead of Alberta Finance Minister Travis Toews making a mid-year fiscal update and economic statement on Thursday and six months before the province will plunge into an election. The payments are going to be $100 payments for six months, which matches up nicely with the spring election when it takes place, Shaw said. Smith is not the only premier who has turned to payouts for inflation relief. The Climate Action Tax Credit, estimated to be worth up to $1,500 a year for a family of four, will benefit approximately 85 per cent of the province's population, according to Premier John Horgan.