Prime Minister Justin Trudeau is facing a lot of pressure to spend more on clean-energy subsidies and health care, even as a possible recession looms.
Chrystia Freeland, speaking Tuesday at a cabinet retreat ahead of parliament's return next week, said she ll continue to take a fiscally prudent approach as the government prepares its budget for the fiscal year beginning April 1.
She stated that spending requests are mounting and that she is not going to stoke inflation that could force the Bank of Canada to raise interest rates even higher.
The energy industry is hoping for billions of dollars in public funding for carbon-capture projects to meet emissions targets and keep Canada competitive as the US rolls out green subsidies under the Inflation Reduction Act.
Freeland told reporters in Hamilton, Ontario that this is a once-in-a-generation moment. Canada either seizes that opportunity, seizes our share of the new industrial global economy that is being built, or we get left behind. Provincial governments want billions to help patch up Canada's health-care system. The government may fall off the path it mapped out for balanced books within five years due to a major increase in federal health payments to provinces.
Freeland conceded that helping industry and repairing the medical system, while keeping total spending in check, are difficult things to do at the same time, and that's the balance we're going to have to find in the budget. She acknowledged that Canada, like other advanced economies trying to tame inflation through higher interest rates, could face a lot of challenges in the coming year.
She said we still don't know how the plane is going to land. We do not know how the Covid recession will play out. Earlier Tuesday, cabinet heard about the economy from a panel, including Carolyn Wilkins, the former No. Professor Kevin Milligan, professor of economics at the Bank of Canada, and the University of British Columbia.
Milligan told reporters outside the meeting that the government should exercise caution on spending while the central bank works to bring inflation down.
If you go too far too fast, the Bank of Canada is going to ratchet things up and make the interest rate environment more challenging, he said.
He added that increased health care spending would likely be rolled out over many years and wouldn't hurt the short-term inflation outlook.
Wilkins warned that Canadians may be in for some pain in the year 2023, as the economy slows and unemployment rises, which is what she believes is necessary to bring prices to heel.
Wilkins said that it is something that no one really knows about whether or not we will have a hard landing. I wouldn't rule it out. None Fake Meat Was Supposed to Save the World. It Was Just Another Fad.