Economics expert says federal government’s plan announcement will not help inflation

The federal government has unveiled an $8.9-billion “affordability plan” to help Canadians deal with inflation, but an economist with the University of Regina is concerned the government is not dealing with the problem, and might actually be making it worse.

“The system is overheating,” said Jason Childs, an associate professor of economics at the University of Regina.

“We’re dumping more money into the system, so what that’s going to do is it’s going to further inflation. It’s going to mean that interest rates as controlled by the Bank of Canada are going to have to rise even more than they otherwise would.”

Read more: Canada’s inflation rate hit 7.7% in May, fuelled by soaring gas, food prices

Deputy Prime Minister and Finance Minister Chrystia Freeland announced the $8.9-billion plan earlier this month in her first major speech since the release of the federal budget.

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“We know that Canadians are worried about inflation and that they’re asking what their government is going to do about it,” Freeland said.

The federal government’s “affordability plan” offers $8.9 billion in new support that will “more money in the pockets of Canadians at a time when they need it most,” she said.

Read more: Freeland touts affordability programs, but no new spending, to combat inflation

Yet if Childs thinks this might overheat the system, what does he think the solution should be?

According to Childs, the solution remains in the hands of the federal government and the Bank of Canada in what he calls fiscal restraint. For Childs, actions speak much louder than words.

“We need the government to reduce its spending and to really take that sort of fiscal restraint seriously,” Childs said.

“It stopped getting the Bank of Canada to buy its bonds. That’s good news that will slow things down. But we are a long way from where we need to be to stabilize inflation.”

Click to play video: 'Breaking down Canada’s latest inflation data' Breaking down Canada’s latest inflation data

Breaking down Canada’s latest inflation data

According to Childs, Saskatchewan is actually doing better than most provinces in Canada in terms of inflation.

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Overall, Saskatchewan’s need for relief from inflation is lower than elsewhere. But the reality is there is no relief in sight from inflation said Childs and those already struggling to make ends meet will continue to be hit the hardest.

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