Maritimes Data Prove Inflation Linked to Carbon Taxes: Saskatchewan Premier

People shop at a grocery store in Montreal on Nov. 16, 2022. (Graham Hughes/The Canadian Press)

Saskatchewan’s premier says a big jump in inflation in several Maritime provinces shows carbon taxes contribute to inflation.

“The biggest jumps were in the Atlantic provinces of NS, NL and PEI,” Premier Scott Moe wrote on X, formerly known as Twitter, referring to July inflation numbers from Statistics Canada that came out on Aug. 15.

“Those same three provinces got hit with the Trudeau carbon tax starting in July. Pretty hard to argue that the carbon tax isn’t driving up inflation.”

The Saskatchewan premier is not alone in that assessment.

Dalhousie University food distribution professor Sylvain Charlebois cited annualized food inflation figures on X to prove the point: “Curious about the impact of Canada’s carbon pricing on food prices since July 1? Annualized food inflation rates by province: PEI: 26.4%, NS: 15.6%, NL: 3.6%, NB: 9.6%, QC: -1.2%, ON: 3.6%, SK: 2.4%, MB: 3.6%, AB: 3.6%, BC: 4.8%.”

“What happened with the Maritimes is really interesting because it does sort of serve as a natural experiment,” University of Regina economics professor Jason Childs told The Epoch Times. “You raise carbon taxes, you get inflation.”

Related Stories

Bank of Canada ‘Losing the Fight’ Against Inflation, Says Scotiabank Economist

8/15/2023

Canadians Buy Fewer Groceries Due to Inflation: Statistics Canada

7/27/2023

“Again, in all those cases … maybe not all that jump is gasoline prices. In fact, I can be pretty sure it isn’t. But it’s a pretty clear, natural experiment.”

‘Can’t Avoid It’

Fuel prices are significant for more than just the carbon tax.

“Here in Ontario … the price of gasoline today, a litre is a buck 85,” Philip Cross, a senior fellow with the Macdonald Laurier Institute and former chief economic analyst with Statistics Canada, said in an interview. “We’re getting close to the $2 rates of last year, which were a shock to people.”

And he said the cost of fuel, including the carbon tax, affects almost everything—not just what is paid at the pump.

“Every industry uses energy, you just can’t avoid it,” said Mr. Cross.

“You’ve got to turn on the lights, you got to heat buildings, you’ve got to run the computer, the machinery. All of this requires energy. So it’s not just motorists and transportation you’re hurting. This feeds into every industry. A lot of the big manufacturing industries in this country and mining are heavy users of energy inputs. So it’s certainly complicating things.”

Overall, said Statistics Canada, inflation hit 3.3 percent nationally. But increases in different areas varied. Grocery prices were up 8.5 percent from July 2022.

Statistics Canada said the biggest jump in the index was mortgage costs—up a whopping 30.6 percent from a year ago.

Both Mr. Cross and Mr. Childs said the increase is not as bad as it sounds because the majority of mortgage holders have fixed-rate mortgages that only have to be renewed every few years.

But for those who have to renew, or those with variable rates, it’s a different story.

“You’re going to see more and more people renewing at higher rates,” said Mr. Cross. “That’s going to be a lot higher than what people were used to and what people were expecting. … It’s not a majority of people, but there is a significant share of homeowners out there who are facing a very steep increase in their mortgage costs. And for those people, this is going to be a really, really difficult time.”

Both said the high interest rates driving up the cost of mortgages are a direct result of the Bank of Canada raising rates to try to control inflation.

“Since the Bank of Canada isn’t getting any help from governments across the country who are spending like crazy, they’re going to have to do it through higher interest rates. Is that painful? You bet,” said Mr. Cross.

Economy

In July, the federal government was claiming progress in the fight against inflation because it was 2.8 percent in June—which is within the Bank of Canada’s target of 1 to 3 percent.

At a news conference in Alberta on Aug. 15, Finance Minister Chrystia Freeland said the increase in inflation for July does not tell the whole story.

“At 5 percent, wage growth outpaced inflation in July, just as it has done for the past six months,“ said Ms. Freeland. ”And at just 5.5 percent, unemployment is near historic lows. And we know we’re not all of the way there yet.”

Mr. Childs said service costs have also risen, and because many services are local, such as haircuts, it’s a good indicator of what people are facing in their day-to-day lives.

It’s not all bad news. Part of the reason inflation is rising is because the economy has not sputtered to a halt.

“The economy is clearly not in recession,” said Mr. Cross. “The labour market’s doing much better than expected. … People are spending like crazy, call it revenge spending, call it whatever you want, but people are travelling like crazy. They’re going out to ‘Barbie’ and ‘Oppenheimer.’”

But all that spending may mean the Bank of Canada will have to raise interest rates again.

“And in that type of situation, it’s going to be very hard to rein in demand to put downward pressure on prices needed to get back to target inflation,” said Mr. Cross. “They’re obligated by their mandate to take the actions necessary to bring inflation back to its target. I don’t doubt that they will do that.”

And that would affect more than just mortgage holders.

“I saw an ad, where there are 5 percent interest rates on new cars now,” said Mr. Childs. “Whereas two, three years ago, everything was at 0 percent interest for a car loan. So all those things are going to matter.”