In a recent interview with the Harvard International Review, former Liberal finance minister Bill Morneau admitted that the Liberal government’s pandemic spending went on for too long and contributed to Canada’s current inflationary woes.
Morneau, who oversaw many of the Covid programs as finance minister, said that while many countries engaged in vast spending programs to tackle Covid-19, Canada’s in particular lasted longer than necessary.
“I think the early efforts were appropriate and important. They were, in a number of cases, too large. That was not purely a Canadian issue; there were other countries that had the same problem,” Morneau told the interviewer.
“The bigger issue was they went on for too long, and that meant that we put more money into the economy than we needed to.”
“(This) is, of course, one of the reasons that we find ourselves with demand for goods and services that’s in excess of what the economy (could) support as we came out of COVID. And when demand is in excessive supply, the inevitable result is inflation.”
Morneau is not the only high-level financial decision maker to say that the Canadian government’s decision to extend Covid-19 stimulus was a contributing factor to inflation.
Last year, Bank of Canada Governor Tiff Macklem made similar remarks, admitting that the Bank should have tightened interest rates sooner to stamp down on stimulus.
“If we knew everything a year ago that we knew today, yes I think we should have started tightening interest rates sooner to withdraw the stimulus,” said Macklem.
“(If) there would have been less stimulus in the economy, there would have been less demand, (inflation) would have been less.”
Additionally, despite spending vast amounts of taxpayer money, a Fraser Institute report found that Canada achieved some of the worst results when compared with other developed nations.
“While governments across Canada, particularly the federal government, increased spending markedly during COVID, it’s now clear we didn’t get much bang for our buck,” said Lakehead University economics professor and author of the report, Livio Di Matteo.
“It’s important for governments in Canada to understand the effects of their pandemic responses so they don’t repeat the same ineffective and costly policies in the future.”
