Government spending is to blame for at least 2 percent of the 4.75 percent hike in interest rates that Canadians have seen over the past few years, according to a Scotiabank analysis.
“Rising government consumption and the pandemic transfers account for roughly 200 basis points of the 475 basis points increase in the Bank of Canada’s policy rate,” the report says.
The authors said that while all levels of government spending are contributing to the economic climate, provincial governments are out-spending the federal government.
“Given that provincial government consumption of goods and services is more than triple that of the Federal government, provincial spending alone accounts for about a third of the increase in the policy rate,” they wrote.
Related Stories
The report also notes that all levels of government spending have fed into a rise in inflation.
“Government final consumption on goods and services has risen sharply since the end of 2019 across all levels of government,” the report authors wrote.
“The economy would not have been in excess demand were it not…
Read the full article here