Inflation, the cost of living is insane. And many Canadians postpone retirement
TORONTO – Inflation at 7.7%, skyrocketing prices and Bank of Canada which continues to increase the “key” rate of interest – now at 1.5% – to stem the problem by creating, in fact, another one: the increase in mortgage payments and loans for Canadian families. In short, a “perfect storm”. The question is: when will the clear sky return?
While there may not be easy solutions in the short term, Concordia University economist Moshe Lander, speaking today to “Your Morning” on CTV, assured that “the end will come”, but adding that “now, what people wants is the governments to go into their pockets to help the population with rising gasoline prices, rents and housing costs “.
But it doesn’t seem that the government – beyond the recent proclamations by Finance Minister Chrystia Freeland – is (and can) do much. A Scotiabank report, released Sunday, argues that a reduction in government spending could help reduce inflation but notes that “fiscal policymakers in Canada are doing nothing significant to slow inflation right now.”
However, according to Sheila Block, senior economist at the Canadian Center for Policy Alternatives interviewed today by CTV, “much of the inflation is out of the hands of the Central Bank of Canada and the federal government, due to external factors such as the war in Ukraine”.
According to the expert, indeed, interest rate hikes are having different effects, as evidenced by the recent slowdown in the housing market, so efforts to reduce prices by raising interest rates will mean a slowdown in the economy: ” I really think it’s going to be a tough road to go,” she said.
The annual inflation rate in May rose to its highest level in nearly four decades, with Statistics Canada posting a 7.7% increase from a year ago. Energy prices increased by 34.8% over the previous year, with gasoline prices up 48%, food prices in supermarkets by around 10% and travel costs by over 40% , just to give a few examples.
But the knock-on effects of such a complicated situation are, in reality, multiple and do not concern only “spending” in general or homes: inflation also affects life choices and prospects. According to a survey commissioned by Bromwich + Smith and Advisorsavvy, 4 in 10 Canadians over the age of 55 have delayed or planned to delay retirement because they are in debt. And nearly two-thirds (62%) have delayed retirement because they don’t have enough savings or investments. Only in this year, just over half (54%) of older Canadians have delayed retirement due to rising inflation and the cost of living.
“Canadians are all feeling a little exhausted from the past two years, amidst multiple waves of Covid-19 and a tattered economy,” said Laurie Campbell, executive at Bromwich + Smith. “For those close to retirement, 2022 may seem like the best year to do so. But with inflation still high and bank accounts and retirement savings running out, it might be wise to ask: Can I retire in 2022?”. The answer is probably “no”.