Economists share economic concerns with Trudeau

On the second day of the federal cabinet retreat, Prime Minister Justin Trudeau and his cabinet received a sobering outlook on Canada’s economy from three renowned economists. Kevin Milligan of the University of British Columbia, Carolyn Wilkins of Princeton University, and Anil Arora of Statistics Canada informed the cabinet of an anticipated economic slowdown, a rise in unemployment, and potential inflationary pressures.

The economists advised the government to exercise caution before committing to any major expenditures, considering the uncertain economic environment. The retreat in Hamilton has been met with a constant presence of anti-Trudeau protesters, which intensified on Tuesday evening when a group surrounded the restaurant where Trudeau was dining, leading to several city blocks being closed off.

Ottawa is considering significant increases to the Canada Health Transfer and establishing a national pharmacare program by year-end, which are expected to cost billions of dollars. While a tight job market has led to a growth in wages, a slumping economy could further increase the deficit and national debt, which already rose from $628.9 billion in 2015 to $1.1 trillion in 2022.

“The most likely scenario is that we hit a soft spot,” said Milligan. “We ought to be aware of those short-run challenges.” Wilkins warned that a spike in unemployment could actually alleviate inflation, which is already at a level not seen in decades. An ambitious stimulus package to support the economy could juice inflation even further.

Policymakers must keep the uncertain economic outlook in mind as they navigate the challenges facing the country.