Freeland says we’re in a ‘vibe-cession’ and she’s got the cure

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OTTAWA — Federal Finance Minister Chrystia Freeland said on Monday that she hopes her government’s proposed GST holiday will help bridge the gap between Canada’s macroeconomic picture and historically stressed-out households by bringing good vibes to the latter.

“People have been talking about a ‘vibecession’… and the fact that Canadians just aren’t feeling that good,” Freeland told reporters at a press conference in Ottawa to promote the temporary sales-tax reprieve. “That’s shaping their economic behaviour in ways that are not great for the Canadian economy.”

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“One of the positive impacts of this measure is to help Canadians get past that ‘vibecession’ because how (they) feel really does have a(n) economic impact.”

Opposition Conservative Leader Pierre Poilievre said in question period that he took exception to Freeland’s use of the term “vibecession” given that millions of Canadians are still struggling to feed and house themselves amidst an ongoing cost of living crisis.

“What’s (Freeland’s) message to people who are hungry and homeless after nine years of her government?” said Poilievre. “That they just need to get with her vibe?”

Freeland fired back by telling Poilievre to be more “economically literate,” pointing to positive projections for Canada’s economic future put forward by international organizations such as The International Monetary Fund. The IMF assessed in July that Canada had avoided a recession mainly due to surging immigration that had kept GDP from shrinking, but that per capita incomes have shrunk.

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Statistics Canada reported in October that persistently high interest rates have pushed household inequality to historic levels, with the middle 60 per cent of Canadian households getting squeezed the worst by ballooning mortgage and car payments.

The Statistics Canada report found that Canadian households in this income range lost ground in the second quarter of 2024, versus one year earlier.

“Middle-income households’ investment gains did not keep pace with growth in interest paid on mortgages and consumer credit,” it said.

Freeland joined Prime Minister Justin Trudeau in Toronto last week to announce a two-month GST holiday, starting December 14, on certain household goods, including groceries, prepared foods and children’s clothing.

The holiday tax break is expected to cost the federal government $1.6 billion in foregone revenue.

Trudeau and Freeland also announced last week that Canadians who worked in 2023 and made less than $150,000 will be receiving a $250 cheque in the spring. The two programs together are expected to come at a combined cost of nearly $6.3 billion to taxpayers.

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Tyler Meredith, an ex-fiscal advisor to Freeland and her predecessor at the finance portfolio Bill Morneau, said that, while he wouldn’t use the word “vibecession” himself, there’s still a disconnect between people’s pocketbooks and macroeconomic forecasts.

“The macro looks good but the micro does not,” Meredith said. “People make spending decisions based on the micro.”

He added that he didn’t see the Trudeau government’s stimulus package changing the Bank of Canada’s approach to cutting interest rates going forward.

“$6 billion in stimulus in a $3 trillion economy isn’t really cause to fundamentally rethink things from the Bank’s perspective,” said Meredith.

National Post

rmohamed@postmedia.com

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