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How we can each deal with inflation

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Inflation is a relatively new concept to younger people, who have never experienced the onslaught of rising prices. It’s chilling to those who have lived through or learned of times when hard-earned and well-saved money depreciated in value.

Monetary policy in Canada aims to keep inflation at or under two per cent. The latest rate is 6.7 per cent, an increase in prices that’s noticeable at gas pumps, grocery stores and restaurants. It’s big enough for some politicians to call for the firing of the head of the Bank of Canada since the bank is responsible for keeping inflation close to the target level.

Firing the governor of the Bank of Canada will likely not make much difference as the current inflation is generated by factors beyond the bank’s control, such as war, weather, the strong demand for goods and services as the COVID-19 pandemic eases, and the lack of supply for those goods and services.

Here are some steps we can take to minimize the effects of inflation on our lives and families:

Increase your income

Can you work more hours, especially at overtime rates? Can you get a higher-paying job or a pay raise at your current position?

With Help Wanted signs everywhere and labour shortages at almost every skill level, prospects for earning more money are excellent.

Although the stock market has become more nerve-racking recently, rising interest rates promise a higher return on bonds, deposits and other interest-bearing assets. More money coming in makes all purchases more affordable.

Buy less

One definition of inflation is more money chasing fewer goods. By choosing to buy less, not only do we save money ourselves but we also reduce the upward price pressure on goods and services.

Buying only what we really need with respect to quality and quantity eases our budgets, simplifies our lives and cools the economy.

Housing

Market forces appear at last to be taming the explosively upward trend in home prices. The most recent data show that the number of homes sold has dropped dramatically in Canadian urban centres. Prices last month still rose by one per cent, a negligible amount compared to the 18 per cent they had been rising over the previous year.

Some potential homebuyers have been deterred by rising interest rates for mortgages. Others have given up on big cities and moved to smaller centres, pushing up prices there.

A significant increase in the supply of affordable housing will only occur when zoning and regulations allow for more density, smaller units and fewer amenities. Not everyone can afford or needs ‘luxury’ housing, but too many are only given a choice between that or no housing.

Food

Cooking at home from scratch is the best way to tell all the restaurants, fancy delicatessens and producers of prepared foods that they don’t offer value for money at the current prices. We will all be healthier and richer eating more lower-cost foods like local, in-season vegetables and less expensive proteins and packaged foods.

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If those in government are really concerned about how food inflation is hurting Canadians, there’s definitely something they can do about it. They can remove marketing boards and eliminate quotas and other constraints on the production, importation and sales of eggs, dairy products and other foods. Our trading partners are already complaining that we aren’t playing fair in these areas.

The justification for the dairy marketing board is to protect the 15,000 or so farmers in that sector. But Statistics Canada has just told us that Canada now has a population of over 37 million. That means that more than 200,000 Canadians face inflated food bills for each subsidized farmer.

Allowing free trade in food would greatly benefit all Canadians. Previously protected farmers would have to make adjustments. But they would be able to sell across the world, not be limited to Canadian markets.

Gasoline

We can reduce the impact of high gas prices by driving less and using more fuel-efficient or electric cars when we do drive.

However, if we claim to be concerned about the environment and want to reduce the use of carbon-based fuels, we should be delighted that the prices of petroleum products are high and rising. This is the signal that will convince people and companies to move away from such products and invest in greener energy sources.

Such alternatives are costly but become more competitive as the price of carbon-based fuels rises. This is an example of inflation that might actually do our environment good.

Troy Media columnist Roslyn Kunin is a consulting economist and speaker.  For interview requests, click here.


The opinions expressed by our columnists and contributors are theirs alone and do not inherently or expressly reflect the views of our publication.

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Troy Media is an editorial content provider to media outlets and its own hosted community news outlets across Canada.

Roslyn Kunin

Dr. Roslyn Kunin is chair of the board of the Haida Enterprise Corporation, on the board of the Michael Smith Foundation for Health Research and has been a Director of the Business Development Bank of Canada, chair of the Workers Compensation Board of British Columbia and member of the National Statistics Council of Statistics.

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