Canadians are finding the purchasing power of their money has dropped

What is purchasing power?

As defined by Canada’s Parliamentary Budget Officer, a non-partisan federal officer, purchasing power refers to the quantity of goods and services that can be purchased with an income.

In very simple terms, it’s how much you can buy with your money. Determining purchasing power can be done by comparing income growth with price increases over a given period of time.

On Oct. 8, the Parliamentary Budget Officer published a report titled, “A Distributional Analysis of the Purchasing Power of Canadian Households Since 2019.”

The purpose of this report is to study “how the purchasing power of Canadian households has changed (with) a distributional analysis of inflation and Canadian household incomes since 2019.” Canada’s Consumer Price Index was utilized in this research, as well as consumption bundles of products within the measure of inflation affecting different households at different income quintiles.

The key takeaway from the report is clearly highlighted. “Rising inflation and tighter monetary policy have eroded purchasing power, particularly among lower-income households,” it says.

On average, households have experienced price increases of approximately 15% since 2019. Worryingly, spending on the basic necessities of food, shelter and transportation account for more than three-quarters of inflation since 2019. That shows eroding purchasing power is not affecting things that are luxuries or unnecessary, it’s an erosion affecting the most basic necessities that Canadians cannot go without.

Something of note within the report is that the wealthiest Canadians actually saw their wealth appreciate. That was thanks to investment income which provided a net increase in income, outpacing inflation.

Most Canadians, like those living paycheque to paycheque, on fixed incomes or the working class, do not have the same buffer that the highest income Canadians have. That underscores the effect to which inflation hurts the vulnerable the most.

The report is more bad news in addition to already reported bad news this year. One example is where RBC predicted in September Canada’s GDP per capita will decrease for a sixth consecutive quarter – another sign Canadians’ incomes are not keeping up with inflation.

When GDP per capita is down in a country, that means productivity of the country is down, and the quality of life of citizens is down.

So what is driving these negative economic shocks?

A major contributing factor is the current Liberal government’s ever-increasing inflationary spending and tax increases. The more the government spends, the more inflationary pressure is pushed onto Canadians. That also keeps interest rates high, which contributes to reducing purchasing power and making things more expensive for Canadians.

Thie government, through continued reckless spending, has created a reality where Canadians simply can’t afford what they used to nine years ago.

Conservatives would decrease taxes, stop tax increases and stop wasteful spending to bring Canadians’ purchasing power back.

I'd like to hear from you

Has your purchasing power been negatively affected within the last nine years? If so, how?

Please reach out to 250-470-5075 or [email protected] if have any thoughts to share – on this issue or others or if you need assistance with any federal programs.

Tracy Gray is the Conservative MP for Kelowna-Lake Country.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.