Prime Minister Justin Trudeau speaks at a Liberal fundraiser in Mississauga, Ont. on Sept. 27. Affordability concerns have been clobbering Trudeau’s Liberal government for two and a half years. Now, many of the economic indicators suggest that some of those pressures are easing.Paige Taylor White/The Canadian Press
Interest rates are falling. Inflation is back down to the target level. Wages have finally caught up, on average, to the price increases of recent years. In some cities, landlords are asking new tenants for lower rents.
Affordability concerns have been clobbering Prime Minister Justin Trudeau’s Liberal government for two and a half years. Now, many of the economic indicators suggest that some of those pressures are easing.
Yet the Liberals can’t count on that helping them to a political revival. Economic indicators can be good for bragging, but the politics won’t change much until people start to feel their own economic situation is looking brighter.
And Mr. Trudeau’s minority government – facing constant threats of defeat in the Commons within weeks or months – doesn’t have much time.
Not all the economic news is good, of course. Unemployment is ticking up, and productivity and per-capita growth are weak.
But on the set of economic issues that have been dominating politics, Finance Minister Chrystia Freeland can now point to some objective measures that show the affordability pressures on Canadian pocketbooks are easing.
In mid-September, Ms. Freeland announced new mortgage rules that expanded access to 30-year amortizations, along with increasing limits for mortgage insurance.
That move will be relief to many homebuyers who can now finance their homes with lower payments. And it is also a sign about conditions for homebuyers: Ms. Freeland had to hold off on introducing the measure until the housing market had cooled somewhat, so that it wouldn’t fuel a spike in demand and prices.
Ms. Freeland now touts the decreases in interest rates and the fact that real wages have now caught up the buying power lost to inflation in recent years.
Randall Bartlett, senior director of Canadian economics at Desjardins Group, said prices levels rose roughly 20 per cent since 2019, while the wages of permanent employees rose close to 25 per cent. And, he noted, in some cities, landlords are asking new tenants for lower rents. But then, for all those silver linings, there are clouds.
That wage growth is still not strong, Mr. Bartlett noted. People renewing mortgages now are still doing so at a higher rate than four or five years ago: “Folks are still going to be coming up against higher costs,” he said.
And Desjardins’ economists concluded in a recent paper that the “fire hose” of Liberal government measures to boost homebuilding will not really have a major impact have on the supply of homes – and therefore home prices – for three or four years.
Mr. Trudeau already looks too far gone to rebuild his standing with the public in a way that would make him a credible salesperson for economic hope in the next election campaign. But even if the Prime Minister could rebrand himself, the Liberals would need people to feel more economic hope. Quickly.
The political issue isn’t the leading economic indicators, said Greg Lyle, the pollster and strategist who is president of Innovative Research Group.
“The problem in Canada isn’t interest rates or jobs. It’s the declining standard of living,” he said.
People still have incomes, even growing ones, but they haven’t been keeping pace with their expenses in recent years, Mr. Lyle said. The fact that wages have caught up to inflation for some hasn’t made everyone feel like they are getting ahead. For many, buying a home or paying a mortgage is the biggest factor in their perception that things are unaffordable.
Older Canadians, living in a paid-for home, are more likely to be satisfied, while people under 45 are more likely to think “they’re in a bad spot and things are not going to get better,” he said. An Innovative poll conducted in March found 41 per cent of respondents said they are worse off than in 2015, and only 25 per cent said they were better off.
What Canadians want are policies that will increase incomes or make it easier to buy a home, Mr. Lyle said: “None of those things get solved in four months or maybe even four years.”
But inside Mr. Trudeau’s government, there are still those who argue that economic conditions are turning a corner and remain hopeful that Liberal political fortunes will see a boost. If they have enough time.