What is purchasing power?
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As defined by Canadasa国际传媒 Parliamentary Budget Officer, a non-partisan federal office, purchasing power refers to 鈥渢he quantity of goods and services that can be purchased with an income.鈥
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In very simple terms, itsa国际传媒 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, 2024, the Parliamentary Budget Officer published a report titled, 鈥淎 Distributional Analysis of the Purchasing Power of Canadian Households Since 2019.鈥
The purpose of this report is to study 鈥渉ow the purchasing power of Canadian households has changed (with) a distributional analysis of inflation and Canadian household incomes since 2019.鈥 Canadasa国际传媒 Consumer Price Index (CPI) 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 this report is clearly highlighted: 鈥渞ising inflation and tighter monetary policy have eroded purchasing power, particularly among lower-income households.鈥 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.
This shows that eroding purchasing power is not affecting things that are luxuries or unnecessary 鈥 itsa国际传媒 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. This is thanks to investment income which provided a net increase in income, outpacing inflation.
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Most Canadians 鈥 like those living paycheque to paycheque, on fixed incomes, or the working class鈥 do not have the same buffer that the highest income Canadians have. This underscores the effect to which inflation hurts the vulnerable the most.
This report is more bad news in addition to already reported bad news this year. One example is where RBC predicted in September 2024 that Canadasa国际传媒 GDP per capita will decrease for a sixth consecutive quarter 鈥 another sign that Canadians鈥 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 this Liberal governmentsa国际传媒 ever-increasing inflationary spending and tax increases. The more the government spends, the more inflationary pressure is pushed onto Canadians.
This also keeps interest rates high, which contributes to reducing purchasing power and making things more expensive for Canadians. This Liberal government, through continued reckless spending, has created a reality where Canadians simply can鈥檛 afford what they used to nine years ago.
Conservatives will decrease taxes, stop tax increases, and stop the wasteful spending to bring Canadians鈥 purchasing power back.
I鈥檇 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听tracy.gray@parl.gc.ca听if have any thoughts to share 鈥 on this issue or others - or if you need assistance with any federal programs.
