John Ivison: Nearly two years ago, the OECD said that, as Canada’s GDP fell by 10 per cent in the second pandemic-hit quarter of 2020, household income grew by 11 per cent, thanks to generous government hand-outs. The same phenomenon did not happen in Germany, France, the U.K. or the U.S.
The Bank of Canada said in its statement on Wednesday that the war in Ukraine, with its effect on energy prices, and continued supply-chain issues led to its decision to increase the overnight interest rate by 100 basis points to 2.5 per cent, giving the nation an effective pay-cut. But it acknowledged that excess demand in the domestic economy was a factor, a hangover from Liberal largesse in 2020 that was entirely predictable.
As Philip Cross, former chief economic analyst at Statistics Canada and now a fellow at the Macdonald Laurier Institute said, employment income in 2020 fell but disposable income rose — the only recession in Canadian history where people were actually better off. “We just stuck a huge mixer in the economy and hit top speed. We are still trying to figure out what happened,” he said.
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