The surprise decision by the Bank of Canada to hike interest rates has put affordability back on the front of the agenda for Premier David Eby’s administration, as British Columbians find themselves squeezed on all sides by rising costs.
The bank last week raised its key lending rate 25 basis points, to 4.75 per cent, citing the need to cool persistent inflation. More increases could be coming, it signalled.
The move quashed hopes that interest rates would pause, and perhaps even drop, in the not-too-distant future.
British Columbians are back to a familiar question: What’s worse, high inflation that raises the cost of household goods like groceries, or high interest rates that spike mortgage and debt payments? Put another way: Does the problem or the solution hurt more?
The B.C. government has no control over the Bank of Canada’s decisions, nor can it touch most of the fiscal levers available to the federal government.
But it can use the provincial treasury to offer financial relief in the form of tax breaks, rebates and credits. One of the first questions to Eby upon his return from a two-week trade mission to the Asia-Pacific on Friday was: What’s he going to do?
“We've seen the impact of rising inflation, global inflation, on BCers, the impact of rising interest rates as central banks around the world increase interest rates which impacts people who have to pay a mortgage and have to renew mortgages and who have borrowed money, which is most BCers,” he said.
“This has a huge impact on people. Our priority has been on providing relief for costs wherever we can, wherever government touches people's lives, flattening rate increases at BC Ferries, flattening to zero basic car insurance rates in the province, providing a credit through BC Hydro, new cost-of-living credits for BCers, and, importantly, making sure the BCers have access to food, especially kids.”
Eby cited a $200 million investment in breakfast and food programs for provincial schools — admirable, but also not particularly useful for parents whose kids are about to go on a two-month summer break. The rest of the items on his list are a distant memory in the minds of voters.
To be fair, affordability issues have been largely overshadowed in recent months by the many other crises facing the NDP government.
Public safety has exploded into view, with mayors challenging the Eby administration to act on public drug use, the premier pushing Ottawa for bail reforms, and businesses demanding financial help to cover the cost of rising vandalism. Polls indicate people feel crime is rising, and the province isn’t doing enough to respond.
The health care system has collapsed (again), with open letters from physicians and nurses warning about unacceptable understaffing and overcrowding at facilities like Surrey Memorial Hospital, and wait times for cancer treatment so bad that the government has been forced to send patients to the United States for help. The crumbling state of healthcare remains a constant sore spot for voters, and the political blowback has been immense.
The NDP government should be able to walk and chew gum on multiple issues at the same time, but the extraordinarily complex nature of the challenges facing the province right now are occupying a lot of the brainpower of the premier and his senior advisors. They only have the bandwidth to do so much, so quickly.
Which brings us back to affordability.
The rebates, credits and rate freezes announced months ago are old news. With the Bank of Canada signalling a summer of financial pain, Eby is going to have to hive off some political capital to craft a new response, or risk looking slow and uncaring at a time of enormous financial stress for low-and-middle-income British Columbians.
“Our work is certainly not done,” the premier said Friday. “We're going to continue to provide that support as people need it.”
The people need it now. They are simply waiting for the premier and his government to respond.
Rob Shaw has spent more than 15 years covering B.C. politics, now reporting for CHEK News and writing for Glacier Media. He is the co-author of the national bestselling book A Matter of Confidence, host of the weekly podcast Political Capital, and a regular guest on CBC Radio. [email protected]