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Monday, May 23, 2022

Inflation: Five things to know about rising costs in B.C. - Vancouver Sun

Short of giving people cost-of-living bonuses, there is nothing the B.C. government can do

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At the start of this year, people were talking about COVID-19. The Omicron wave was taking off, restrictions were still in place and B.C.’s provincial government was providing updates five days a week.

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By the start of spring things had changed.

People were talking about inflation, as the costs of things began to rise — from mortgages to gas to rents — and the reality of a post-pandemic world started to appear.

Here’s five things to know about inflation in B.C.


Sales across much of Canada have slowed dramatically after the Bank of Canadas interest-rate hike forced banks to also move theirs up.
Sales across much of Canada have slowed dramatically after the Bank of Canadas interest-rate hike forced banks to also move theirs up. Photo by Postmedia, file

What caused it?

The rate of inflation is a key economic indicator, and is defined by the price of a collection of goods (consumer price index) at one point in time compared to another.

Statistics Canada reported Wednesday that the consumer price index rose 6.8 per cent in April, the highest monthly increase since 1991 — with food costs growing 8.8 per cent from March to April.

When COVID-19 arrived in early 2020, the first thing that happened was the price of a litre of gas plunged. Then the real estate market stalled as viewings were cancelled. Soon, however, supply chain problems emerged, as COVID restrictions impacted the ease with which goods could be transported. This meant it was more expensive to do business and was the start of inflation as costs were passed on to consumers.

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By late winter 2022, as prices began in general to rise, banks around the world started to increase interest rates as a way to temper prices.

This however, particularly in B.C., has increased the cost of servicing a mortgage — which leads to inflation (though only impacts people with a mortgage, and with a variable interest rate mortgage).


A service station in North Vancouver sells gas at more than $2 a litre in March 2022. It’s the first time that gasoline in a major Canadian market has ever cracked the $2 mark.
A service station in North Vancouver sells gas at more than $2 a litre in March 2022. It’s the first time that gasoline in a major Canadian market has ever cracked the $2 mark. Photo by Taehoon Kim/Bloomberg

Who is hardest hit?

Inflation is hardest on people on a fixed income. If you need to spend more money on goods and services — especially gasoline, which has soared even more due to the war in Ukraine — and your income does not change, then you have to cut from somewhere. Or start using credit cards or lines of credit, that are seeing rates rise.

The wealthiest people, who have savings and investments, see those values rise and are spared the pain of inflation. For the majority of people, the only way out is a pay rise, which then leads to more inflation.

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Canadian five and 10 dollar bills are displayed at the Bank of Canada in Ottawa April 30, 2013.
Canadian five and 10 dollar bills are displayed at the Bank of Canada in Ottawa April 30, 2013. Photo by Chris Wattie /REUTERS

Is there a solution?

The Reserve Bank of Canada is tasked with managing the national economy with the tools it has. For instance, during COVID-19 the bank bought up as many bonds as it could (instead of businesses buying the bonds) as a way to keep interest rates down in order to keep the economy going. However, this had a negative impact in that money became so cheap it drove up housing prices.

For now, the bank is raising interest rates hoping that will reduce inflation. One positive side-effect for the federal government is that increases in the cost of everything leads to more goods and services tax revenues going into federal coffers.


BC Health Care Matters rally at the BC legislature on BC Family Physician Day in Victoria, B.C. on May 19, 2022.
BC Health Care Matters rally at the BC legislature on BC Family Physician Day in Victoria, B.C. on May 19, 2022. Photo by DARREN STONE /TIMES COLONIST

Is there anything the provincial government can do?

Sadly, there is little. The provincial government and its Crown corporations are also impacted by inflation. Any collective agreements coming up, like with the B.C. Nurses’ Union, will include cost-of-living hikes that will need to be paid. And, as an example, B.C. Ferries has already increased fares to cover gas costs. This inflationary environment could be why Premier John Horgan’s promise to built an $800 million museum has gone awry among taxpayers.

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Short of giving people cost-of-living bonuses or reducing taxes on gasoline, there is nothing the B.C. government can do.


B.C. Liquor Store at 2088 W Broadway.
B.C. Liquor Store at 2088 W Broadway. Photo by Francis Georgian /PNG

Is everything going up in price?

Usually the last things to go up in price during an inflationary surge are vices — like alcohol, cigarettes and coffee. Anyone who drinks takeout coffee in Vancouver has already been hit with a 25 cent paper cup fee, while the price of whisky and wine are on the rise.

The price of beer and cigarettes, however, remain the same.


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