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Trudeau announces $4.5 Billion Inflation Aid

Canadian Prime Minister Justin Trudeau announced a $4.5 billion package on Tuesday to provide relief from high inflation to low-income families.

The measures include doubling the quarterly tax credit sent to low- and modest-income individuals and families to offset the sales tax and a one-time increase of $500 to the housing benefit given to low-income people who need help with rent, Trudeau said.

The Trudeau Liberal government will also provide up to $650 a year for dental care to children under 12 who do not have access to dental insurance.

“These are things that will change people’s lives right now, but they’re also targeted enough that we’re confident they won’t contribute to increased inflation,” Trudeau told reporters in St. Andrews, New Brunswick.

While inflation cooled a bit from a near four-decade high of 8.1% in July, the Bank of Canada remains concerned about rising prices and is promising another rate hike after raising them to a 14-year high last week.

Derek Holt, director of Capital Markets Economics at Scotiabank, expects the stimulus to kick in in the first and second quarters of 2023. “I would expect that to add to inflationary pressures at the start of the year,” he said, adding that he expects it to increase pressure on the Bank of Canada to go beyond 4% with its cash rate”.

The support package includes money previously allocated in the budget and $3.1 billion in additional funding, Reuters reported last week, citing a government source.

Payments to low-income tenants and a dental plan for children are part of a deal Trudeau struck with the opposition New Democrat Party (NDP) in March in exchange for its support to keep his minority government in power until 2025.

Creating a national dental care system was one of the cornerstones of the deal, and Trudeau said his government plans to expand dental benefits to more people by the end of next year, with the entire program completed by 2025.

“I know so many families are being overwhelmed by skyrocketing food, rent and gas prices, so this immediate assistance is critical,” NDP Leader Jagmeet Singh said in a statement after Trudeau’s announcement.

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