How Alberta stacks up when it comes to helping people cope with inflation

Inflation has hit Albertanshard food bank use is rising, seniors are accruing more debt, and affordable rentals are in scarce supply.

That's spurred the rollout of measures meant to help Albertans cope with high prices including rebates on power and electricity bills, and hitting pause on the collection of the provincial fuel tax (although that will be partially reinstated this week).

Every government has tried to provide support, and they've done it in different ways depending on their capacity to help, said Trevor Tombe, a professor of economics at the University of Calgary.

"I think the priority was to get support out quickly, and so Alberta did do that," he said.

But Alberta's programs and others,like top-ups to the Canada Housing Benefit programs or cheques for citizens in Saskatchewan and Quebec, have also come under scrutiny. In some cases, there are concerns about how they could aggravate the problem.

Moshe Lander, an economics professor with Concordia University in Montreal, said most relief programs will fuel inflation (and higher prices) in the long-term.

But in that vein, Lander feels the Alberta government is among the provinces taking the best approachthere aren't too many programs and some are already existing measures.

In his opinion, when it comes to cooling inflation, less is more.

Targeting high energy prices

Earlier this year, the province announced it would introduce a rebate program meant to ease the sting of high energy prices.

Starting Oct. 1, and until the end of March, any time the monthly natural gas default rate exceeds $6.50 per gigajoule, a rebate will be issued to cover those costs.

However, since October's highest monthly default natural gas rate will be $5.632 per gigajoule, the program won't be activated before November.

This is in addition to a six-month, $50-per-month electricity rebate (for a total of $300).

Other provinces have also tried to stem the pain of energy inflation.

For example, this fall,the Newfoundland and Labrador government issued a one-time payment to supplement the cost of furnace oil used for home heating.

And in March, Yukon announced a $150 inflation-relief rebate to reduce the impact of rising electricity bills.

Still, Alberta's rebate program is "problematic," Tombe said, as it eliminates important signals that prices provide to consumers when they go up.

"What the government is doing is short-circuiting an important mechanism for a market to allocate, in this case, natural gas."

Tombe says that's one reason why he prefers targeted cash-transfer programs, adding it does less to distort the market.

"When governments instead provide income support, then it lets prices go up or down depending on market conditions. Consumers will respond accordingly," he said.

Cash transfer programs, which provide money directly to eligible groups of people, include things like the proposed federal one-time top-up to the Canada Housing Benefit program, resulting in a $500 payment for low-income renters.

Saskatchewan residents will receive a $500 cheque, dubbed Moe Bucks by some. Quebec created a one-time, cost-of-living tax credit, also $500.

Economist David Macdonald, with the Canadian Centre for Policy Alternatives in Ottawa, said cash transfer programs that are aimed specifically at lower-income households, rather than broadly distributed, will have a better impact in offsetting the sting of inflation.

"Cash transfers are not going to change the underlying increase in prices. It'll help to offset those increases in prices. And as a result, I think that it makes more sense to target those toward lower-income households. And so those can be very effective," he said.

He said he doesn't believe packages meant to curb the effects of inflation will fuel inflation in the long run, as soaring inflation is being driven, in part, by high oil prices.

Lower prices at the pump

Gasoline prices have been putting the bite on consumers for months, with Russia's invasion of Ukraine in February sending oil markets into a frenzy.

Due to ballooning pump prices, Alberta put a temporary pause on collecting the provincial fuel tax on gas and diesel, easing pain at the gas station.

From April 1 until Sept. 30, Alberta stopped collecting the provincial fuel tax on gas and diesel at the pump. The monthly savings were estimated at $27 for a Toyota Corolla up to $74 for a Ford F-150.

However, the province will be partly reintroducing the fuel tax starting Oct. 1. For the next three months, the provincial government will collect a tax of 4.5 cents per litre on gas and diesel.

The Ontario government took a similar approach, slashing the gasoline tax by 5.7 cents per litre, as did the Newfoundland and Labrador government temporarily lowering the price at the pump by 8.05 cents per litre until Jan.1, 2023.

Tombe said these types of tax cuts are relatively easy to implement and can take effect the next day, while cash-transfer programs take time to implement, though he added he felt the money spent could be used on a targeted program that provides support to low-income Albertans.

Macdonald said the gas tax cuts are not necessarily distributed to those who most need it.

"It goes equally to the person filling up the Porsche versus the person filling up their 2002 Toyota Corolla," he said. "That's not entirely fair."

But Lander said inflation affects everyone, adding high-income Canadians are more likely to borrow large sums of money and therefore be more exposed to rising interest rates.

He believes that's what politicians are trying to balance when suspending the fuel tax.

No provincial sales tax

Alberta's provincial government says low taxes namely a lack of PST helps people save money in the face of inflation.

"Albertans already pay the lowest overall taxes among provinces, with low personal income tax and no provincial sales tax, payroll tax or health premiums," Finance Minister Jason Nixon said in a statement earlier this summer.

Macdonald says that doesn't really help people with inflation.

"If you were to cut the tax in the middle of the period, then it would help with inflation," he said.

Alberta hasn't had a PST for the entire period inflation soared, so it won't change the path of prices, he added.

"The fact that you have it or don't have it is neither here nor there when it comes to inflation."

No quick fix

No government program offers a silver bullet when it comes to inflation.

Policy decisions are often a mix of politics, economics, financesand citizen needs and expectations. Needless to say, it's a complex formula.

Ultimately, Tombe said, the effectiveness of inflation relief programs should be measured by what they're meant to achieve.

"I'd say that we're in a time of very high uncertainty, and that means we should give our governments a little bit of rope to experiment and to try things out," he said.

"Some things will work, some things won't, because it's a pretty fast-moving situation."