Canadians’ Finances Shaken by Inflation and Rate Hikes: Insolvency Firm

People shop for produce at the Granville Island Market in Vancouver, on July 20, 2022. (The Canadian Press/Darryl Dyck)

Canadians are less prepared to buffer financial shocks as they spend more towards food, clothes, and shelter, says a survey conducted for the insolvency firm MNP.

“Canadians are putting more of their paychecks towards basic necessities. That is leaving less of a financial buffer to manage the impacts of current and potential future interest rate hikes,” said Grant Bazian, president of MNP, in an Oct. 3 statement.

MNP released its Consumer Debt Index this week, which is based on polling conducted quarterly by the Ipsos polling firm.

It says the impact of inflation and successive rate hikes by the Bank of Canada are becoming clear.

Compared to December 2021, 52 percent (+5 points) of respondents said it’s becoming less affordable to feed themselves and their families.

The proportion of respondents who said transportation is becoming less affordable climbed by 9 points to reach 49 percent. Clothing or other household necessities climbed from 40 to 45 percent.

MNP said there are fewer Canadians who are closer to insolvency than in the previous quarter (46 percent, -6 points). MNP, Canada’s largest insolvency firm, describes insolvency as someone being $200 or less away from not being able to meet his financial obligations at month’s end.

Despite this number, the firm says the average Canadian has less disposable income due to necessities costing more.

A further rise in prices or interest rates will push more people to insolvency and that impact will be felt more by younger Canadians.

‘Tripling the Carbon Tax’

The report by MNP was mentioned by Conservative Party Leader Pierre Poilievre in the House of Commons on Oct. 4.

“Almost half of Canadians are $200 from insolvency, that means that they’re about to default on a debt or other legal payment,” Poilievre said after mentioning the report during question period.

Poilievre has been a constant critic of the government on its management of finances and since taking the helm of his party on Sept. 10, he has pressed the Liberals on a daily basis about inflation and upcoming federal tax hikes.

“The liberal solution to all this is to raise taxes on paychecks and on energy, including by tripling, tripling, and tripling the Carbon Tax on gas, heat and groceries. Will they cancel their plan to triple the tax?” Poilievre asked.

The government has defended the Carbon Tax, citing the need for a “price on pollution” to achieve the “green transition.”

The Liberals have had support from the NDP, the Bloc Québécois, and the Green Party in defeating two recent Conservative motions calling for no increase in the Carbon Tax or Canada Pension Plan contributions.

“Our government knows that many Canadians are struggling today with the cost of living, and we do have a Liberal solution,” said Deputy Minister Chrystia Freeland in responding to Poilievre.

Freeland mentioned the GST tax credit of up to $500 that will be given to 11 million households.

That measure is supported by the Conservative Party and is making its way through the House as Bill C-30.