Iit's safe to say that many Canadians feel lousy about their ability to make ends meet. A recent Royal Bank of Canada survey found that nearly half of respondents say they can't maintain their standard of living, and an October Abacus Data survey found that 62 per cent of respondents cited the rising cost of living as one of their top concerns.
In other words, little has changed since the spring, when the major parties' federal election campaigns burst with promises to make life more affordable for Canadians, including by cutting taxes and building houses (along with parties' claims that their plans to cut taxes and build houses were better than other parties' plans to cut taxes and build houses). Of course, long-term change by definition takes time. But the general concern also reflects a larger tension: Accessibility and what it takes to achieve it don't mean the same thing to everyone.
For economists, affordability is largely a function of inflation-adjusted wages: as long as average wages are high enough for people to pay for what they need, the cost of living is considered affordable. One way to measure this is Statistics Canada's Consumer Price Index. It offers a snapshot of the prices of a metaphorical basket of eight categories, including food, education, recreation and housing, that covers rent, interest on mortgage payments and even expenses such as painting or installing floors. The CPI has fallen significantly over the past three years, a sign that the cost of goods is not rising as much as in, say, 2022, when inflation was at its peak. Thus, at first glance, prices have become much more stable than three years ago.
At the same time, wages are generally holding steady, with many Canadians in the same position they were in February 2020, says David McDonald, senior economist at the Canadian Center for Policy Alternatives. (He notes that there are exceptions, including some public sector workers whose wages have been frozen.) For economists, he says, inflation is a problem that has largely been solved. If people have more income, it means affordability.
But consumers don't usually see it that way. Most Canadians, says McDonald, “don't care about wages, even if they got a raise. All they care about is what that bag of chips costs.”[s] $1 more than two years ago and that coffee thing [that] Previously it cost $10. . . expenses[s] 20 dollars.” In other words, for many, what they are expenses matters more than how much they earn—what's known as loss aversion. For Macdonald, this makes inflation a “political problem” rather than an economic one. Because while economists focus on higher wages as a solution to higher costs, politicians have to show how their policies will make life cheaper.
Of course, it's not just chips and coffee. For decades, a widely accepted budgeting rule has been that housing costs should make up about 30 percent of the basket; in practice, many Canadians typically spend between 35 and 50 percent of their salary on housing. Rent costs have outpaced inflation and demand for housing is driving up costs. According to Statistics Canada, rents in Vancouver increased by about 27 per cent between the first quarter of 2019 and the first quarter of 2025; in Montreal they grew by almost 71 per cent over the same period.
Mortgage costs, and to some extent rents, are largely determined by the central bank, which moves interest rates up or down to keep prices stable. If inflation exceeds the target of 2 percent, rates are raised. When they, and therefore mortgages, go up, “so do rents,” says McDonald, “because those rents are tied to landlords' interest costs on mortgages, and they go through [those] Let's move on to tenants.”
So what can governments do? Angela McEwen, director of research for the Canadian Union of Public Employees and a fellow at the Broadbent Institute, says implementing rent controls is one way to reduce housing costs. While it falls under provincial and territorial jurisdiction, she says the federal government could work with different jurisdictions to create rental boards that would establish rent control and allow tenants to report bad landlords.
McDonald warns that any rent control measures must be backed by an increase in the supply of housing, especially non-market housing such as co-ops. The federal government invested in co-op housing programs from the 1970s until the early 1990s, and also provided additional funding to provincial programs in British Columbia, Quebec and Ontario. But during a period of austerity in the 1990s, the federal government pulled back from construction, leaving it to private developers in the name of prioritizing efficiency. That may be changing: as part of the Build Canada Homes initiative, announced in mid-September, the government has pledged an initial $13 billion to build temporary and supportive housing.
Tax cuts, another pillar of campaign promises, don't go far on the affordability front. McDonald says the federal government's repeal of the consumer carbon tax would presumably lead to lower prices for gasoline and heating oil for home heating, although the full benefit to consumers may depend on whether fuel companies pass on the savings.
To finance tax cuts, the federal government has to cut services. Public employee unions warn that Prime Minister Mark Carney's proposed 15 per cent spending cuts over three years are already leading to job losses and reduced availability of services such as employment insurance or the Canada Revenue Agency. “Now it's harder for you to get EI because you can't get through to the call center,” McEwen says.
Another consequence of government funding cuts is the creeping privatization of health services, including some surgeries, McEwen says. She notes that these out-of-pocket costs will likely offset any intended benefit from the tax cut, since the payments typically exceed the amount of the reduction.
In early October, Carney announced that the federally funded school meals program would become permanent and introduced automatic tax filing for low-income Canadians, ensuring they could access government rebates and programs such as the GST rebate.
MacDonald notes that the school nutrition program was already in place and was funded through 2029, meaning this announcement will not have a short-term impact on the program. Considering what services could be lost when the government announces an austerity budget, “it's a drop in the bucket.”
Both experts say there are better ways to address affordability than cutting taxes. Measures such as subsidizing childcare, dental and pharmaceutical fees make a difference. However, the government can do little about the cost of food. MacDonald notes that grocery store margins, while relatively low, have “roughly doubled since pre-pandemic times and have remained there.” While some argue this is a result of the dominance of large grocery chains, increased competition is likely to make little difference, he says. Because the margins are so small, even when they double, the impact on consumers is still small, while more price increases come from bottom-up forces like energy companies raising transportation costs and reaping the rewards: “There's a big supply chain that happens before you end up in the grocery store buying those potatoes.”
There are industries where increased competition could help. McEwen cites Sasktel, a Crown corporation and utility, as an example of how public communications services can reduce costs. “Cell phone bills in Saskatchewan are half the price of anywhere else because there is a public option,” she says. It doesn't have to dominate the market, but could “simply exist to keep private companies from speculating and offer a more affordable alternative.”
But McEwen doesn't see the idea catching on anywhere else. “I don't think any of our current elected leaders are leaning towards that,” she says. “We see that they really want to offer incentives to the private sector. They want to privatize things. They want to make it someone else's problem.”
There are ways the government could more directly support low-income families. MacDonald gives the example of Mexico's canasta básica, or basic food basket: it contains twenty-four pantry items considered essential to the nutrition and hygiene of Mexican families, including bread and tomatoes, and costs a total of nearly $70, which is paid for by the family, with the government committed to keeping prices the same despite inflationary pressures. The basket was introduced in 2022 and extended until 2025. “You won't get the best quality bread,” MacDonald says, but the idea is to control the prices of specific items so that most families can afford them.
In addition to serving as an example, this example helps illustrate a basic perceptual problem: while economists may calculate a metaphorical basket of goods, consumers buy actual baskets of goods. The bottom line for many remains the same: These items are more expensive than they were a few years ago, and costs will not return to pre-pandemic levels. And when people are unhappy with high prices, MacDonald says, “they're going to get back at the government in power.”
