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In the closing months of 2022, many Canadians were suddenly getting more help with their finances.

Government transfers to individuals jumped by more than $20-billion in the fourth quarter, an increase of 7.6 per cent from the previous three-month period, according to Statistics Canada. (These figures are reported in seasonally adjusted, annualized terms.) Employment Insurance payments actually fell during the quarter; instead, the boost in transfers was driven by what Statscan refers to as “other benefits,” which surged by nearly $25-billion.

These “other benefits” include recent measures to help people cope with high inflation. The federal government sent out a one-time payment that doubled the GST tax credit for an estimated 11 million individuals and families. Some provincial governments, meanwhile, have disbursed cheques to their residents.

“Many initiatives are well-intentioned, particularly those targeted at the most vulnerable population,” Beata Caranci, chief economist at Toronto-Dominion Bank, said in a recent report. However, this increase in transfers is “working at odds with the Bank of Canada’s objective to calm the impulse to inflation from buoyant domestic demand.”

Household disposable (after tax) income rose in the fourth quarter, in large part because of higher transfers. This helped people spend more money, despite sharply higher interest rates that are meant to curb demand.

Many economists have criticized the provinces, in particular, for disbursing cheques too broadly. In one example, Saskatchewan sent $500 payments to everyone 18 and older who filed a tax return for 2021.

Speaking to the House of Commons finance committee last month, Bank of Canada Governor Tiff Macklem said government measures to help people with inflation should be temporary and targeted to those “who are really suffering,” such as lower-income Canadians.

“I will just say that if government spending contributes more to aggregate demand at a time when we’re trying to cool the economy, then yes, that wouldn’t be helpful,” Mr. Macklem said.

With a file from Mark Rendell

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