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Prime Minister Justin Trudeau speaks during a Liberal caucus meeting in Ottawa on Nov. 8. Conservative Leader Erin O’Toole and finance critic Pierre Poilievre on Wednesday urged the Liberal government to take action to stem the rising inflation tide.BLAIR GABLE/Reuters

The Conservative Opposition is wrong to allege that the Liberal government is to blame for Canada’s rising inflation. But it is right when it argues that Ottawa can at least stop piling its own wood on the inflation fire.

Conservative Leader Erin O’Toole and finance critic Pierre Poilievre came out swinging Wednesday after Statistics Canada released the latest monthly consumer price figures, showing the national inflation rate hit another 18-year high of 4.7 per cent in October, up from 4.4 per cent in September. They placed the blame squarely at Prime Minister Justin Trudeau’s feet, and urged the Liberal government to take action to stem the rising inflation tide.

Canada’s annual inflation rate hits 4.7% in October, fastest pace in almost 19 years

Let’s be real: There’s only so much the government can do to address the biggest factors behind the rising tide. It can’t make a COVID-19 pandemic disappear, nor unclog global supply bottlenecks that the pandemic has spawned. It doesn’t control world oil markets. It can’t undo droughts that destroyed crops and drove up livestock feed costs.

But the Conservatives’ message is increasingly honing in on the one element that is in the government’s control: the spending taps. Fiscal stimulus was clearly desirable earlier in the pandemic recovery, but now, it may be piling onto already plentiful inflation pressures.

“What’s causing it, of course, is too many dollars chasing too few goods and services,” Mr. Poilievre said in a video posted on his Twitter account. “Trudeau unleashed 400 billion of those dollars with his record deficits, and those dollars are competing for scarce goods and driving up the prices.”

The Conservatives have long been angry and accusatory about inflation, but their message hasn’t always been a clear and relatable one. “They’re printing money” hasn’t resonated with the general public. Taking swipes at Bank of Canada Governor Tiff Macklem was, on multiple levels, the wrong enemy for a political fight.

But on this spending message, they have found a good and, yes, even a constructive point. While government stimulus may not have created our inflation situation, it is certainly contributing considerable demand to an economy that is unquestionably challenged to keep pace with supplies. In that sense, stimulus has become part of the problem.

That’s a wake-up call for the Liberal government, as it approaches next week’s Throne Speech ringing in the new parliamentary session, to be followed by a fall fiscal and economic update, amid a recovery in a sensitive transition. Maybe we’ve reached the point where additional fiscal stimulus is neither necessary to sustain this recovery nor, frankly, desirable.

Even against the Liberals’ own stated yardsticks, the fiscal stimulus looks to have largely achieved its goals. The country has already surpassed the “one million jobs” objective that the government identified in its fall 2020 Throne Speech. Many of the key labour market indicators Finance Minister Chrystia Freeland identified as “fiscal guardrails” – guiding the government on when the time has come to start shutting off the stimulus taps – are either approaching or have already surpassed prepandemic levels.

With job vacancies swelling and labour shortages growing, it’s hard to argue for more spending to support job growth – which has clearly been the government’s priority, both in defining the recovery and in setting the boundaries for its fiscal stimulus.

Yet the government still has a commitment to roll out a $101.4-billion stimulus package over the next three years, as pledged in last spring’s budget. More than half of that hasn’t been spent yet.

Even when that budget was tabled, private-sector economists were warning the government it was already in danger of overstimulating the economy, especially on the demand side. In consultations prior to and following the budget, they urged Ms. Freeland to consider scaling back the government’s ambitions, and to shift policies away from supporting consumption and toward stimulating business investment.

Now, with the dangers of overstimulation more evident, those arguments have grown more urgent. And the Conservatives, to their credit, are fine-tuning their inflation rhetoric to focus on them.

“The answer is to get government spending back to normal, pre-COVID levels, to cancel Trudeau’s $100-billion [stimulus] slush fund and eliminate other wasteful spending, return to a balanced budget. And then unleash the productive force of our economy, so that instead of creating cash, we start creating more of what cash buys,” Mr. Poilievre argued.

That may be taking things too far. After all, the Liberal government’s plans for stimulus over the next couple of years – directed toward investments in housing supply, transportation and green technology – pretty much target the same long-term concerns about supporting productive capacity the Conservatives are talking about.

Nevertheless, this government has to address the demand pressures that it is helping fuel, before those pressures tip over into the seriously counterproductive. It’s time to re-chart the course on spending – with an eye on taking the wind out of the near-term inflation sails, whatever the longer-term goals. And next week’s Throne Speech would be the perfect place to start.

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