Economists warn against tax cuts and rebates as Canadian inflation reaches 40-year high

Canadians are experiencing yet another blow to their cost of living as the country’s annual inflation rate is skyrocketing to its highest level in nearly 40 years.

However, experts are warning the government not to intervene by cutting taxes.

Statistics Canada says inflation rose 8.1 per cent year-over-year last month, the largest annual change since January 1983.

Gas tops the list with a year-over-year increase of 54 per cent and a single-month increase of just over six per cent.

While the cost of food was unchanged from May, it did rise nearly nine per cent from a year ago.

Fortunately, experts believe prices at the grocery store won’t get much worse.

“I think we're seeing the light at the end of the food inflation tunnel, and it appears as though the food inflation rate has peaked in Canada,” said Sylvain Charlebois, a food policy professor at Dalhousie University.

B.C.'s annual food inflation rate was 7.7 per cent -- significantly below the national average.

“In British Columbia prices were much higher, the food inflation rate was actually higher than average last year. So I suspect that the big bump was actually last year compared to this year,” said Charlebois.

However, he says grocery bills will remain high for now.

“Food inflation rates still outpace the general inflation rate. So that's why people are still noticing higher prices and prices will continue to rise, but the rate seems to be slowing down,” he explained.

The cost of accommodation was up nearly 50 per cent in June, and the cost of a plane ticket was more than six per cent higher.

Those living in Metro Vancouver are feeling the pinch.

“Prices are going up and up and up, as you may know, and it's really hard on the pocketbook these days,” said Steve from Port Coquitlam.

Some people are even changing their lifestyles to try and save.

“I stopped driving. I only drive if it's absolutely necessary,” explained Maria also from Port Coquitlam.

However, economists warn against government rebates, saying although it may seem counterintuitive, they should actually be spending less.

“The people that are looking to the government, saying ‘give me money, suspend gasoline taxes, don't force me to pay for certain things, send me checks in the mail,’ those things are themselves inflationary,” said Moshe Lander, a economics professor from Concordia University.

Lander says Canadians will have to do their part to lower inflation and he believes the next few months will be crucial.

“If we get frustrated and say, 'I'm not seeing any signs of these things. So forget it, the gloves are off, and I'm going in and I'm demanding these huge raises.' We're just going to create more problems,” Lander told CTV News.

Last week, the Bank of Canada hiked its key interest rate by a full percentage point in an effort to slow skyrocketing inflation.

The rate hike was the largest single increase in more than 20 years.

“There's this mistaken thought among Canadians that last week that big interest rate increase should lead to lower inflation. It will, but the interest rate changes take about 12 months to have their full effect,” said Lander.

His advice is to be thoughtful with our spending.

“I think that at this point, Canadians have some very difficult choices to make about what it is that they spend their money on and how they spend their money.”