Starting December 14, Canada will waive GST on key goods for two months to ease financial struggles
Federal finance minister Chrystia Freeland has labelled a two-month GST holiday on certain goods as an effort to combat what some economists are describing as a “vibecession” – a period of economic growth but continuing financial struggles for many Canadians.
Starting on December 14, the government will launch the measure to address the disparity between good news on inflation and interest rates and many Canadians’ personal financial outlook.
"One of the positive impacts of this measure is to help Canadians get past that ‘vibecession’ because how Canadians feel really does have a real economic impact," Freeland said.
The GST holiday will apply to a wide range of consumer goods, namely:
- Children's clothing and shoes
- Toys
- Diapers
- Restaurant meals
- Beer and wine
- Christmas trees; natural or artificial
- Snack foods and beverages
- Video game consoles
In addition to the GST holiday, the government will issue $250 cheques to working Canadians that earned up to $150,000 in 2023 in the spring.
The aggregate of these measures is estimated at $6.3 billion. Though many economists have been vociferous in questioning the approach, procurement minister Jean-Yves Duclos has described the intervention as a temporary one.
"We need to distinguish between structural and temporary measures. This is a temporary measure which acknowledges that despite all of the wonderful economic news that my colleagues, economists are correct to spread, the average Canadian doesn't yet feel that good news," Duclos shared.
BMO estimates this stimulus will amount to 0.3% of GDP. However, the bank’s senior economist Robert Kavcic notes in a report that the impact may be limited in solving some of the deeper economic problems around productivity and affordability compared to permanent income tax reductions.
"In fact, when set against an incoming US administration that is gearing up for a significant pro-growth policy push, it seems like energy would be better spent on measures with a more lasting impact,” Kavcic wrote.
Prime Minister Justin Trudeau acknowledges that although both inflation and interest rates are down, therefore softening up some of the pressure on Canadian pockets, economic hardship continues to exist, and this is a direct attempt at offering relief through these measures.
