Friendly Manitoba? Not for taxpayers drowning in debt and high prices
Manitoba is leading the country. Sounds like good news until you realize in what categories: Debt and inflation.
The first news comes from a sobering remark by Portage la Prairie MLA Jeff Bereza. He said: “Manitoba has a new distinction, and that distinction is, in January of 2025, we have the highest inflation rate in Canada.” Bereza said starting in January, Manitoba had a 2.7 per cent inflation rate, which was the highest for any jurisdiction in Canada. Gas prices had increased 25.9 per cent with the re-introduced gas tax. Manitoba also had the second-highest grocery price inflation in the country.
The other gem is the revelation Manitoba has the highest combined federal and provincial debt-to-GDP ratio in Canada, at 141.4 per cent. Winnipeg Sun columnist Kevin Klein recently compared Friendly Manitoba to debt-laden countries such as Greece and Argentina. Klein pointed out how unsustainable spending levels affect average people most when a crisis hits. Politicians love overspending and ‘delivering’ to citizens during good years. Debt, however, will end up dragging the economy, and interest payments erode government spending on essential services.
Jurisdictions dependent on large equalization payments—such as Manitoba—compound the effects of overspending because they lack incentives to spend less and make better policy choices. This is one big reason Manitoba’s public sector is out of proportion. The problem comes when revenues crash or we face unexpected costs for goods (hint, hint, tariffs). Then, governments resort to higher taxes, austerity and layoffs.
Manitoba’s high inflation will get worse if the Trump administration goes through with the tariffs on goods. We can hope—and with good reason based on the record so far—that the tariffs are a posturing tactic for the U.S. administration to force some concessions.
Manitobans know about inflation all too well. Up until tariffs and exaggerated annexation threats, affordability was the dominant concern across the country. Government policies during the pandemic can explain much of the inflationary pressures. The pandemic restrictions severely disrupted supply chains, while governments engaged in excessive spending to mitigate the effects of their restrictions on individuals and businesses. This increased spending led to higher costs across the board.
Manitoba should address the twin debt and inflation problems before the next financial crisis. Bringing spending down to sustainable rates would help, for starters. Manitoba does not have to wait for equalization reform either—if it ever comes—before dealing with its ill effects: Out-of-control bureaucracies.
The tariff threat led Nova Scotia—another ‘have not’ province like Manitoba—to consider its own economic reckoning. In its case, the reckoning involved re-evaluating long-standing resource development bans. Nova Scotia has unique issues, such as an aging population and the out-migration of younger, productive taxpayers to jurisdictions with better taxes and economies. Manitoba has different issues, but equalization creates the same over-spending and distorted policies.
The province ought to consider serious restraint in non-priority areas and make Manitoba a job creation and investment destination that is competitive with other Prairie provinces.
Ultimately, Manitoba can only be most secure in addressing its twin inflation and debt problems through policies promoting economic growth and cutting unnecessary spending and regulation.
Joseph Quesnel is a senior research fellow with the Frontier Centre for Public Policy.
