Prime Minister Mark Carney announced several measures to address food affordability for Canadians on Monday morning, including a top-up to the Goods and Services Tax (GST) credit. Food prices have risen faster than overall inflation and lower-income Canadians are getting hit the hardest, Carney said at Ottawa grocery store. Here the Financial Post looks at how the new measures could affect Canadian consumers and businesses.

What affordability measures did the government announce?

The first, and perhaps most tangible, affordability measure that was announced Monday morning was the expansion to the GST credit, now renamed the Canada Groceries and Essentials Benefit.

Starting in July of this year, millions of lower-income Canadians will receive a 25 per cent boost to their GST rebates over the next five years, as well as a one-time top-up of 50 per cent this year.

Carney also unveiled other longer-term measures, which he said would help bring down the costs of groceries in Canada. “Canada’s new government is acting today to provide a boost to those Canadian families most need one, while creating a bridge to longer-term food security and affordability,” he said.

These measures included allocating $500 million from the Strategic Response Fund to help businesses manage costs of supply chain disruptions and the launch of a $150 million Food Security Fund under the existing Regional Tariff Response Initiative to support small and medium enterprises with the same issues.

Another $20 million is going to the Local Food Infrastructure Fund to support food banks and other organizations to support families in need.

The government said it is also introducing immediate expensing for greenhouse buildings acquired on or after Nov. 4, 2025 (that become available for use before 2030), to encourage investment in domestic food production and supply.

And there will be measures to address unit price labelling at grocery stores and support the Competition Bureau with “monitoring and enforcing competition in the market, including food supply chains,” according to the

government

‘s news release.

How will the expanded GST credit help Canadians?

Carney said the rise in food prices since the COVID-19 pandemic means many lower-income Canadians need support.

He said a family of four will receive up to $1,890 this year, up from about $1,100, with the GST top-up, and about $1,400 a year for each of the next four years. A single person will receive $950 this year, up from $540, and about $700 a year over the next four years.

“On average, these payments make up for the higher level of food prices since the pandemic,” he said.

Colin Mang, assistant professor of economics at McMaster University, said raising the credit amount will also increase the number of Canadians eligible for these payments.

Under the old system, single Canadians earning up to a maximum of $56,000 a year would be eligible for a partial benefit, while those earning less than $45,000 received the full benefit, Mang said. “The range of people collecting partial benefits will now extend up to (those earning) about $64,500 (for this year).”

Mang said a family of four earning up to $66,800 a year could receive partial benefits under the old system, but this maximum household income has now increased to $83,300 under the new system.

In the following four years, when the benefits fall to the 25 per cent increase, Mang said the number of eligible Canadians won’t be as high as this year but will still be greater than past years.

Overall, “particularly for lower-income families, this is going to be a pretty significant benefit for a typical family of four,” Mang said.

Grocery prices are projected to increase by nearly $1,000 for the average family of four, according to a recent

report

from Dalhousie University’s Agri-Food Analytics Lab. With the maximum benefit increasing by nearly $900 in 2026 (from $1,066 to $1,890), Mang said this will help to offset these higher prices.

Although these GST payments are intended to help lower-income and lower-middle-income households with their grocery bills, they could also be used for a range of other expenses, such as rent, new clothes or “anything else you want,” Mang said.

However, this temporary top-up will do little to address the root causes of food inflation, said Joe Brusuelas, chief economist at RSM Canada in an email.

“While, a one-time GST quarterly payment aimed at down market households may prove popular, within the context of Canadian politics and the affordability crisis it’s not going to alter inflation and pricing dynamics over the medium to long term,” said Brusuelas, chief economist at RSM Canada in an email. “Policies that facilitate an increase in supply and time are what is going to mitigate that affordability crisis.”

How will the longer-term measures help Canadians?

Mang said one of the biggest challenges that has been driving up food costs for Canadians is supply disruptions.

For example, the costs of beef have risen dramatically due to reduced cattle stocks, he said. As a result, consumers have pivoted to other meat products, such as pork, which in turn has pushed up pork prices as well.

The federal government’s move to help businesses with the costs of supply-chain disruptions could mean reduced transportation costs for importers, Mang said.

“If you’re thinking about firms having to source globally, and having to look further afield all of a sudden because they lose suppliers closer to home, a government fund would support them in being able to cover the extra cost, so the cost of that global transportation is not passed on to consumers through higher prices,” he said.

Mang said the Food Security Fund is also geared toward maintaining domestic production. The funds are coming out of the existing Regional Tariff Response Initiative, which provides subsidies to small and medium-sized businesses that have seen their export markets disrupted due to tariffs, he said.

“This money is to help subsidize agricultural producers who are exporters but (lost) export access to make sure they’re still producing so we have productive capacity here,” he said.

Mang said the policy around greenhouse expensing could incentivize Canadian farmers to build more greenhouses within the next five years and potentially reduce imports. He said this could be particularly useful during the winter months, when companies need to import some crops from other countries. This could “then lower transportation costs and make groceries cheaper,” Mang said.

The government’s focus on unit price labelling, which allows consumers to compare the prices of comparable items, could mean manufacturers think more carefully about issues such as shrinkflation, where consumers pay the same price but for less, Mang said.

“With standardized unit pricing, it makes it more difficult to hide the fact that shrinkflation is happening, and I think that would make manufacturers more hesitant to employ it as a strategy.”

How much will these measures cost?

Carney said after his announcement, that the Canada Groceries and Essentials Benefit is projected to cost about $3.1 billion the first year, due to the one-time top-up. This will decrease to $1.3 billion in the second year and $1.8 billion for each of the remaining three years.

Mang said the slew of measures the federal government plans to implement will likely come out of the government’s general budget.

“Either they spend it from tax revenue, or they borrow the money, in which case we pay interest on (that),” he said, adding that interest rates have plummeted over the past year-and-a-half.

Still, he said Canada’s debt picture is much better than other comparable countries, such as the United States and United Kingdom. “The government’s spending an extra $500 million to an extra $1 billion dollars,” he said. “It’s a drop in the bucket.”

Increasing inflation is a potential concern with the Canada Groceries and Essentials Benefit, said Sylvain Charlebois, professor of management at Dalhousie University.

Charlebois said more money in the pockets of consumers could stimulate demand and cause grocery stores to raise prices, though he acknowledged the GST payments are targeted toward lower-income Canadians in need.

Mang said the payments would likely not have a significant impact on inflation, estimating it could lead to an additional $750 in spending or $62 a month per person this year.

When asked about inflation after his announcement, Carney said, “You could say that about any aspect that grows the economy.”

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• Email: slouis@postmedia.com