MNI: Trudeau Ditches Canada Housing Minister On Inflation Pain

Canadian Prime Minister Justin Trudeau removed his housing minister during a wider mid-term cabinet shuffle Wednesday amid anger about the cost of living and failure to boost supply in what the IMF has called the world’s most stretched market.

Ahmed Hussen was dropped after less than two years as Minister of Housing and Diversity and Inclusion, replaced by Sean Fraser as Minister of Housing, Infrastructure and Communities. As housing prices boiled and consumer debts grew bigger than Canada’s GDP, Hussen recycled past announcements amid warnings of worsening shortages as the government brings in more than a million immigrants. (See: MNI: Canada Minister Briefed 45% Cost Jump Risks Housing Goal)

The cost of living is a massive political problem as the Bank of Canada’s 475bps of rate hikes punish consumers also staring down persistent double-digit rises in grocery bills. Trudeau says he intends to take his minority Liberal government into an election due by 2025 and polls suggest Pierre Poilievre’s Conservatives will give him a tough fight over deficit spending and his pledge to fire BOC Governor Tiff Macklem. Most economists call Poilievre’s approach on the central bank misguided.

Still, even the left-leaning New Democratic Party helping the Liberals pass confidence votes to stay in power have attacked Trudeau and the BOC over the cost of living. Inflation peaked around 8% in June of last year and has faded to around 3%, with the BOC hiking a 10^th time this month and warning it may act again with inflation seen holding above the 2% target for another two years.

Other economic ministers including Finance Minister Chrystia Freeland and Innovation Minister Francois-Philippe Champagne stayed in their jobs. Both are seen as replacements if Trudeau changes his mind and decides not to fight the next election as Liberal leader.

The new housing minister may have some say in the finance department’s review of whether to fold the mortgage bond program into the government’s regular bond program. (See: MNI: Canada Could Earn CAD800M/Yr Ending Mortgage Bonds-Memo and MNI: Canada Warned Ending Mortgage Bonds Could Be Costly)

Polls suggest Conservatives will challenge for government in the next election, but internal divisions over social policy and a rump of support in western Canada rather than vote-rich Ontario and Quebec have led to failure for several elections now. Poilievre in his first year as leader has yet to embrace centrist policies that carried his colleagues to power at the provincial level in recent years.

Trudeau also replaced Public Safety Minister Marco Mendicino amid outrage around his lack of knowledge about the transfer of a notorious serial killer to a medium-term prison.

This is the 17^th cabinet Trudeau has set since coming to office in late 2015. The shuffle allows a fresh front bench for when Parliament re-opens in late September, and also includes new ministers of justice, defense, employment, public services, health, agriculture, and transport. Four ministers in recent days said they wouldn't run in the next election, opening up new spaces.