Will prices ever go down? A Laurier economist explains cost of living

Nov. 9, 2026

During recent election cycles, affordability has remained a top issue as Canadians despair about the cost of living. But is life actually more expensive than it used to be? If so, what can be done about it?

Azim Essaji, an associate professor of Economics at Wilfrid Laurier University’s Lazaridis School of Business and Economics, studies economic development and international trade. Below, he explains the state of consumer prices and why Canadians are feeling the pinch.

In a post-pandemic era, why are consumer prices still so high?

There is a misconception that has been fuelled by politicians about bringing the cost of living under control. The assumption is that somehow prices would go down, and that was never going to happen. I think the most we can do is slow the rate of price increases, and that has happened. Inflation was running at 7 or 8% annually as the pandemic was winding down. Now rates have moved back into the normal range of between 2 and 3% over the last few years.

Is this a wage issue then? Have wages not kept up with inflation?

Each year, employees will likely see an increase in their “nominal wage:” the money value of their wage. If you earned $30 an hour last year, this year you earn $31. Your nominal wage went up by 3.3%. But if inflation is rising at the same rate, you effectively haven’t received a wage increase because your wage no longer buys the same bundle of goods. “Real wage” is a measure of how many goods you can buy with that amount of money.

If we look at the statistics, real wages in Canada have risen relative to inflation. There was a period in which inflation was outpacing wages, but real wages are back to normal. In fact, real wages are higher now than they were in 2019, by a very small percentage.

So why do people feel like their dollar isn’t going as far?

I think the rub is that certain prices have continued to grow and outpace inflation. Namely, housing and food.

Housing costs have been steadily climbing for the past 20 years and then went haywire during the pandemic. This particularly impacts renters. Based on Canada’s Consumer Price Index – which measures price changes by comparing the cost of a fixed basket of goods and services over time – inflation has risen approximately 3.4% per year since January 2020. At the same time, rents have increased 4.4%. Average rents today are about 34% higher than they were in January 2020. Overall prices are up 25%, so there’s a significant disparity there.

We saw food prices climb, largely due to supply chain issues, and they’re still running hot relative to the economy. Grocery prices are up approximately 33% since January 2020, or about 4.4% per year.

Will prices ever go down?

For particular items, but not overall. In fact, the Bank of Canada doesn’t want consumer prices to go down. This is a dirty little secret, but no policymaker wants price levels to drop and there are good economic reasons for that. Deflation can be really harmful. You don’t want an economy where people expect lower prices in the future than they see now because they will stop spending. If my money will buy more tomorrow than it does today, I have incentive to stuff it under my mattress. That can lead to a contraction in the economy, which can become a self-fulfilling prophecy.

Economists want the economy to run on a small rate of inflation. We don’t want people to sit on cash balances in their bank accounts; we want people to invest and funnel their resources into productive ends. So, we’re not going to see price levels go down. If that happens, the Bank of Canada will do its best to step on the gas.

Voters continue to cite affordability as a major concern. Realistically, are there policy decisions that could actually impact cost of living?

Yes, absolutely. Take food prices, for instance. Despite protestations to the contrary, Canada has a very concentrated food sector. There is evidence to suggest it’s an oligopoly. I read a recent statistic that something like 80% of all grocery sales in this country are at just five major retailers. If we had more competition, we might have lower food prices.

For housing costs, there are no short-term solutions, but plenty of long-term ones. If we’re worried about vulnerable populations who are housing precarious, we can increase the supply of low-cost housing in the rental market. The federal and provincial governments have largely left that market, but if they work with municipal governments to build the right kind of housing quickly, it could make a big impact.

The United States held midterm elections in early November. How are policy decisions down south impacting affordability here in Canada?

This latest inflation spike that caused the Bank of Canada to raise interest rates in October is entirely a consequence of U.S. foreign policy. If the U.S. was not at war with Iran, gas prices wouldn’t have gone up.

Trade-wise, the unpredictability of our trade relationship is almost worse than the effects of tariffs. If we knew the auto industry was effectively dead because Americans were going to continue to tariff it at this level, we could make plans to transition away. This game we’re playing – maybe we will have a deal, maybe we won’t – is holding any transitions up and freezes potential investment.