What makes the situation tricky at the moment is that the inflation rate is still very high. It's headed in right direction now, but it is still much higher than we would like. It will therefore be important to be cautious in making policy decisions to avoid putting the Bank of Canada in a very difficult position.
As for support measures for the most vulnerable households, what was done, particularly in 2022, was the right thing to do. The provinces also followed the federal lead. It was important for people who were having the most trouble putting food on the table and paying the rent. As the situation is beyond their control, it's important for the government to give them back the profits from inflation, which definitely increased nominal GDP, among other things. So the idea of giving that back to give them some breathing space was a good one.
Now there's a reason why these measures were ad hoc: they are expensive and they affect the budgetary balance, which will likely benefit from much less revenue over the next year, in view of the recession we are expecting and lower inflation. A word of caution is in order, however. We are not encouraging the government to make a habit of measures like these. They need to remain ad hoc if there is to be a degree of credibility.
Nevertheless, for all the measures whose goal is to deal with the urgent housing shortage, combined with a high level of immigration and rising immigration targets, our estimate is that there has to be a 50% increase in housing starts, beyond our baseline target, to prevent immigration from having a negative impact on affordability. We are nowhere near that yet. In fact, what our baseline scenario projects is fewer housing starts, which has already been happening for some time. It's therefore urgent to adopt policies that would finally get things moving in terms of housing development, particularly for affordable housing.
It's also important to react to the United States Inflation Reduction Act of 2022. It's going to be extremely important, because it's like a magnet that will attract investment in everything related to the climate transition. We have interests to protect in this regard. We have very promising developments under way whose future might become uncertain because of the Inflation Reduction Act. These are things that need to be factored into the long-term perspective.