Financial concerns in Canada are rising – or they should be – and not just in households but also down at your local politician’s constituency office.
The Bank of Canada (BoC) recently warned that household debt and “housing market imbalances” have increased risks to the country’s financial system over the past six months.
Those imbalances are linked to bets on an overheated housing market, especially in Vancouver and Toronto, that could turn sour for the many debtors carrying uninsured mortgages if real estate markets drop and interest rates rise. RBC Economics shares the BoC’s concerns. Its June market outlook notes that the housing market is the largest domestic risk to the Canadian economy.
Debt, meanwhile, continues to pile up on Canadian doorsteps.
Recent Equifax Canada data shows that Canada’s average consumer non-mortgage debt has risen 4.2% year-over-year since 2016. Much of that debt is connected to mortgages and home equity loans.
Total household debt at last count: just over $2 trillion. That’s a concern down at street level, but more worrying for the overall economy is senior governments’ return to accumulating debt and accelerating spending. The Fraser Institute, for example, has noted that federal government per-person program spending is approaching its highest all-time levels.
Back in B.C., details of the new “GreeNDP” minority coalition’s plans for spending are readily available; details of how they will be financed are not.
But, as Fraser Institute calculations confirm, it won’t be government paying the freight. According to institute numbers released last week, proposed GreeNDP tax changes will add $594 to the average B.C. family’s annual tax bill and $1.4 billion to taxpayers’ overall tax burden.
Steadily rising household debt combined with higher government spending inevitably adds up to bad budget outcomes at home and in the country’s economy sooner rather than later.