Household Debt Hurting Canadian Economy

29 March 2012 07:30am - Jack Stupple

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Household Debt Hurting Canadian Economy

The Organization for Economic Co-operation and Development (OECD) said that Prime Minister Stephen Harper and the Bank of Canada should continue be careful considering the vulnerability of a fragile economy which is attributed to large household debt. This warning comes as Finance Minister Jim Flaherty is to unveil the latest budget and he is expected to announce cuts in government spending of up to $8 billion in an attempt to eliminate its deficit of about $31 billion by 2015-16. The OECD, said Canada’s growth will be 2.5% during the first two quarters of this year, while the U.S, is expected to grow 2.9% and 2.8%.

The warning comes from Pier Carlo Padoan, chief economist of the OECD also said that Canada is lagging behind the US in the recovery from the recession. He said that, “We recommend keeping the monetary policy open because this is needed to open to allow households to deleverage in an orderly way.” Padoan believes that Canadian interest rates should remain low long enough to allow homeowners to pay down their debts gradually instead of having to deal with more dramatic consequences such as bankruptcy or foreclosure. According to Statistics Canada, Canadian household debt was about 150.6% of their total income at the end of 2011. That works out to a total household debt of $1.6 trillion.

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Related Links:
• OECD
Canada
• Statistics Canada
Consumer Price Index
• Department of Finance
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