We Canadians have done a pretty good job of racking up debt – especially consumer debt – and it has caught the eye of the international financial community.
Morgan Stanley looked at the state of household debt in the 10 biggest industrial economies. Canada is on the list and we are on the naughty side of the ledger.
Countries such as the U.S., Japan, the UK and the European Union have seen debt levels go down. Australia, Norway, Canada and Sweden went the other direction, adding to what they owed. Morgan Stanley says Australia is the most at risk as home values declines and tax changes are undermining household net worth. Sweden and Canada were second most at risk, followed by Norway.
Canada’s at-risk position follows declining house prices – which lowers the equity home owners hold – along with rising interest rates. And if the trend keeps up, it might have an effect on monetary policy decisions from the Central Bank, which may have to shift its strategy too as debt levels have hit record levels of 160 per cent of annual incomes.