Congrats, Canadians: You're world leaders in debt -

Congrats, Canadians: You’re world leaders in debt

A new report shows our household credit tally has surpassed Canada’s annual GDP. Have we stopped listening to the warnings?

(Steven Puetzer/Getty Images)

(Steven Puetzer/Getty Images)

Not every record is worth celebrating. Instead, there are some dubious achievements that should prompt sober self-reflection. This is one of those times: A report from the Organization for Economic Co-operation and Development (OECD) shows that Canadian households are among the most indebted in the world. In fact, Canada tops the list of countries surveyed.

Household debt is more than 100 per cent of GDP in Canada, according to the report, surpassing other developed countries such as South Korea, the U.S. and U.K. While most countries have seen their levels of indebtedness fall since 2007, Canada is a rare exception, digging itself deeper into the red. The OECD states the obvious: rising debt levels don’t imply immediate doom, but definitely increase a country’s vulnerability to economic shocks.

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Some developed countries are absent from the above chart, notably Australia. Like Canada, Australia is dealing with frothy real estate markets and consumers who have an insatiable appetite for credit. A different OECD metric, the household debt-to-income ratio, shows that Canada stands at 175 per cent compared to 212 per cent in Australia. But both countries have a long way to go before catching up to Denmark, which stands at 290 per cent.

READ MORE: How Canadian homes became debt traps

Still, Canada achieved another record earlier this year: we’re loading up on debt faster than any other developed country. A report from the Canadian Centre for Policy Alternatives found household and corporate debt-to-GDP increased 20 per cent between 2011 and 2016, blowing past Australia’s 14 per cent gain. And in September, the Bank of International Settlements warned the country’s debt levels are putting it at risk. The BIS looks at the credit-to-GDP gap, the difference between a country’s current credit-to-GDP ratio and the long-term trend. Canada stands at 11.3 percentage points above its historical norm. Anything above 10 percentage points could be a sign of trouble, according to the BIS.

Canadians have been flooded with warnings about their spending habits for years, of course, and the headlines, commentary and scolding tend to blur together after a while. So whether Canadians are actually getting the message is an important question. Some see encouraging signs. Douglas Porter, chief economist at BMO, argued in a report this fall that “much of the commentary on this topic has been overwrought.” The savings rate is nearly five per cent, “remarkably close to its 25-year average,” while the debt-service-ratio has been “amazingly stable.” (Though it’s worth pointing out that’s probably a result of low interest rates.) Porter expects the debt statistics everyone frets about will “soon finally top out” and spending will gradually moderate.

RELATED: After weathering the Great Recession, can Canada avoid a debt crisis?

Retail sales, for one, are already slowing. Measures implemented to cool the housing market could dampen Canadians’ enthusiasm for debt and consumption, as well. But it’s a very delicate balance. Recent economic data suggest the Bank of Canada will be exceedingly cautious before raising rates further, lest it push indebted households over the edge. Low rates only encourage more spending, however, raising the possibility that debt levels will continue to grow. That is a scary scenario. At this point, Canada doesn’t need to set any more records.


Congrats, Canadians: You’re world leaders in debt

  1. And Xmas is coming…….

    • Also demonstrating that the Fraser Institutes report on household debt back in July was spot on, as usual.

      Remember that just last week Maclean’s had an article on foreign investments also being noticeably down in Canada. Sorry to be the one that said “I told you so”.

      • Foreigners should not be allowed to buy Canadian real estate period. You got Canadians wanting to own a home and can’t. Of course it was Harper who opened the market to foreigners. While benefiting home owners and helping to exaggerate the market. Greedy and inefficient economics.


          NO, SORRY.

        • As a person living in Vancouver who has kids that have been left out of the housing market due to the ridiculous prices of homes, I agree 110% that foreigners should not be allowed to buy (residential) real estate.

          New Zealand is banning foreign ownership of residential property in 2018, and Australia already bans foreign ownership of existing housing. Canada, or at least BC, really needs to do likewise.

          See: h$$p://

          FWIW, with my partner I own a home in Vancouver, so if prices were to come down to reasonable levels, my (paper) net worth would come down as well. However, I’m perfectly willing to see that happen if it means that Vancouver can once again be a place for families to live rather than just the playground for the wealthy it’s turning into.

          • You could sell your house and move elsewhere…..and you’ll even have money left over.

            Banning foreign owners means we’ll have one big empty country. There’s only 35M of us.

          • @Emilyone

            Pretty much by definition, foreign owners do NOT live in Canada.

          • Foreign owners can live anywhere.

        • Harper changed 4 things in the existing legislation that were laid out by the previous government.
          1. He increased the stress test when putting down <20%.
          2. He closed the tax loophole on primary residency. Now ALL buyers (including foreign) must file taxes in Canada. No thanks to your beloved Liberals.
          3. He launched some consultations into foreign buyers. IMO – it was a start. Now that Trudeau Jr. has all the years of consultations at his disposal — what decisions has he made with it? Zero!!!
          4. Change some restrictions on property insurance.

          • @Emilyone

            So, there are so many foreign (i.e. not Canadian citizens and not permanent residents) buyers *living in Canada* (doing what?) that “Banning foreign owners means we’ll have one big empty country” without them? Really? Do you have any supporting evidence?

          • You can own 10 houses around the world…..used by your family, friends and renters.

            Parents in Hong Kong buy houses here for their kids while they go to school. The houses are sold or rented afterwards……or bunched together for development.

            Surely you’re aware of this.

          • @Emilyone

            And, there are so many of these people that “Banning foreign owners means we’ll have one big empty country”?

          • 90% of Canada is empty already.

      • The Fraser institute is a charity.

        • The Canadian Centre for Policy Alternatives is a registered charity. They published an article in the summer called “Addicted to Debt” and source much of the same facts as the FI. Do we discredit them too? Or because they are a left-leaning advocacy think-thank that means it’s “ok” in your opinion?

          I would hazard to guess that your Alma Mater is probably a registered charity too. Should we discredit your alma mater? Well — based on the recent agenda coming from Laurier, if your alma mater is Laurier maybe they should be discredited.

          The whole point of the article is in the opening lines of the article. Canadian’s are ignoring the warning signs. The signs have been there for months.

          The timely Maclean’s article “the myth that Canada is a great place to do business” authored by the Institute for Competitiveness and Prosperity and the Trillium Network for Advanced Manufacturing was just another warning sign.

  2. Brought to you by the Bank of Canada.

    • Nope sorry….it’s your name on the credit card.

      • Would not be possible without artificially low interest rates. Free money, but you better not take it!

        • People buy stuff on credit no matter what the interest rate.

          • Lower interest rates mean more credit availability and more borrowing. Few cause and effect relationships are more certain than that. But you know better.

        • Now, normally, when EmilyOne says the sky is blue, I look up just to check, but she’s got it on the nose here. If have an open bar at my wedding, and you get sloppy drunk on free booze and end up wrecking your car, it isn’t my fault for having an open bar, it’s your fault for not being a responsible adult about drinking within your limits. Don’t want to be burdened under debt: don’t live beyond your paycheck.

          • LOL ah c’mon now….gimmee a break. I source everything I write.

            No but really the one thing we need is a sense of responsibility…..and it’s the one thing we haven’t got.

  3. Low interest rates, foreign investment in canadian real estate, the wealthy buying up real estate like gold. This debt and housing cost got to be sucking the rest of the economy dry. Seems terribly inefficient. Recession is now necessary. Serfdom ain’t easy.

    • You’re the one signing the bills.

  4. I don’t have a whole lot of sympathy for those carrying huge debt loads – when you dig deep you realize very quickly that people basically want things that they can’t afford. They want a house that is too big for them when they are in their mid 20s and then need it furnished right away. There was a time that your first house was 700 sq feet with two bedrooms and then when you had the third kid you moved up to a house that was 900 sq ft and finally ended up with a house that was maybe 1500 sq feet before you downsized in retirement.

    I bought my first house at 37 and for the first 6 years the living/dining room HAD NO FURNITURE because I couldn’t afford it (and didn’t want to buy crap that I would need to replace 5 years later). I keep my cars on average for 10 to 13 years. I don’t take an out of country vacation every year (maybe every 2 or 3 years.

    I eat out every other Friday with my sister compared to friends who eat out 2 to 4 times a week. If I can’t pay off my credit card each month, I don’t spend on it – and all my credit cards are cash back so every Feb I get about $350 from one and my PC Mastercard gives me about $150 of groceries every year.

    Its sad that individuals don’t know how to set priorities or manage money because it is not that difficult. And peer pressure was strong when I was in my 20s and 30s (as much as it is today) – but the lesson is that those friends/colleagues that ‘seemed’ to have everything (trips, new cars, big houses, etc. etc,) are now struggling to have any type of a good retirement – most are needed to work even through they hate their work and are dead tired at the end of each week. Me – not so much!

  5. It’s no surprise: the current account (difference between receipts from foreigners and payments to them) is deep in the red, business investment moribund, and federal government spending scandalously inadequate (it’s only 15% of GDP, 10 points less than it should be). The only thing keeping the economy afloat is household indebtedness but that is unsustainable, as we all know.
    The fetish on trying to balance the federal books when the economy is weak is a recipe for disaster.

  6. Whatever happened to “Cut your coat according to your cloth” and “Take care of the pennies and the dollars will take care of themselves”? (Okay, that should be “nickels” now.) People need to stop aping idiots like the Kardashians and other trashy devotees of pointless materialism and realize they don’t need most of the stuff they’ve been brainwashed to believe they need. They should also learn to shop wisely for necessities, cook frugally and healthily, establish savings accounts, and tell their kids to go shovel driveways if they want smartphones.