A new report from Canada’s budget watchdog warns that the country’s households could soon have the largest debt-to-income ratios in the G7. As the country goes through a wave of economic woes (SEE: Falling loonie, rising food prices, selfie-obsessed PM – a look at Canada’s economic collapse), this won’t bode well for either households or the government.
The Parliamentary Budget Officer (PBO) warned in a report Tuesday that Canadian households could soon see their debt-to-income loads reach 174 percent sometime this year. Essentially, households in the Great White North are more indebted than any of their G7 peers.
In fact, once Canada reaches that number, it will be the highest national level in a quarter of a century.
This is because Canadians have been piling up large amounts of debts since the year 2000. There is no sign of slowing down, either.
Since the third quarter of last year, household debt has skyrocketed to 171 percent of disposable income. Or, for every $100 of disposable income, the household is in the red by $171.
“This is the highest level recorded since 1990,” PBO said in its report. “Policymakers continue to express concern about the vulnerability of households to economic shocks, such as unexpected job loss or higher, the PBO said. “What matters more for financial vulnerability is not so much the level of the debt relative to income, but rather the capacity of households to meet their debt service obligations.”
What’s causing soaring household debt? The PBO believes low interest rates, higher housing prices and “financial innovation.”
There is talk that the Bank of Canada (BOC) will further cut interest rates from today’s 0.5 percent amid collapsing oil prices.
Canada is blanketed in debt. Not only are citizens immensely in the red, governments are collectively indebted by $1.3 trillion, and, much like the citizenry, there is no sign of slowing down.
–AM
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