Question to Senator Peter Harder on what government action will be taken on rising; household debt, market prices and interest rates and its impacts on Canadians.
Hon. Larry W. Smith (Leader of the Opposition): Honourable senators, my question is for the Leader of the Government in the Senate. Just a few months ago, the Advisory Council on Economic Growth told the government that if it really wanted to stimulate economic growth then it should focus on innovation, improve infrastructure and make sure that workers are able to get the job training they need.
Since that time, we have witnessed a $186 billion infrastructure program with less than 10 per cent of projects targeting economic growth, a new innovation budget dedicating $1.4 billion to innovate a $2 trillion economy, a national economy running on fumes of an overheated housing market and a continuing debate over the possibility of an increase in interest rates.
Last Thursday the Bank of Canada released its semi-annual financial system review which outlined the continued rise of household debt in the housing prices in major markets. Yesterday former PBO Kevin Page told the Senate Finance Committee that the housing situation is not sustainable. The IMF and OECD are so worried about Canada’s out-of-control level of consumer debt that they are both recommending the draconian measure of capping personal debt.
Can the Leader of the Government in the Senate explain to this chamber what the government intends to do when there is a correction in the housing market?
Hon. Peter Harder (Government Representative in the Senate): I thank the honourable senator for his question. He will know from previous answers to similar questions that the Government of Canada has taken a number of initiatives, both directly in coordination with other levels of government and through the CMHC, to tamp down the housing market, and that’s had its desired effect in recent data.
I would also point to the Bank of Canada where the senior deputy governor pointed to very positive indicators of growth where the data shows that more than 70 per cent of industries have been expanding and the labour market continues to improve.
Canada continues to have the best fiscal position amongst the G7. Growth was 3.7 per cent in the first quarter of 2017. In the last year the Canadian economy created a quarter of a million new jobs, and since December 2015 Canada’s unemployment rate has dropped from 7.1 to 6.5 per cent. The approach this government is taking to the economy is working.
Senator Smith: Thank you, leader, and those are the facts. However, one question that continues to plague Canadians is the amount of debt that each Canadian has versus income, and I think that figure stands at 170 per cent. The figure I had was about 167 per cent in terms of debt-to-income ratio, which is very serious.
The Americans are indicating that they will increase their interest rates in the next three to six months. In our country, what would happen with an impact of a 1 per cent hike in interest rates to consumers that are so heavily indebted?
I recognize the good economic news you read, but there are some underpinnings that still make us fragile. If you cannot provide us with that answer today, could you research that answer? It’s important for people who are heavily indebted to understand what it means to go from 2 to 4 per cent or 3 to 4 per cent in terms of your mortgage rate.
Senator Harder: I thank the honourable senator for his question. I will of course research, as he is asking, but I would also underscore his preface in which he said we are still living in fragile times. That is why the budget that is now before us is so urgent to be adopted, so its measures can bolster and strengthen the Canadian economy, and I hope all senators will take heart.