Charest closely watching mortgage renewal wave
Jean Charest, the former premier of Quebec who led the province from 2003 to 2012, is sounding the alarm about escalating debt levels among Canadians and expressing concerns that mortgage renewals at higher rates could impede economic growth.
In an interview with BNN Bloomberg, Charest pointed out that Canada’s economy has lagged behind those of the US and other nations, largely due to the substantial debt burden carried by the average Canadian household. “We always have to keep in mind that household debt in Canada is very high – among the highest of the G7,” he emphasized, noting that the impact of interest rate hikes is felt more acutely by Canadians compared to their American counterparts.
Charest painted a sombre picture of the Canadian economy, highlighting the challenges ahead as people face higher mortgage rates and grapple with existing debt. “They're already starting from a high point of debt, and that means that in the long term in Canada, it’s going to be tough to get some growth out of this economy,” he remarked.
Debts surpassing GDP
According to a May 2023 report from Canada Mortgage Housing Corporation (CMHC), Canada has the highest household debt levels among G7 nations. The report also notes that Canada, alongside New Zealand, stands out as one of just two countries where household debt surpasses the country’s gross domestic product (GDP).
“The cost of servicing and repaying that debt slows economic growth over time,” the report states. “This outcome is more likely when this debt is incurred to finance house purchases that do not meaningfully improve the economy’s potential.”
Charest says that reviving Canada’s economy requires a focus on enhancing productivity. “We have to address the issue of taxes, we have to address the issue of regulations in the long term,” he asserted. He also emphasized the need for greater investment in the industrial and business sectors, encompassing technology and automation.
Immigration, Charest suggests, could be another avenue to bolster the economy, but he expressed concerns about the current approach. “One of the things that mystifies me is that there is no way we can integrate so many people without the federal and provincial governments working very closely together, and yet that is not happening,” he observed, calling for concerted efforts at both levels of government to address integration challenges and maximize the potential benefits of immigration.
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