Rising household debt levels in Ontario, Canada’s most populous province, pose a risk to the national economy, warns Ontario’s Financial Accountability Office.
The provincial watchdog says that household debt levels within Ontario have increased steadily since 2010, and are projected to grow further in coming years – a situation that could spell trouble for Canada’s economy as the bank of Canada continues to raise interest rates.
The average Ontario household owed nearly $154,000 in 2016, up from $119,000 in 2010. This means that Ontarians owe $1.71 for every dollar earned. Ontario’s Financial Accountability Office said in a report that low interest rates have helped fuel spending in the province, and that household debt has grown by 5.6%, on average, in each year between 2010 and 2016. At the same time, growth in household disposable income grew by only 3.4 per cent on average, per year.
Another recent, separate report found that one in three Canadians say they are unable to cover monthly bills as interest rates continue to rise. The budget watchdog said that a sharper than expected interest rate hike could force households to cut back on spending and have negative implications for the broader national economy.
