Canadian Debt Dogpile

As a collection agency in Edmonton, Calgary and the GTA we are watching with keen interest the unfolding of events with respect to the following phenomenon and their impact (or lack thereof) on Canadian credit markets.

Our Federal government recently admitted that they will never eliminate the deficit. In fact, Finance Canada now projects deficits for another 25 years, totaling almost a half-a-trillion-dollars!

The fiscal victory being claimed by the federal government however is that the debt will grow ‘slower’ than the economy’ – lowering the debt-to-GDP ratio with program spending growing at only 1.6% for the next 5 years. Keep in mind however that program spending growth over the last 2 years has been 5.6%; during a time that the Canadian economy was performing reasonably well!  So much for keeping some powder dry for tougher days ahead.  Furthermore, that would mean GDP growth in excess of 1.6% per year.  In our regulatory environment?   Anyone try building a pipeline or try getting grain shipped to market lately?…and that’s before any new gender and identity provisions for environmental impact assessments come into play (whatever those are).   But it sure as hell sounds expensive and will be guaranteed to be a further drain on productivity, that’s for sure!

Who’s going to pay for all this?

Provincially Alberta ran a $9 billion deficit in 2017/18, almost 1/5th of the total budget, while the Wynne Liberals in Ontario have more than doubled their debt in just over 10 years.  Furthermore the Atlantic provinces have their own liability concerns along with an aging population that will pay less taxes overall while requiring more costly heath care services post retirement.

Who’s going to pay for all this?

We’ll tell you who’s going to pay for that…the same Canadian taxpayer whose households are carrying a record $1.74 of debt for every dollar of income. As interest rates rise over the next three years, debt payments will consume a larger share of household income than at any time in the last 30 years, costing a family with $100,000 in net income approximately $2000.00 more than they were paying last year to service their debt.  While households deal with higher interest rates on credit cards and mortgages, their taxes will naturally also need to rise to pay a one-third or $8 billion increase in federal debt interest payments.  It’s either that or cut program spending.  Cut program spending? Never…that’s sacrosanct!

Canada’s combined personal, business and government debt is now three times the size of the entire Canadian economy. This is a higher total debt-to-GDP ratio than even European fiscal basket cases like Italy, Spain and Greece…and our weather generally sucks in comparison to theirs!

We are truly doomed.