Higher public debt has helped slow buildup of household debt: Bank of Canada

OTTAWA — The governor of the Bank of Canada says the federal government’s steps in the last couple of years to take on more public debt has helped prevent an even faster buildup of household debt that has still managed to climb to historic highs. Stephen Poloz says Ottawa’s recent spending on programs, such as enhanced child benefits and infrastructure, have lifted the economy and pushed interest rates to a level higher than they would have been without government stimulus.

He says the higher rates have helped keep the accumulation of household debt lower than it otherwise would have been had Canada continued with government belttightening approaches of the past.

Poloz made the comments Tuesday as he responded to questions following a speech at Queen’s University in Kingston, Ont.

His remarks come a couple of weeks after the Trudeau government tabled a federal budget that has faced criticism for its plan to continue running annual multibilliondollar deficits across the five-year projection horizon, despite the country’s surprisingly strong economic performance.

In response to a journalist’s question, the governor said he agrees with the view consumers are facing high debt loads today because they filled in the debt-accumulation void left when governments turned to austerity by shutting down stimulus measures to address fallout from the 2008 financial crisis.