Well, it looks as though Jim Flaherty has gotten his wish, at least partially. After over a year of warning us that our household debt levels are far too high, the Finance Minister can now take heart knowing that those levels are on the decline. We are finally lowering our household debt!
Statistics Canada released a report yesterday stating that Canadian household debt fell in the last quarter of 2011. That might seem right in line with retailers saying that they didn’t have as busy a holiday shopping season in years past but in fact, the decline of our debt has nothing to do with what we actually spent; it has to do with what we actually made. The reduction in debt isn’t because Canadians stopped spending, it’s because they started earning – and those earnings rose to show figures of the average household net income, which is now $182,100, up from the $180,600 average household net income we had in the third quarter of the year. Nationally, our net worth in the fourth quarter grew to $190,999 per capita, also up from the $189,700 that we amassed in the third.
Along with the report, Stats Canada also released data on how much we spent in the last quarter; and the results do seem to suggest that the more we make, the more we spend. Consumer spending also rose to $1.595 trillion in the fourth quarter, up from $1.575 trillion in the third. This debt that we added on included Toronto second mortgages, HELOCs, consumer credit, and other types of loans. But even if we’re earning and spending more, our spending went down, too, according to the report. Remember in the third quarter when Canadians were spending $1.52 for every $1.00 that they made? We managed to bring that first number down somewhat, spending only $1.50 for every dollar made in the last quarter.
The news that our household debt is declining is certainly going to be encouraging to Ottawa, especially as they prepare to present the budget on March 29. But the fact is that we’re still spending, and that’s something that Mr. Flaherty is sure to focus on and continue to warn us about. For now, we can take some solace in the fact that however we’re doing it, our scales are becoming more balanced and our household debt is declining. Even if we still can’t seem to stop spending.
