Bank of Canada Governor Mark Carney sat down with Tom Clark on “The West Block” last week to talk about two things that are weighing heavily on his mind, as well as the minds of many Canadians – whether or not he’s leaving us here in Canada; and of course, what we’re going to do about all that debt we’ve racked up.
One of the first questions Clark had for Carney was whether or not he was going to pack up his bags and head across the pond to become the Bank of England Governor. But, Carney was quick to shoot down that possibility, or any other of him going into politics of any kind. “I do not contemplate it,” he said. “I’m absolutely focused. I’ve got two jobs at present which, as I said the other day to somebody, more than takes up my waking hours. I’ve expanded my waking hours so that I can do both the financial stability role [as chair of the Financial Stability Board,] and my most important role of the Bank of Canada, so I’m absolutely focused on that.”
Turning from politics to policy, Carney again revisited the issue of the amount of debt Canadians have, and comparing it to our savings. From the years 1961 to 2001, our personal savings rate in Canada was 9%, with a huge increase to 20% during the mid-80s. Since that time though, our savings have fallen to only 3.4% recorded in 2011.
Relating that drop in savings to our current debt levels, Carney spoke once again of how Canadians are relying far too heavily on home equity lines of credit and home equity loans. “We’ve been in a transition path from a higher rate of savings,” he said. “People using their home more like ATMs, to use a colloquial expression, during that transition has left the savings rate suppressed. That, plus rising home prices.”
But it’s not just household debt that Carney sees as a threat. While Carney was in his interview the federal government was trying to promote a free trade deal with the European Union to Canadians. Carney thinks that’s a big mistake.
“It’s the biggest external risk,” he said. “Europe is the biggest external risk. It takes the other half of my time that I don’t spend on Canada – if it’s not derivatives and financial reform, it’s working on European issues, and we will evaluate and adjust policy as necessary if things go poorly.”
