Prime Minister Stephen Harper says rising household debt levels are “not a reason to panic,” but urged Canadians to consider what will happen when interest rates rise in the coming years.
Mr. Harper made the comments in a 45-minute discussion with what he called “cultural media” in Vancouver last week. It was unannounced publicly and closed to major media outlets, including The Globe and Mail, but a recording of the event was obtained and posted online by 24 Hours, a Sun Media paper in Vancouver.
During the casual discussion, Mr. Harper called immigration reforms “the most important legacy of this government,” but also spoke at length about consumer debt levels, even hinting that it will be two or three more years before interest rates begin to rise.
“There are a percentage of Canadian households who have probably borrowed too much, which is why we’ve tightened Canadian mortgage rules to try and prevent that and discourage that. But I think broadly speaking, notwithstanding that some households are overextended, overall the Canadian housing and mortgage sector are essentially sound, and the banking sector that underwrites them is essentially sound,” Mr. Harper said, according to audio of the event.
“So look, it’s not a reason to panic; in fact, we’ve actually seen Canadian debt beginning to level off. But we would obviously encourage people to look at their debt levels carefully. Eventually, it may not be for two, three years, but eventually interest rates will start to rise. And Canadians should ask themselves serious questions about if interest rates came up significantly, would I still be able to afford my debt payments?”
Mr. Harper later offered a personal anecdote.
“In our case, my wife and I have never been big borrowers, but we have borrowed some money in the last few years because of the low rates, but we also know if the rates went up significantly we could still afford to carry that debt,” he said. “But Canadians should ask themselves that question. I think more are.”
Household debt hit a new record last month, by one measure – household credit market debt, as compared with disposable income, reached 163.7 per cent in the third quarter, up from 163.1 per cent in the second quarter, Statistics Canada reported in December. But the growth rates of household debt has slowed, and Mr. Harper said the high debt rates are largely because Canadians are making the obvious decision to borrow when it’s cheap to do so. “Under these circumstances many Canadians have made what I, as an economist, would argue is a rational decision to actually borrow more,” he said.
His comments follow that of Finance Minister Jim Flaherty, who raised eyebrows earlier this month with the airing of an interview that saw him wade into monetary policy – typically the domain of the Bank of Canada – by discussing Canada being under pressure to hike interest rates, and the future of the Canadian dollar. The Bank of Canada has signaled interest rate hikes aren’t imminent, a position Mr. Harper seemed to reflect in saying it “may not be for two, three years” that rates will rise.
Mr. Harper praised what he said were the “so-called cultural media” gathered for the event, said to have taken place on Jan. 6 when the Prime Minister was in Vancouver to speak at the Board of Trade, an event where he did not take questions from reporters. “You are vital to us getting our message to Canadians,” he told reporters at the private roundtable, which included the Korean Daily, Asian Star Weekly, Philippine Journal and the Vancouver Chosun.
The press conference lasted longer than any Mr. Harper has had recently in Ottawa, where questions continue to swirl about the Senate spending scandal, which he was not asked about at the Vancouver event. He was joined by fellow MPs James Moore, Alice Wong, Nina Grewal and Wai Young, as well as Conservative Senator Yonah Martin, according to the audio recording obtained by 24 Hours.
Mr. Harper also spoke strongly about the Temporary Foreign Workers program, which his government expanded after taking power only to overhaul recently. Mr. Harper acknowledged that it has been abused by employers. “We are in the process of reviewing the TFW program. We’ve been limiting it somewhat. We think quite frankly that while there is a need for it, some businesses have been abusing it and misusing it,” he said, saying the country needs fewer temporary foreign workers and more “permanent foreign workers.”
“I hope the need [for TFWs] diminishes, and I hope we address some of these concerns by having more permanent residents come here and become Canadians. I think that’s the solution,” he said. “We have too many examples of companies that were misleading the companies or abusing the system.”
Mr. Harper also reiterated his criticism of Iran’s human-rights record, saying President Hassan Rouhani has, “in my judgment, received a lot more good ink in the Western press than he deserves,” and adding, “many of our allies are really on this Rouhani bandwagon. We’re not so much.”
He said early signs of reform need to lead to “real change” before Canada softens its position on Iran.
“Do not judge this new administration in Iran by a few symbolic acts or by its rhetoric. Let’s make sure, keep pushing, until we see real significant change in governance and human rights treatment in that country. So far we have seen some promising, symbolic moves, but that’s all they are. With a few exceptions, that’s all they are. So we have to keep up the pressure and not be fooled by a friendlier face or a change in rhetoric. We have to see a real change,” Mr. Harper said. “…When that change occurs, we will be the loudest to welcome it.”
At the end of the roundtable discussion, Mr. Harper was asked what his legacy will be. “I’m too young to talk about legacy,” he began, before discussing changes to the immigration system. “… I think the most important legacy of this government is reorienting our economic immigration, so it’s not just application based, so we can go out and recruit immigrants quickly to fill job needs in the Canadian economy.”
He closed with a relatively rosy view on Canada’s place in the world.
“This country is actually at the top of the pack in terms of its performance among developed countries, and there’s no reason why we shouldn’t be at the top of the pack. We have an amazing country. We have a modern, educated society with vast natural resources. There are very few countries that have that combination. We have great diversity and yet harmony and social strength,” Mr. Harper said.
“So this country should continue to be the kind of country that can provide hard-working, lab-abiding families from any background anywhere on the earth the opportunity for really unlimited success and security. And we’ve come out of the recession with a better standing, but in the longer term I want to see us really secure those assets,” he said.