Canada’s AAA credit rating was affirmed Wednesday by Standard & Poor’s, which cited the nation’s “strong public institutions, prosperous and resilient economy, fiscal and monetary flexibility, and effective policymaking.”
Of course, it wasn’t all kudos and compliments as S&P made note of Canada’s record household debt level, which now exceeds 163 per cent of disposable income.
“The growing debt burden, combined with rising housing prices, raises the risk of an abrupt correction in the real estate market in the event of an unexpected rise in unemployment,” S&P said in a statement, adding that a sharp decline in house prices could depress consumer demand and hurt GDP growth.
But S&P doesn’t believe that scenario would destabilize Canada’s financial system, thanks to the country’s “strong capital levels and the rigor of regulation and supervision.”
Last month the Bank of Canada issued their own warning of a housing market correction after announcing that the key interest rate of one per cent would be maintained.