Financial literacy and household debt are missing from this electionOct 08, 2015
With Canadians heading to the polls in two weeks, the economy has been a key theme in this election. But most of the talk seems to be around whether or not Canada is in a recession, based on the fact that we’ve had two consecutive quarters of (slightly) negative GDP. On the other hand, candidates aren’t offering solutions for the serious economic issues that affect Canadians, like student loans, the cost of housing or record levels of household debt. The Financial Consumer Agency of Canada (FCAC) has made strengthening financial literacy in Canada a key priority, which would help Canadians dealing with these financial concerns—shouldn’t this be included in each party’s election platform?
As previously discussed, Canada’s household debt hit a record-high level of 164.6 per cent of income in June. This was alluded to in September’s Globe and Mail debate between the three major party leaders, where one mentioned that lower interest rates have helped Canadians reach record-high levels of home ownership. There was also some debate about the high cost of housing and how Canadians’ incomes aren’t rising at the same pace. But no one said anything about the burden of household debt, nor were any promises made to focus on improving financial literacy.
Last week, Statistics Canada announced that our economy grew by 0.3 per cent in July, marking the second consecutive month of growth since the technical recession. With Canada’s GDP back in the black, it would be a good time for our political leaders to start addressing financial literacy and other economic issues that personally affect Canadians. In April, when the federal budget was revealed, Maclean’s listed 35 economic charts that Canadians should be watching. Some of the most notable include:
- Youth unemployment: There’s currently a 13 per cent unemployment rate for Canadians aged 15-24. Even for those in their early 20s, it’s still much higher than before 2008. Canadians are taking on more debt for their studies and not all of them are finding good jobs. We could use a youth employment initiative.
- Housing prices to income: Canada’s house prices relative to income per capita are now at a higher rate than in the U.S. before its housing crash. Some parties have proposed looking into the rate of foreign ownership, but more needs to be done to make housing more affordable for all Canadians.
- Increased life expectancy: While it’s great that Canadians are living longer, this requires them to save more for retirement and puts more stress on public pension plans. In 2016, there will be more Canadians over 65 than those under 14 years old. Will the next generation be able to count on pension funds for their retirement?
- Household debt to GDP: Canadians’ household and non-profit sector debt to GDP is much higher than in the U.S. And one-in-six Canadians say they couldn’t afford a $500 increase in their mortgage payments. It’s time to educate Canadians about managing their finances by promoting financial literacy.
Although no government could possibly address all these issues in one fell swoop, a first step would be to support a focus on financial literacy and educate Canadians about household debt. November is Financial Literacy Month in Canada; the parties could start by pledging their support to promote this initiative.
What economic issues are most important to you in this election? Share your thoughts with BDO by joining the conversation on Twitter using #LetsTalkDebt #BDOdebtrelief