Prime Minister Stephen Harper added his voice to those who are warning Canadians not to take on too much debt, saying consumers dealing with record leverage may be “approaching the limit” on how much they can carry.
“We continue to urge people to have caution because eventually, interest rates will go up,” Harper said in an interview with Global Television to be broadcast Dec. 23. “Many households are well within a comfort level but some have been pushing the envelope and we obviously urge them to be cautious.”
Bank of Canada Governor Mark Carney has called mounting household debt the biggest domestic risk to the economy. The ratio of Canadian household debt to disposable income rose to a record in the third quarter, even after Finance Minister Jim Flaherty tightened mortgage rules for a fourth time in July.
Harper encouraged Canadians to balance their ambitions to own a home with the need to save. “Watch your debt levels,” he said. “The country is doing well but we are in a period of considerable global uncertainty. Interest rate shocks are possible.”
The prime minister said he’s optimistic U.S. lawmakers will reach a temporary solution to avoid more than $600 billion in tax increases and spending cuts set to take effect Jan. 1.
“I feel not bad about the fiscal cliff issue,” Harper said in the interview with Global News national anchor Dawna Friesen. Lawmakers will reach “at least some partial compromises to avert catastrophe” during January, he said.
The “bigger challenge” for Congress is developing a medium-term plan to reduce the U.S. deficit, he said, according to a transcript of the interview provided by the network.
“The U.S. fiscal situation, if you look at it, is a runaway train,” said Harper. “They’re running deficits of a trillion dollars plus and that cannot continue.”
Harper’s Conservative government this month approved Cnooc Ltd.’s $15.1 billion offer for Nexen Inc., the largest foreign takeover by a Chinese company. Canada also said it would permit Petroliam Nasional Bhd.’s C$5.2 billion ($5.2 billion) acquisition of Progress Energy Resources Corp.
Still, the government said it would permit future acquisitions of control by state-owned enterprises of oil-sands operators only under “exceptional circumstances.”
The Nexen sale “did not raise flags” for Canada in terms of security issues, Harper said when asked about U.S. concerns over Chinese state-owned companies and the potential for spying.
“The United States uses national security extremely broadly,” he said. “I think it at times becomes a front for protectionism. We try and restrict our national security analysis to genuine threats to national security.”