WHO IS MARK CARNEY? — PART FIVE
CANADA'S DEBT LOOKS MANAGEABLE — BUT WHAT ABOUT GDP PER PERSON?
The national balance sheet and the household balance sheet may be telling two very different stories.
Ottawa measures the health of Canada's economy with numbers such as GDP, economic growth and debt-to-GDP.
Those numbers matter.
But Canadians keep another set of books.
Can the paycheque still cover the bills?
Is there anything left to save?
Is debt going up or down?
Can a retiree still maintain the same standard of living?
Can the family business keep its doors open?
That is Canada's other balance sheet.
And it may be telling a very different story.
DEBT-TO-GDP AND GDP PER CAPITA — DIFFERENT STORIES
The federal government frequently measures debt against the size of the Canadian economy.
That is what the debt-to-GDP ratio does.
If GDP grows along with the debt, the ratio can remain relatively stable and government can argue that the debt remains manageable.
Fair enough.
But GDP per capita asks a different question:
How much real economic output is there for each Canadian?
In 2015, real GDP per person was approximately $57,637.
In 2025 it was approximately $60,073.
Those figures have already been adjusted for inflation.
That means real economic output per Canadian increased only about 4 per cent over an entire decade.
Canada became a much larger country and a much larger economy.
But the economic pie available per person barely grew.
TEN YEARS LATER — WHAT CHANGED?
There is value in looking back to the last federal balanced-budget period — not to romanticize one government or blame another for every economic problem, but simply to establish a benchmark.
2014–15 FEDERAL BUDGET:
$1.9-billion surplus.
2026–27 FORECAST:
Approximately $65.3-billion deficit.
FEDERAL DEBT-TO-GDP IN 2014–15:
31.0 per cent.
2026–27 FORECAST:
41.5 per cent.
REAL GDP PER PERSON:
2015 — $57,637
2025 — $60,073
That is only about a 4.2 per cent real increase in ten years.
MEDIAN AFTER-TAX INCOME:
2015 — $70,900
2024 — $75,500
Those numbers are expressed in constant 2024 dollars, so there has been a genuine improvement of roughly 6.5 per cent.
That deserves to be acknowledged.
But now look at housing.
NATIONAL AVERAGE HOME PRICE:
August 2015 — approximately $433,000
July 2026 — approximately $675,000
National averages are imperfect and heavily influenced by Canada's most expensive housing markets.
But the direction is difficult to miss.
Income improved modestly.
Housing costs increased dramatically.
GDP DOESN'T KNOW WHERE THE MONEY CAME FROM
Here is a simple illustration.
Imagine three Canadian households.
Each spends an additional $5,000 this year.
The first household earned another $5,000.
The second withdrew $5,000 from savings.
The third borrowed $5,000.
All three contributed additional spending to the economy.
But their financial condition could hardly be more different.
One became wealthier.
One consumed yesterday's savings.
One borrowed from tomorrow.
GDP records the economic activity.
It does not tell us what happened to the household balance sheet.
WHEN SAVINGS BECOME INCOME
There are signs Canadian households are under increasing pressure.
In the first quarter of 2026, household spending increased faster than disposable income.
The household saving rate fell to 3.5 per cent.
That does not prove Canadians are universally draining their bank accounts to buy groceries.
But it raises a very important question:
How much of today's standard of living is being maintained by consuming yesterday's savings?
That may be particularly important among retirees.
A mortgage-free homeowner may look wealthy because the house is worth hundreds of thousands of dollars.
But the house does not pay the grocery bill.
If pension income no longer covers actual expenses, the difference has to come from somewhere.
Often that means drawing down the nest egg.
The bills still get paid.
Nothing appears financially catastrophic.
But the savings account gets smaller every year.
THE FIXED-INCOME REALITY
CPP and OAS are indexed to inflation.
That provides important protection.
But inflation is not the same thing as affordability.
The Consumer Price Index measures price changes across an average basket of consumer goods and services.
Statistics Canada itself makes clear that an individual's experience of inflation can differ substantially from that average.
A retiree does not pay an average bill.
They pay:
their property taxes,
their insurance,
their utilities,
their groceries,
their transportation costs,
their prescriptions,
and their home repairs.
Some of those expenses may increase much faster than the pension adjustment.
In spring 2024, 28 per cent of Canadians aged 65 and older reported that rising prices were greatly affecting their ability to meet everyday expenses.
So government can truthfully say:
"Your pension was indexed to inflation."
While the retiree can equally truthfully say:
"Then why am I taking more money out of savings every month?"
WHEN CREDIT FILLS THE GAP
The other way to bridge a gap between income and spending is debt.
By the first quarter of 2026, Canadian households were using approximately 14.75 per cent of disposable income just to meet required principal and interest payments on their debts.
That is almost 15 cents of every disposable-income dollar already spoken for.
Not all household debt signals financial trouble.
A mortgage buys an asset. A business loan may generate future income.
But borrowing becomes a very different economic signal when households need credit simply to maintain ordinary consumption.
That is why household debt and savings belong beside GDP when judging the health of an economy.
BANKRUPTCY DOESN'T TELL THE WHOLE STORY
There is another number that can easily mislead.
Personal bankruptcies are no longer the best measure of Canadians reaching the financial wall.
Canada recorded 140,457 consumer insolvencies in 2025.
But 78.4 per cent of them were consumer proposals rather than bankruptcies.
A consumer proposal allows an insolvent individual to negotiate different repayment terms with creditors rather than declaring bankruptcy.
It can be a much better outcome.
But the underlying message remains significant.
More than 100,000 Canadians reached the point where they could no longer repay their debts according to the terms originally agreed to.
They did not necessarily go bankrupt.
But neither were their household finances healthy.
MAIN STREET HAS A BALANCE SHEET TOO
The same problem occurs when we look at small businesses.
A mom-and-pop business does not have to declare bankruptcy to fail.
An owner may spend years putting personal savings into the business.
Eventually the savings run out — or the owner simply decides enough is enough.
They pay the last suppliers, meet payroll, sell what equipment they can and close the doors.
No bankruptcy.
No creditor protection.
No dramatic insolvency statistic.
But a business has disappeared and perhaps a family's lifetime savings went with it.
Statistics Canada's broader business data show that in 2025 the average monthly business opening rate and closure rate were both approximately 4.8 per cent.
In other words, new businesses were essentially replacing those disappearing.
Growth in the active-business population had largely stalled.
That does not describe an economy in collapse.
But neither does it suggest a Main Street economy bursting with confidence.
INFLATION IS NOT AFFORDABILITY
This distinction may be one of the most important in the entire discussion.
Inflation asks:
How quickly are prices increasing?
Affordability asks:
Does my income still pay my bills?
Those are not the same thing.
Inflation falling from 8 per cent to 2 per cent does not mean prices return to where they were.
It means the already-higher prices are now increasing more slowly.
That is why government can truthfully announce that inflation has been brought under control while households continue saying:
"Everything still costs too much."
THERE ARE TWO BALANCE SHEETS
Mark Carney's economic strategy places considerable emphasis on Canada's national balance sheet.
How much debt can Canada carry?
How large is the debt relative to GDP?
How much investment can government borrowing attract?
How much larger can the economy become?
Those are legitimate questions.
But Canadians should insist on another set of measurements:
Is real GDP per Canadian increasing?
Is disposable income gaining purchasing power?
Are households saving more or less?
Are Canadians borrowing simply to maintain their lifestyle?
Are fewer people becoming insolvent?
Are small businesses expanding?
Is housing becoming more attainable?
Are retirees becoming more financially secure?
Those questions measure something debt-to-GDP does not.
THEY MEASURE FINANCIAL RESILIENCE.
GDP CAN GROW WHILE PEOPLE GET WEAKER
An economy can grow while families borrow more.
It can grow while retirees consume their savings.
It can grow while young people give up on buying a home.
It can grow while small businesses quietly disappear.
And government spending itself can contribute to that GDP growth.
None of that means GDP is false.
It means GDP is incomplete.
A national economy ultimately exists to serve the people living within it.
The people do not exist merely to make the national economic statistics look better.
SO WHICH BALANCE SHEET MATTERS?
In 2015 Canada had a balanced federal budget, federal debt equal to about 31 per cent of GDP and real GDP per person of approximately $57,600.
A decade later the economy is much larger.
But federal deficits are again measured in the tens of billions, debt-to-GDP is above 40 per cent, housing is dramatically more expensive and real GDP per person has increased only modestly.
At the household level, Canadians are carrying substantial debt, savings are under pressure and more than 140,000 consumers entered formal insolvency proceedings last year.
None of this proves Canada's economy is collapsing.
It does raise a much more important question than whether GDP grew another percentage point.
Ottawa measures whether Canada can carry its debt.
Canadians measure whether they can carry their lives.
Perhaps both balance sheets should be doing well before government declares the economy healthy.
AND THAT LEAVES ONE QUESTION...
Canada borrowed hundreds of billions of additional dollars over the past decade.
The economy grew.
Government grew.
The population grew.
The national debt grew.
But real economic output per Canadian barely moved.
So if Canadians are carrying more government debt, more expensive housing and enormous household debt while economic output per person has improved only modestly...
WHAT EXACTLY DID CANADIANS GET FOR ALL THAT BORROWING?
SOURCES AND FURTHER READING:
Department of Finance Canada — Annual Financial Report 2014–15
Department of Finance Canada — Spring Economic Update 2026
Statistics Canada — Real GDP Per Capita
Statistics Canada — Median After-Tax Household Income
Statistics Canada — National Balance Sheet and Financial Flow Accounts
Statistics Canada — Household Debt Service Indicators
Office of the Superintendent of Bankruptcy — Insolvency Statistics 2025
Statistics Canada — Business Openings and Closures
Statistics Canada — Rising Prices and Older Canadians
Canadian Real Estate Association — August 2015 Housing Market
```
Comments
Post a Comment
Pending moderation, your comment will be published. Thank You