In March, Canada Mortgage and Housing Corp. board members received an update on the country’s credit and housing trends. And, as it turns out, the steady climb of the domestic household debt-to-GDP level has put Canada’s long-term economic growth prospects at risk.

The document pointed to a study that argued household debt accumulation eventually hampers economic growth over the longer term, eclipsing the nearer-term benefits of consumption.

The strong expansion of household spending, encouraged by a prolonged period of historically low borrowing rates, has created concerns over Canadians’ record-high debt loads.

Read: Watch banks’ credit card portfolios during downturns

It has also been a major driver of economic growth.

The Canadian Press obtained a copy of the CMHC presentation via the Access to Information Act. It was included in a “confidential” memo to deputy finance minister Paul Rochon.

Citing international research, the CMHC presentation points to an estimate that says a one percentage point increase in household debt-to-GDP tends to lower growth in a country’s real gross domestic product by 0.1 percentage points at least three years later.

The calculation, published in a January study by the Bank for International Settlements, was based on an average produced from the data of 54 countries from 1990 to 2015.

“Our results suggest that debt boosts consumption and GDP growth in the short run, with the bulk of the impact of increased indebtedness passing through the real economy in the space of one year,” said the BIS report.

“However, the long-run negative effects of debt eventually outweigh their short-term positive effects, with household debt accumulation ultimately proving to be a drag on growth.”

An accompanying chart in the CMHC presentation showed that between 2010 and 2016 Canada’s household debt-to-GDP level rose by more than five percentage points. The household debt-to-GDP ratio increased from almost 93% to just over 101% at the end of 2016, Statistics Canada says.

A reduction of even 0.1 percentage points in the country’s GDP can have an impact. For example, Canada saw year-over-year growth in real GDP last year of 1.3%.

Read: Why this economist predicts slower Canadian GDP after Q2

The chart listed eight developed countries and ranked Canada second, behind Australia, for having the biggest increase in household debt-to-GDP level over the six-year period.

BMO chief economist Doug Porter says he doesn’t dispute the broader conclusion that a rising household debt-to-GDP level poses risks for growth. But he’s skeptical one can draw a direct line from the household debt-to-GDP directly to economic growth down the road. For one, he said interest rate levels must be factored in.

“I’d be very cautious about putting pinpoint accuracy on that,” Porter said. “I think that’s incredibly difficult to do.” However, Porter says the record levels of household debt piling up in Canada, like in many industrial-world economies, does suggest it will be tougher for the country to grow as quickly as it has in the past.

“The consumer spending and housing gains that we could reap from lower interest rates have basically been reaped,” he said. “And, if anything, interest rates are probably more likely to rise than fall from current levels.

“So, to me that suggests we just really can’t count on the consumer to really pull the economy ahead as they have in recent years.”

Read: Consumers spend again in Q2, but shopping trip won’t last

In other news: Liberals’ deficit projections on track

The Canadian Press reports the federal government says that, three months into the fiscal year, the public books are on track to meet the Liberals’ deficit projection of $28.5 billion.

The Finance Department says the government posted a thin budgetary surplus of $83 million between April and June, which means the balance-sheet ink will start to turn red over the coming months.

The monthly fiscal monitor says while the financial results for the first quarter provide limited detail for the whole fiscal year, it insists they are consistent with the deficit prediction in Ottawa’s March budget. The report says revenues were up $3.5 billion or 4.9% — including a 7% increase in total tax revenues — compared with the same three-month period last year.

Meanwhile, total expenses compared with 2016 rose $2.4 billion or 3.3%, including a 9.1% increase in transfers to individuals, such as child- and elderly-benefit payments.

The Trudeau government has projected double-digit shortfalls until at least 2021-22 in order to finance initiatives it’s banking on to lift the economy, such as major infrastructure projects and enhanced child benefits.

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