Global debt is growing — and Canada's household debt is worse than most, McKinsey says

Amanda Lang's first order of business

The myth that the world is paying down debt isn't true, Amanda Lang says. That's bad news for Canadians

Canada's debt-to-income ratio currently sits at 163 per cent. (CBC)

Tonight's first order of business: an alarming take on global debt, one that could not only slow growth globally but also set us up for financial crises.

For years, the story we were told was that the world was deleveraging — paying down debt in other words. But according to consultancy McKinsey, the reverse is true. In fact, the world is almost $50 trillion deeper in debt today than it was after the financial crisis.

And if that's not enough bad news, Canada is singled out as a particularly weak spot.

— Amanda Lang

​Seven economies could be particularly vulnerable to household debt, according to McKinsey: The Netherlands, Sweden, Australia, South Korea, Malaysia, and Thailand. And of course, Canada. Statistics Canada says our debt-to income ratio is almost 163  per cent. McKinsey says the ratio grew 22 percentage points from 2007 to mid-2014. That's just behind Greece, where the same ratio increased 30 per cent.

In part, Canadians have taken on all that debt to buy homes. Canadian home prices were up 28 per cent in the period studied by McKinsey. One piece of good news for Canada. Unlike the other countries McKinsey views as being at risk, Canada's debt servicing ratio is relatively low, just 8 per cent in 2013. That means Canadians can largely afford to keep up with all those debt payments.

Amanda Lang spoke with Susan Lund, one of the authors of the report, and a partner at the McKinsey Global Institute.