Standard & Poor’s has reaffirmed Canada’s triple-A rating despite mounting levels of household debt and the housing market flux.
“Despite several elevated measures of Canadian household indebtedness and house prices, including household credit market debt to disposable income of 162 per cent in 2011, we continue to view Canada’s contingent liabilities as limited;” according to S&P. “We view micro and macro-prudential factors as stronger than those of many peer countries at the time of their housing market corrections.”
The encouraging assessment from the rating agency comes at the heels of CMHC’s own report that housing starts across the country has registered a slide in November for the third months in a row and an earlier warning from the Bank of Canada that overbuilding in the condo sector risks a sudden price correction that could have dire consequences for the economy.
Despite these factors, S&P believes economic strengths and strong policies will help Canada pull through.
“The ratings on Canada reflect Standard & Poor’s opinion of the country’s relatively diversified and resilient economy and its effective and predictable policymaking and political institutions,” the S&P report said.
Finance Minister Jim Flaherty, who had recently expressed delight that the government’s recent mortgage rule changes have slowed the housing market, welcomed the S&P assessment.
“We are pleased that Standard & Poor’s has confirmed our federal government’s top credit rating, while pointing to the effectiveness and stability of our policy making, the resilience of our economy, and the strength of our monetary and fiscal flexibility,” said Flaherty. “Their assessment is that our track record in managing economic and fiscal crises is strong.”