There are few sets of numbers out this week that are worth pondering.
Last week, when the province released the public accounts, the per-capita debt of residents in this province rose again. That’s the amount of debt that each individual Newfoundlander and Labradorian is responsible for, as a result of the government’s regular deficit spending.
The number is now $27,898, up by more than $2,000 from $25,788 a year ago.
Another set of numbers? The province currently has $22.5 billion in liabilities, compared to $14.4 billion in 2014. Needless to say, we can’t go on maxing out our provincial credit card.
The other set of numbers?
That comes a little closer to home.
On Thursday, the Canada Mortgage and Housing Corporation released an on-line survey of more than 4,000 first-time home buyers in Canada. Out of all the new home buyers (congrats on your new homes, folks), 85 per cent of those surveyed spent the absolute maximum they had budgeted to make their new home purchase.
In other words, they maxed out, too. (A little more frightening is that 76 per cent of those surveyed said they were confident they could still make their mortgage payments. There must be a bit of buyer’s remorse for the remaining 11 per cent — if you’ve just bought a house and don’t know if you can make your mortgage payments, you’ve got an issue all right.)
Interest rates are continuing their slow but steady climb, and what is affordable right now — whether you’re a first-time home buyer or a provincial government — might not be later. The fact is that increased borrowing costs can hurt you badly.
Now, it might take a while for those chickens to come home to roost — especially for the provincial government, which likes to borrow money at fixed rates over a long period of time.
But no one can really afford to depend on cheap borrowing in the long term.
Oh, and that per capita debt number? Expect it to rise again next year.
There are two factors that are likely to come into play — the province’s continuing practice of running current account deficits to cover its operating costs, and the harsh fact that there are few people in the province. Every time our population decreases by one single person, whether they die or simply move away, their $27,898 gets split up amongst all the rest of us.
Our population is aging (something that, face it, means higher health costs), the population is shrinking, and we’re about to divert millions of dollars to pay for increased electricity rates, a good chunk of which is going to vanish in interest paid to out-of-province financers.
We all have to lower our expectations and learn to live with less.
It doesn’t work any other way.