Recent Trends in the Evolution of Household Saving and Wealth Components in Canada

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Recent Trends in the Evolution of Household
Saving and Wealth Components in Canada

Presentation to the OECD Working Party on
Financial AccountsPatrick OHaganSystem of
national Accounts, Statistics CanadaOctober 10,
2005
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Household Sector Asset-Liability Detail

• This presentation is the result of the 2004 WPFA
  discussions, specifically on the topic of the
  Financial Accounts database and the need for
  additional details on households
• Both the U.S. and Canada were among those that
  supported the need for more detailed information
  on the financial position of households, and
  mentioned that the current international
  asset-liability breakdowns did not meet the
  analytical needs in their respective countries
• The Secretariat then asked the U.S. and Canada to
  present, at a forthcoming meeting, some of the
  ways in which detailed data on households were
  used in their respective countries. This
  presentation is the result.

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Downward trend in personal saving and saving rate
continues
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Household financial asset acquisitions slow, in
line with the downward trend in the saving rate
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Household demand for funds continues to advance,
in line with the decline in the saving rate
6
Household net worth average annual growth over
6, despite the 2001 stock market correction
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Fixed income assets sharply in decline
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Equity assets take up a substantial, and
increasing, share of household portfolios
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High growth financial assets overtake residential
real estate in the mid-1990s
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Equity and life insurance and pension assets
drive asset growth, largely via appreciation
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Net worth advances relative to income, but is not
driven by saving
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Financial assets assume greater importance over
the 1990s, though less so in recent years
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Household debt continues to reach significant new
highs
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as the upward trend in consumer indebtedness
continues
15
Credit cards lead the growth consumer
indebtedness in recent years
16
Mortgage debt also outpaces income growth, but at
a slower pace than consumer credit
17
Home equity has increased in recent years, in
line with the housing boom
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however, adjusted for the strong growth in home
equity line of credit this may not be the case
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Overall household leverage relatively stable
between 16 and 19
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Capital gains result in a different
interpretation of personal saving
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Summary and future work

• It is clear that capital gains have strongly
  influenced the household sector financial
  positions over the last 15 years, and help to
  explain the downward trend in personal saving
• In order to further explore these effects,
  additional financial instrument details will be
  added in the near future
• Another significant and emerging issue is the
  impact of the aging of the post-war baby-boom
  generation. Growing numbers of baby-boom
  pensioners will continue to consume, but using a
  source of funds other than income that is,
  dis-saving in financial instruments. This will
  put further downward pressure on personal saving,
  and present a challenge for accurate forecasts of
  economic activity
• Addressing this issue has resulted in the
  development of a Pension Satellite Account a
  current work in progress
• In Canada, the Financial Account and Balance
  Sheet Account continue to evolve in relation to
  emerging needs