Over the past three years, the savings rate of Quebecers has increased dramatically, and is now at 8%. It took the opposite path in the rest of Canada, going from 5.1% to 1.8% in the span of five years, according to a recent study by Desjardins Economic Studies.

MARC TISON
LA PRESSE

At the same time, the indebtedness rate of Quebecers stopped its rise, stabilizing for three years at around 155%. Ontario’s continued to climb, reaching 188%. “It is still major, because a savings rate of around 8% in Quebec, we would not have expected it a few years ago,” comments senior economist Hélène Bégin. “I remember a time when the savings rate was less than 1%.” The explanation lies mainly in the tightening of the job market in Quebec, according to the economist. Explanations:

Decrease in the unemployment rate

The strong expansion of the Quebec economy over the past three years has resulted in a drop in the unemployment rate, which even remained below 5% for much of 2019.

An older population

Accelerated aging in Quebec compared to Canada has also increased the number of available positions.

Increased remuneration

In response, the remuneration of Quebec workers has grown for three years by about 3% per year. The increase had been between 1% and 2% in previous years.

Increase in disposable income

With the added effect of federal and provincial tax breaks, after-tax disposable income has increased by almost 5% per year over the past three years

More money in pockets

As a result, Quebec households, without reducing their consumer spending, were able to save more. In 2019, they devoted about 8% of their after-tax income to saving. In 2018, the savings rate was negative in 7 out of 10 provinces. Only Alberta was just ahead of Quebec, after also experiencing a dramatic drop in its savings rate.

Two curves of the same slope

For the past three years, Quebecers’ after-tax income has maintained a growth similar to that of property prices, which has allowed them to stabilize or even slightly reduce their indebtedness rate. In 2019, their debts were around 155% of their after-tax income, compared to about 175% in the rest of Canada.

The weight of the mortgage

Since mortgages account for 75% of all household debt, property prices largely explain the difference between the indebtedness rate of Quebecers and other Canadians. In November 2019, the average price was $331,525 in Quebec, $628,234 in Ontario, and $526,303 in Canada. Quebec households reserve 28% of their disposable income for mortgages, compared to 35% in Canada and 40% in Ontario, which leaves less room for savings than in Quebec, noted Hélène Bégin.