RIAC believes the recent Macleans article “This is how Canada’s housing correction begins” is spot on.

Although at this point in time Canadian interest rate growth is in a momentary lull, the threat to the Canadian economy remains at a significantly high level and it all has to do with consumer debt. At $2.16 trillion in mortgage, credit card and other consumer debt – the highest ever – the consumer spending engine that has been driving economic growth in Canada for more than a decade is now stalling.

Some are taking solace in employment figures that still look relatively strong. Unfortunately, what we are seeing in that respect, is history.

With interest rates rising and the government action to restrict growth in mortgages, inevitably there will be less building leading to reduced employment in that sector. That in turn will lead to less consumer spending due to fewer purchases for new houses which will exacerbate the rise in unemployment as retailers and wholesalers cut costs due to shrinking sales. Reduced disposable income caused by that self-same interest rate growth will compound the negative effect that rising unemployment is having on the financial health of consumers and hence on the overall Canadian economy.

Consumer bankruptcies will spread to business bankruptcies, especially in retail. Typically, we have seen this trend climb back up the business chain to wholesalers and manufacturers.

It sounds pretty dismal.

The good news is that Canadian businesses can choose to prepare.

By purchasing receivables insurance (also known as credit insurance), businesses can protect themselves from the inevitable bankruptcies that this economic prediction will lead to. Beyond that, by having this financial tool in a business’ arsenal, a company can safely expand into export markets where consumers are not so leveraged and where growth is strong and sustainable. A proactive move towards assuring a successful future.

If you, as a business, do not want to be on the wrong side of an economic reversal, make the sensible move to receivables insurance and be prepared.

For information on receivables insurance please contact the Receivables Insurance Association of Canada at info@receivablesinsurancecanada.com.


by Ian Miller, Past and Founding Chair of the Receivables Insurance Association of Canada (RIAC) and Emeritus RIAC Member.