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Former Bank of Canada governor breaks rank with successor over consumer debt

Former Governor of the Bank of Canada David Dodge is pictured during an interview in Ottawa on Tuesday March 17, 2008.

Sean Kilpatrick/The Globe and Mail

Canada's current and former central bankers seem at odds over the country's soaring consumer debt, with former Bank of Canada governor David Dodge playing down warnings by his successor, Mark Carney.

Mr. Dodge also waded into one of the country's most pressing infrastructure debates, suggesting Tuesday the proposed Northern Gateway pipeline, from Alberta to the West Coast, is unlikely to be built and that Alberta should instead look east to get its oil to overseas markets. Alison Redford, he added, is the first Alberta premier in two decades with the "broader view of what needs to happen."

The comments come as Mr. Dodge, an economist and former federal deputy minister who retired as governor four years ago, continues his transition out of government. He serves as chancellor of Queen's University; is a senior adviser to a top law firm, Bennett Jones LLP, speaking to its corporate and public clients alike; and sits on several corporate boards. He gave a speech in Edmonton on Tuesday about Alberta's position in the global economy.

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One role Mr. Dodge hasn't taken on is that of retirement – and, in interviews Tuesday, he broached the pipeline debate, criticized Ontario's green-power sector and broke step from Mr. Carney, who has repeatedly warned that rising consumer debt is the top domestic threat to economic recovery. Mr. Dodge, who recruited Mr. Carney to the Bank of Canada, does not share those fears.

"I don't think it's in trouble," he said, noting most consumers aren't overexposed. In areas where employment levels remain high (such as Alberta, which Statistics Canada reports has Canada's highest per-capita consumer debt level), debt loads are "probably not such a big deal." And so long as interest rates don't rise past historically average levels, it would be "a bit of a squeeze, but that's kind of manageable."

One tool to slow rising debt levels could be changing the rules around qualifying for a mortgage. "Maybe they should be a little bit tighter at the moment," Mr. Dodge said.

Speaking one day after B.C. New Democrat Leader Adrian Dix – whose party is leading in the polls – told the National Energy Board that Enbridge Inc.'s proposed pipeline isn't in B.C.'s best interest, Mr. Dodge said Alberta cannot solely rely on proposed routes to the west and south.

"You've got to get the stuff to market. And I guess I keep thinking that the really interesting thing is B.C. and the Indians are going to make it difficult to go across the mountains. Bring it east, right?" Mr. Dodge told The Globe and Mail, saying he believes hundreds of millions of barrels of bitumen could be upgraded daily in central and Atlantic Canadian cities.

"It may be that there are fewer obstacles in moving the stuff east than there are moving it west. Not engineering obstacles, but political obstacles and everything else," he said.

He championed Ms. Redford's vision, saying "discipline got away from" Ontario Premier Dalton McGuinty when he said Canada's booming resource industry hurt his province's manufacturing sector. However, "it's a much broader picture" driving a decline in manufacturing, including lagging gains in productivity, Mr. Dodge said. Ontario, meanwhile, should have built natural-gas power plants instead of jumping on the green energy "bandwagon," Mr. Dodge said, one for which "the consumer ends up having to pay for."

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Ms. Redford has said she hopes to develop a Canadian energy strategy that ties in each province's energy sector, which Mr. Dodge sees as a stark change from her predecessors, who shied away from taking a leadership role nationally, he said.

It's "very important that we not be seen as a totally dirty country. So, I think she will do a much better job in understanding that. The industry has moved a lot – a lot faster, I think, than the politicians have – on smart thinking about that," Mr. Dodge said.

With a report from Shawn McCarthy

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About the Authors
Parliamentary reporter

Josh is a parliamentary reporter in Ottawa. Before moving to the nation's capital in 2013, he covered provincial affairs in Edmonton and throughout Alberta. He joined the Globe in 2008 in Toronto before returning to his home province in 2010. More

Economics/business writer

Jeremy has covered Canadian and international economics at The Globe and Mail since late 2009. More

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