A former premier of Quebec worries debt levels among Canadians will sour as they renew mortgages and make it harder for the economy to grow.

Jean Charest, who led the province from 2003 to 2012 and is now a partner with the law firm Therrien Couture Joli-Cœur, believes Canada’s economy has fallen behind that of the U.S. and other nations. He said this is due largely to the amount of debt the average Canadian holds.

“We always have to keep in mind that household debt in Canada is very high – among the highest of the G7 – which means that the increase in interest rates hit our consumers and fellow citizens a lot harder than it does in the United States,” he told BNN Bloomberg in a television interview on Tuesday.

“The perspective is a little gloomier in Canada as we look at how people will renew their mortgages at a higher rate (and) how they'll handle that. They're already starting from a high point of debt and that means that in the long term in Canada, it's going to be tough to get some growth out of this economy.”

According to a May 2023 report from the Canada Mortgage Housing Corporation, Canada has the highest debt levels among the G7 nations. The report also highlighted that along with New Zealand, Canada is one of just two countries with more household debt than the country’s gross domestic product. 

“The cost of servicing and repaying that debt slows economic growth over time,” the report states. “This outcome is more likely when this debt is incurred to finance house purchases that do not meaningfully improve the economy’s potential.”

Charest said if Canada wants to reboot its economy, it needs to look at ways to boost productivity.

“We have to address the issue of taxes, we have to address the issue of regulations in the long term,” he said.

“We have underlying issues of a lack of investment in our industrial sector in our business sector and that includes technology, it includes automation, all those things where we have to do better.”

Another way for Canada to boost its economy is through immigration, though Canada’s current strategy is a “big, big red flag,” Charest said.

“One of the things that mystifies me is that there is no way we can integrate so many people without the federal and provincial governments working very closely together and yet that is not happening,” he said.

“There are things that need to be done at both levels of government and yet I don't see that effort happening.”