The International Monetary Fund (IMF) is out with its annual report on Canada’s economy. No one with even the slightest familiarity with IMF reports would identify that organization as Austrian in its orientation. Even so,Â the analysis provided by the IMF is always worth consideration if only because it offers an outsider’s perspective.Â And though this is more evident in its microeconomic than in its macroeconomic inquiries,Â the IMF does lean in a pro-market direction.
There are two noteworthy takeaways from the IMF’s report. First off, it reiterates the Austrian concern, albeit with less apprehension than we followers of Mises would like, about the escalation of household debt in Canada.
Stretched household balance sheets are the main domestic risk although the Canadian debt imbalance is currently not as great as that experienced in the U.S. (expressed on a comparable basis, the debt to
income ratio stands at 143.6 in Canada and 148.6 in the United States) … However, a stronger than expected correction in the housing market could have sizeable spillovers to the rest of the economy.
Secondly, the IMF points to the longer term danger to Canada’s public finances posed by rising health care costs, which will be exacerbated by the ageing of the population:
The [IMF] mission stressed the importance of increasing transparency and communication about these challenges and their long-run implications, to increase public awareness and contribute to a debate about possible solutions.
The sub-text of this bureaucratic prose is that we need to seriously look at reforming Canada’s health care system.Â The IMF is definitely on the mark here. Indeed, it should have been more explicit and daring, by counseling our politicians to consider the introduction of market mechanisms in the provision of health care. A growing number of domestic voices, to be sure, have issued this call. But given the almost divine status which our government run system has in the minds of this country’s political and intellectual elites,Â it would’ve been helpful — indeed, it may ultimately be necessary –Â if an influential external body could have at least broached the topic of health care privatization.
Editors note – as this is about our financial state and the health care question, I thought I would add this chart showing the expenses of the Province of Ontario for 2010-11 – please note that 47% of our expenditures currently go towards Health Care and debt servicing.