Canadians reached a record level of mortgage debt, credit-card debt, lines of credit and other liabilities. In the third quarter the ratio of household debt to disposable income reached 148.1. That is nearly identical to the figure in the U.S., where elevated debt levels were a factor in the worst economic downturn since the Depression.

Policy makers are faced now with two main challenges. First, they must keep debt from rising to a point that it triggers a wave of defaults that would hobble lenders and impair the financial system. This leads to the second challenge. Tapped out, consumers will naturally reduce spending. If exports and business investment fail to make up for reduced household consumption, economic growth will slow.