As a result, Canada’s net debt relative to GDP went from being the second-highest ratio among the G-7 countries in 1995 to the lowest (Chart 13). This fiscal flexibility provided leeway for governments to respond while maintaining our credit standing at the highest levels. Having clear policy frameworks has disciplined the post-crisis response.
Fiscal consolidation has begun, with the combined deficits of all levels of government falling from 4.8 per cent in 2009 to an expected 2.8 per cent this year.9 Disciplined by its inflation target and reflecting the relative strength of the economy, the Bank of Canada was the only G-7 central bank not to engage in quantitative easing, and we have been the only one to move away from emergency settings of interest rates.