Personal Debt: BDO Dunwoody/Chamber Weekly CEO/Business Leader Poll by COMPAS in the Financial Post for Publication February 21, 2005

Transcription

1 Personal Debt: BDO Dunwoody/Chamber Weekly CEO/Business Leader Poll by COMPAS in the Financial Post for Publication February 21, 2005 COMPAS Inc. Market and Customer Research February 21, 2005

2 Report Template Draft 1, February 16, Introduction The CEOs and business leaders who form the weekly panel are increasingly concerned about the level of household debt, which they attribute to an instant gratification culture. Concern has jumped in the last year. Only a minority are reassured by the fact that so much debt is in the form of mortgages on real property. Respondents are clear in their remedies drop taxes but don t try experiments with how employees are paid or raise taxes to deter borrowing. In the event of a rise in interest rates, panelists tend to expect a softening of real estate prices in the form of either stabilization or even a decline. These are the key findings from this week s survey of the COMPAS/FP business panel sponsored by BDO Dunwoody LLP and the Canadian Chamber of Commerce. 2.0 High Concern about Household Debt Attributed to Instant Gratification Culture CEOs and business leaders in the weekly panel are concerned about the level of personal debt. Those concerned outnumber those unconcerned by a factor of almost 3:1, as shown in table 2A. The proportion who are concerned has jumped from a year ago, as shown in the pattern of responses to a series of debt-related questions in table 2B. For example, the proportion disagreeing with the statement that Rising household debt is not a problem because so much of it is in the form of mortgages on real property is 50% today compared to 27% in January, A large majority attributes high personal debt to an instant gratification culture, as shown in table 2A. Thus, the statement that High personal debt comes from an instant gratification culture and a society that more readily spends on frivolous goods, like CD s and clothing elicits 70% agreement and 20% disagreement. 2

3 Table 2A: (Q1) There s been some talk in the media about the amount of personal or household debt. Using a 7 point scale where 7 means current levels of personal debt could definitely be a brake on the economy and 1, the opposite, to what extent are you concerned? MEAN DNK Table 2B: (Q2) On a 7 point scale where 7 means agree a lot and 1, the opposite, please score how you feel about each of the following opinions about household debt: [RANDOMIZE] Mean DNK High personal debt comes from an instant gratification culture and a society that more readily spends on frivolous goods, like CD s and clothing February Rising household debt is a problem and there should be stricter income and asset requirements to deter more borrowing February January Rising household debt is not a problem because so much of it is in the form of mortgages on real property February January Rising household debt is a good thing because it is a result of consumers investing increasingly in their homes, which will be valuable assets for them in later years February January The current amount of household debt and savings is not a real problem February Rising household debt is a problem and the Bank of Canada should raise interest rates to deter more borrowing February January

4 3.0 Drop Taxes Don t Raise Interest Rates Business leaders singlemindedly favour reduced tax burden over high interest rates in order to address the problem of excessive household debt, as shown in both tables 2B and 3A. For example, 71% favour cutting taxes to encourage saving with 14% opposed. By contrast, members of the panel show little enthusiasm for either a portion of salaries paid in bonds or savings accounts or government s raising rates to deter borrowing. Table 3A: Using a 7 point scale where 7 means definitely agree and 1, the opposite, to what extent do you agree with each of the following? [ROTATE] The Government should reduce personal taxes to encourage saving Employers should provide portions of salaries or bonuses in the forms of bonds or saving accounts to encourage personal savings The Government should raise interest rates to deter borrowing Mean DNK Housing Prices May Abate or Even Fall An anticipated rise in interest rates is predicted to help stabilize or even attenuate house prices, as shown in table 4A. The proportion anticipating a decline in prices has risen to 27% from 15% a year ago. 4

5 Table 4A: (Q3) Given that falling interest rates have been the driving force behind rising house prices, what do you predict will happen to real estate when interest rates begin to rise again? [RANDOMIZE] Feb Jan 2004 % % Housing prices will stabilize, neither rising nor falling Housing prices will continue to rise but more slowly than over the past year Housing prices will fall DNK Methodology The National Post/COMPAS web-survey of CEOs and leaders of small, medium, and large corporations and among executives of the local and national Chambers of Commerce was conducted February 17-18, Respondents constitute an essentially hand-picked panel with a higher numerical representation of small and medium-sized firms. Because of the small population of CEOs and business leaders from which the sample was drawn, the study can be considered more accurate than comparably sized general public studies. In studies of the general public, surveys of 121 are deemed accurate to within approximately 8.9 percentage points 19 times out of 20. The principal and co-investigator on this study are Conrad Winn, Ph.D and Tamara Gottlieb. 5