You've hit on a key dynamic in the Canadian economy and a very influential element of the projection. Obviously, as you're well aware, the level of household debt has increased substantially. Most of this debt is backed by assets, an increase in value of real estate. We all—and particularly the bank—have to be aware of the possibility that there could be a negative dynamic that gets introduced into household spending if there is a sharper adjustment in the housing market than we anticipate, for whatever reason. It could be because of a shock from abroad. It could be because of other factors. If there were to be a sharper adjustment, given the level of debt that many households are carrying, that could cause a sharper contraction in household spending, or, at a minimum, a slower rate of growth of household spending.
Given, obviously, that consumption is more than 55% of GDP, it has a big knock-on effect on the prospects for the economy. We're very alert to that. As you say—you used the term “double-edged sword”—it's a fine balance in terms of the adjustment the government and CMHC have taken on the mortgage insurance rules; that OSFI has taken, in terms of their supervision of financial institutions, the quality of the underwriting standards; and obviously, the balance that the bank has to take within the context of its inflation target, in meeting its inflation target, in the setting of monetary policy, so that there is, as we've termed it, a constructive evolution of household finances.
I would say that as we sit here today, we are encouraged by the fact that the rate of debt accumulation has slowed. We see the prospect of stabilization this year of the debt-to-income ratio. We're encouraged by the fact that the level of housing starts has come down to slightly below demographic demand, as we see right now. There's still more adjustment to go. We're encouraged by the evolution of house prices in a number of markets.
We're on the path to a balanced evolution of the household sector. We all have to continue to be vigilant to the risks of both sides, the risk that this could re-accelerate and create more imbalances, more vulnerabilities for the future, and this risk on the downside that you just highlighted.