Canada’s Advantages Mitigate Household Debt Risks Derek Holt Vice-President, Scotia Capital Economics Presented to the Durham Economic Prosperity Conference, November 5 th, 2010

U.S. Growth To Stumble If Tax Cuts Not Extended For All

Double Dip Risk Via U.S. Fiscal Drag In

Impact of Softer US Growth

BoC Likely On Hold – But Importing Longer-Term Risks Canada U.S. % forecast Source: Bank of Canada; Federal Reserve; Global Insight; Scotia Economics. Central Bank Rates

% Canadian Home Ownership Rate At All-Time High Source: Census Canada. Average = 63.8% Now 70%? US Peaked at 69%

Canadian Renovation Spending Coming Off Record High

Canada U.S. Source: CREA, NAR, Global Insight, Scotia Capital Economics. $ 000s, local currency Average Resale Home Prices in Local Currencies

Not Just One or Two Cities Driving House Price Gains

Canadians More Heavily Leveraged Than All But U.S.

Canada’s Debt Service Burden at All-Time High Source: Bank of Canada, Statistics Canada, Scotia Capital Economics.

Still Backed by Excellent Corporate Balance Sheets Source: Statistics Canada, Quarterly Survey of Financial Statements

Canada’s Public Finances Deleveraged Early % of GDP Gross Debt Net Debt Source: OECD, IMF.

Canadian Home Equity Offers Solid Support

Canadians Have a Solid Cash Buffer

Firmer Micro Foundations to Cdn Mortgage Markets, Despite Macro Parallels Explicit GSE guarantees Strongly capitalized banks & captive dealers, no shadow banking leverage Totally different funding model: deposit funding & large held-on-book component, versus reliance upon revolving door financing Financial institutions less reliant upon short-term lines No strategic defaults, outside of Alberta & Saskatchewan Less outsourcing of sales force in Canada Generally more conservative products, but not entirely No option ARMs in Canada, but entire book resets within 5 years No mortgage interest deductibility (with exceptions) Stricter underwriting criteria including independent appraisals & hair-cuts

Contacts Economics Derek Holt, Vice-President Gorica Djeric, Financial Markets Economist Disclaimer This report has been prepared by SCOTIA CAPITAL INC. (SCI), a subsidiary of the Bank of Nova Scotia. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither SCI nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.