Instead of a widening gap between Canada and other OECD countries in living standards, the OECD now warns that Canada may have trouble closing the existing gap. Canadian living standards remain 25-30 per cent below those in the United States, it says.

The agency is worried about Canada's very high level of public debt, well above the average of OECD countries, although it notes that the ratio of public debt to the size of the the economy, the debt/GDP ratio, is now on a downward track. Canada's ratio is about 25 percentage points higher than the average of OECD countries.

While there is no agreement among economists on what is an appropriate debt/GDP ratio, the OECD says a possible target for Canada could be to bring the total debt/GDP ratio down 15 percentage points to the OECD average. It says this could be achieved by 2001.