Prime Minister Justin Trudeau’s decision to dial down immigration targets is among the top three headwinds facing the Canadian economy. Randall Bartlett, deputy chief economist at Desjardins, shared that with an audience on Wednesday.
Last November, Trudeau admitted that his government “made some mistakes” on the file, blaming “bad actors” who took advantage of the government’s plan to boost immigration in order to meet the needs of Canada’s red hot labour market after the pandemic.
The plan had been to welcome one million new permanent residents over the course of 2025 and 2026. Revised targets aim to add 395,000 this year, 380,000 next and 365,000 in 2027. The country’s temporary population (a technical term we think could do with a little warming up) will go in the opposite direction. Ottawa plans to slash that number by better than 445,000 in each of the two years ahead.
“Population growth is starting to slow meaningfully in Canada,” Bartlett said. “While that is going to provide some relief on the inflation front … it also is going to slow overall economic activity.”
The steps Ottawa took to meet Canada’s post-pandemic labour needs buoyed the economy. But only for a short time. Real GDP growth per capita fell for the sixth consecutive quarter in Q3 2024. The Bank of Canada has said it expects that to turn around in the fourth quarter. We’ll see.
Did Trudeau blow it? Yes, to the extent that he should have had a better handle on the unintended consequences of moving so quickly. He’s not wrong about organizations gaming the system for profit, but it’s hard to imagine that none of his advisors saw that coming.
Desjardins’ other two key headwinds are more expensive mortgage renewals facing Canadians and — you guessed it — U.S. economic policy.
