OTTAWA — One economist argues the federal Liberals’ renewed pledge to throttle immigration levels over the next few years will weigh on Canada’s economic growth.
The federal budget tabled last week recommitted to a previous target of reducing the share of temporary residents in Canada to five per cent of the total population — down from about 7.5 per cent in late 2024 — but pushed the timeline for that goal back a year to 2027.
That plan would see 385,000 temporary residents — workers and students — admitted in 2026, reduced to 370,000 in the following two years.
The 2026 target includes 230,000 temporary workers, down from the nearly 368,000 planned for 2025.
Stephen Brown, deputy chief North America economist at Capital Economics, said temporary resident growth is on track to exceed Ottawa’s targets set last year because outflows of existing temporary workers and students haven’t been significant enough to fully offset inflows.
Matching inflows to outflows in a given year is tricky, Brown noted, in part because existing work permits are often extended when a business applies to keep that employee. It requires a strong dose of political will to meaningfully reduce the number of temporary workers in the country, he said.
“It’s not necessarily a new plan, but it’s still a big deal that the Carney government has recommitted to the existing target of bringing that temporary residents share down, because it suggests to me that they’re serious about it,” said Brown.
The ramp down in temporary workers and students, if achieved, could lead Canada’s population to essentially hold flat over the next two years, according to Capital Economics’ projections.
Brown said that’s likely to put a drag on growth with fewer new workers and a long-standing productivity problem.
Proposals in the budget to increase the share of economic migrants — typically those with in-demand skills added to the permanent residents pool — and speed up foreign credential recognition could mitigate the overall hit to Canada’s economy from slower population growth, he added.
One of the sharper immigration plan changes in the federal budget, which is still pending final approval in parliament, is a plan to cut the annual number of international study permits roughly in half through to 2028.
Tamping down the number of international students and workers coming into the country could help limit competition for jobs among Canadian youth, Brown said. Those aged 15 to 24 saw their unemployment rate rise to 15-year highs in September, outside the pandemic, with modest improvements in October.
“As the pool of temporary workers dries up, then young Canadians should have a better time finding positions,” Brown said.
RBC economist Rachel Battaglia said in a report released Monday that a drop-off in international study permits could help ease rents in cities with a significant student population.
On the other hand, Brown said those same reductions could discourage developers from breaking ground on new rental apartments — the kinds that cater largely to students and freshly landed workers — ultimately hampering the supply of rental units in the market.
He said signals that Ottawa is willing to support rental construction could help soften the blow to residential investment in the face of dwindling population growth.
“The government is doing a lot to support that construction, but there’s only so much you can weigh on population growth and rental growth before they turn around and say, ‘You know, maybe this doesn’t make sense to keep building these buildings,'” Brown said.
Battaglia said in her report the Carney government’s new immigration plan represents a “far smaller shift in policy than last year’s overhaul.”
She added that one-time exemptions will help fast-track some existing temporary workers and students into permanent resident status. That will cushion the blow from a projected population freeze over the next two years, she argued.
This report by The Canadian Press was first published Nov. 11, 2025.
Craig Lord, The Canadian Press
