Bank of Canada: Lower immigration and population aging will slow economic growth
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Lower immigration and an aging population are expected to slow the growth of Canada’s labour force and economy in the years ahead, while easing some pressure on housing demand, according to a new Bank of Canada analysis.
The Bank published the analysis on October 8, 2026, examining how demographic change is reshaping the Canadian economy after population growth slowed to about 0.5 per cent in 2025, down from rates close to three per cent annually earlier in the decade.
The Bank links the shift to lower birth rates, an aging population and a decline in immigration following federal policy changes introduced since 2024.
Immigration has played a major role in supporting Canada’s workforce, with many newcomers arriving during their working years and helping fill labour shortages across a wide range of sectors.
Rapid population growth, however, also added pressure to housing and public services, particularly because new housing cannot be built as quickly as demand can rise.
Lower immigration is therefore expected to reduce some housing demand and may ease pressure on rents and home prices. The trade-off is slower economic growth, as fewer newcomers also means fewer workers and consumers.
Canada’s population is also getting older, with the median age now above 40 and a large share of the baby-boom generation reaching retirement.
The Bank says this demographic shift is likely to increase demand for health care and services for older Canadians while making it harder for some industries to replace retiring workers.
Labour shortages could also increase competition for employees and put upward pressure on wages, one of the factors the Bank considers when assessing inflation.
The Bank of Canada stressed that it does not set immigration policy, but said demographic change is increasingly important when assessing the country’s productive capacity, consumer demand and inflation outlook.
