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Prosperity waning due to Ottawa’s misguided population growth policy

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From the Fraser Institute

By Jock Finlayson

Federal ministers have finally acknowledged that soaring immigration has aggravated the housing affordability crisis and put added pressure on stretched public services.

Last week, in response to growing concern about fast-rising immigration levels, the Trudeau government announced it will cap the number of international student permits over the next two years. Canada’s population increased by 1.2 million last year, following a gain approaching one million in 2022, with these increases almost entirely due to immigration.

The most striking feature of the international migration data is the vertiginous rise in the number of “non-permanent residents” (NPRs). They have accounted for most of the newcomers arriving in Canada since 2020, dwarfing the ranks of new permanent immigrants. NPRs consist of temporary foreign workers and international students (many of whom also work), along with smaller numbers of asylum seekers and refugees, together with some of their families. The stock of NPRs has skyrocketed under the Trudeau government, reaching 2.5 million last year. This means one in every 16 people walking Canada’s streets is a “temporary” immigrant; in some large metro areas, the NPR share is significantly higher.

The federal government’s slapdash handling of immigration has caused problems for other levels of government. The dramatic increase of NPRs occurred without any advance notice, coordination or planning with the provinces, let alone the cities where most newcomers settle. After waving the issue away, federal ministers have finally acknowledged that soaring immigration has aggravated the housing affordability crisis and put added pressure on stretched public services. Remarkably, until last week’s announcement, there had been no federal government limit on student visas and no meaningful oversight of the rapidly expanding international education “industry,” which has largely driven the surge in NPRs.

In addition to the effects on housing demand and public services, Canada’s booming population has contributed to an erosion of prosperity, as measured by the value of economic output on a per-person basis. Nationally, per-person GDP fell by at least two per cent last year and is set for a repeat performance in 2024. Canada is getting poorer, even as our population increases faster than in any other developed country.

Why has the Trudeau government been so keen to turbo-charge population growth? The principal reason cited by federal ministers is to offset the effects of aging. Canada is indeed getting older, like every other developed country. Unfortunately, economic research finds that immigration has relatively little impact on the age structure of the population over time. Nor does it have a measurable influence—either positive or negative—on average incomes, wages or productivity. Simply put, most published academic research suggests that neither population size nor immigration are significantly correlated with higher levels of GDP per person.

It follows that Canada’s current economic development strategy—one premised on strong population growth—is unlikely to increase average incomes or living standards. It’s worth noting that many of the most affluent countries actually have small-to-modest-sized populations. According to the CIA World Factbook, of the 25 richest countries as measured by GDP per person, only one (the United States) is home to more than 20 million people. Among the 30 richest countries, just three meet the 20 million population threshold.

Ultimately, prosperity does not primarily depend on population size. It’s far more important for countries to be productive and innovative, to nurture entrepreneurial wealth creation, to build high-quality workforces, and establish and maintain well-functioning institutions. To improve incomes and living standards, Canadian policymakers should direct their efforts to these areas.

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Business

Upcoming federal budget likely to increase—not reduce—policy uncertainty

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From the Fraser Institute

By Tegan Hill and Grady Munro 

The government is opening the door to cronyism, favouritism and potentially outright corruption

In the midst of budget consultations, the Carney government hopes its upcoming fall budget will provide “certainty” to investors. While Canada desperately needs to attract more investment, the government’s plan thus far may actually make Canada less attractive to investors.

Canada faces serious economic challenges. In recent years, the economy (measured on an inflation-adjusted per-person basis) has grown at its slowest rate since the Great Depression. And living standards have hardly improved over the last decade.

At the heart of this economic stagnation is a collapse in business investment, which is necessary to equip Canadian workers with the tools and technology to produce more and provide higher quality goods and services. Indeed, from 2014 to 2022, inflation-adjusted business investment (excluding residential construction) per worker in Canada declined (on average) by 2.3 per cent annually. For perspective, business investment per worker increased (on average) by 2.8 per cent annually from 2000 to 2014.

While there are many factors that contribute to this decline, uncertainty around government policy and regulation is certainly one. For example, investors surveyed in both the mining and energy sectors consistently highlight policy and regulatory uncertainty as a key factor that deters investment. And investors indicate that uncertainty on regulations is higher in Canadian provinces than in U.S. states, which can lead to future declines in economic growth and employment. Given this, the Carney government is right to try and provide greater certainty for investors.

But the upcoming federal budget will likely do the exact opposite.

According to Liberal MPs involved in the budget consultation process, the budget will expand on themes laid out in the recently-passed Building Canada Act (a.k.a. Bill C-5), while also putting new rules into place that signal where the government wants investment to be focused.

This is the wrong approach. Bill C-5 is intended to help improve regulatory certainty by speeding up the approval process for projects that cabinet deems to be in the “national interest” while also allowing cabinet to override existing laws, regulations and guidelines to facilitate such projects. In other words, the legislation gives cabinet the power to pick winners and losers based on vague criteria and priorities rather than reducing the regulatory burden for all businesses.

Put simply, the government is opening the door to cronyism, favouritism and potentially outright corruption. This won’t improve certainty; it will instead introduce further ambiguity into the system and make Canada even less attractive to investment.

In addition to the regulatory side, the budget will likely deter investment by projecting massive deficits in the coming years and adding considerably to federal debt. In fact, based on the government’s election platform, the government planned to run deficits totalling $224.8 billion over the next four years—and that’s before the government pledged tens of billions more in additional defence spending.

growing debt burden can deter investment in two ways. First, when governments run deficits they increase demand for borrowing by competing with the private sector for resources. This can raise interest rates for the government and private sector alike, which lowers the amount of private investment into the economy. Second, a rising debt burden raises the risk that governments will need to increase taxes in the future to pay off debt or finance their growing interest payments. The threat of higher taxes, which would reduce returns on investment, can deter businesses from investing in Canada today.

Much is riding on the Carney government’s upcoming budget, which will set the tone for federal policy over the coming years. To attract greater investment and help address Canada’s economic challenges, the government should provide greater certainty for businesses. That means reining in spending, massive deficits and reducing the regulatory burden for all businesses—not more of the same.

Tegan Hill

Director, Alberta Policy, Fraser Institute

Grady Munro

Policy Analyst, Fraser Institute
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Alberta

OPEC+ chooses market share over stability, and Canada will pay

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This article supplied by Troy Media.

Troy MediaBy Rashid Husain Syed

OPEC+ output hike could sink prices, blow an even bigger hole in Alberta’s budget and drag Canada’s economy down with it

OPEC and its allies are flooding the global oil market again, betting that regaining lost market share is worth the risk of triggering a price collapse.

On Sept. 7, eight of its leading members agreed to boost production by 137,000 barrels per day beginning in October. That move, taken more than a year ahead of schedule, marks the start of a second major unwind of previous output cuts, even as warnings of a supply glut grow. OPEC+, a coalition led by Saudi Arabia and Russia, coordinates oil production targets in an effort to influence global pricing.

This isn’t oil politics in a vacuum. It’s a direct blow to Alberta’s finances, and a growing threat to Canada’s economic stability.

Canada’s broader economy depends heavily on a strong oil and gas sector, but no province is more directly reliant on resource royalties than Alberta, where oil revenues fund everything from hospitals to schools.

The province is already forecasting a $6.5-billion deficit by spring. A further slide in oil prices would deepen that gap, threatening everything from vital programs to jobs. Every drop in the benchmark West Texas Intermediate price, currently averaging around US$64, is estimated to wipe out another $750 million in annual revenue.

When Alberta’s finances falter, the ripple effects spread across the country. Equalization transfers from Ottawa to have-not provinces decline. Private investment dries up. Energy-sector jobs vanish not just in Alberta, but in supplier and service industries nationwide. Even the Canadian dollar takes a hit, reflecting reduced confidence in one of the country’s key economic engines. When Alberta stumbles, Canada’s broader economic momentum slows with it.

The timing couldn’t be crueller. October marks the end of the summer driving season, typically a lull for fuel demand. Yet extra supply is about to hit a market already leaning bearish. Oil prices have dropped roughly 15 per cent this year; Brent crude is treading just above US$65, still well beneath April’s lows.

But OPEC+ isn’t alone in raising the taps. Non-OPEC producers in Brazil, Canada, Guyana and Norway are all increasing production. The International Energy Agency warns global supply could exceed demand by as much as 500,000 barrels per day.

The market is bracing for a sustained price war. Alberta is staring down the barrel.

OPEC+ claims it’s playing the long game to reclaim market share. But gambling on long-term gains at the cost of short-term pain is reckless, especially for Alberta. The province faces immediate financial consequences: revenue losses, tougher budget decisions and diminished policy flexibility.

To make matters worse, U.S. forecasts are underwhelming, with an unexpected 2.4-million-barrel build in inventories. U.S. production remains at record highs above 13.5 million barrels per day, and refinery margins are shrinking. The signal is clear: demand isn’t coming back fast enough to absorb growing supply.

OPEC+ may think it’s posturing strategically. But for Canada, starting with Alberta, the fallout is real and immediate. It’s not just a market turn. It’s a warning blast. And the consequences? Jobs lost, public services cut and fiscal strain for months ahead.

Canada can’t direct OPEC. But it can brace for the fallout—and plan accordingly.

Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.

Troy Media empowers Canadian community news outlets by providing independent, insightful analysis and commentary. Our mission is to support local media in helping Canadians stay informed and engaged by delivering reliable content that strengthens community connections and deepens understanding across the country

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