Economy

New limits on temporary residents to slow Canadian economy

Published

6 months ago

March 25, 2024

Harry Miller

Published Mar 22, 2024 • Last updated 1 hour ago • 3 minute read

Canada plans to reduce the number of temporary immigrants by 20 per cent over the next three years. Photo by Bloomberg

Canada’s planned reduction in temporary residents is set to add downward pressure to inflation and economic growth in the coming months, and the policy will likely halve its population growth rate when it takes full effect next year, economists say.

Prime Minister Justin Trudeau’s government plans to reduce the number of temporary immigrants by 20 per cent over the next three years, bringing the level down to five per cent of the population from 6.2 per cent currently. Starting in May, the government will make it harder for firms to rely on temporary foreign workers.

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With one of the world’s fastest rates of population growth, the country has benefited from quickly expanding its labour force. But the rapid increase, driven primarily by foreign workers and students, has led to growing anxiety about housing shortages and the cost of living, prompting the Trudeau government to scale back its open immigration policies.

“This policy would have a material impact on the economy moving forward,” Royce Mendes, head of macro strategy at Desjardins, said in a report to investors. “The combination of a highly interest-rate sensitive economy and the likelihood of slower population growth are the main reasons we have been more bearish on the medium-term outlook for the Canadian economy.”

A decrease in temporary residents might offset the short-term economic benefits of any Bank of Canada rate cuts this year, Mendes said, adding that it could have an “even more severe impact” next year and in 2026 as population growth will be cut in half.

Robert Kavcic, an economist at Bank of Montreal, expects Canadian population growth to be slashed to near one per cent in the coming years, in line with the pace seen in the decade before the pandemic. The population has been growing around three per cent recently.

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Article content“The impacts will be: Less pressure on rents and housing, less stress and inflation in services, and lower interest rates than we otherwise would see if these inflows were to continue,” Kavcic said.

Worsening housing affordability was a major impetus for the government’s cap. Rent prices have been surging across major cities and have been a key contributor to consumer price increases in Canada. In February, the overall rate of inflation eased to 2.8 per cent on an annual basis, while rents jumped 8.2 per cent.

Excluding shelter costs, the consumer price index rose 1.3 per cent, below the central bank’s two per cent target.

“By way of just slowing the upward momentum in shelter inflation, this reinforces our view that the central bank will cut rates more forcefully than what’s implied by market pricing,” Desjardins’ Mendes said.

Currently, markets are pricing in more than three rate cuts by the end of this year, with a high probability that the Bank of Canada will begin that process in June.

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Article contentThe government’s immigration change will hurt businesses that are relying on importing low-wage foreign workers to fill jobs. According to the Canadian Federation of Independent Business, 22 per cent of small businesses in February said that a lack of unskilled or semi-skilled labour was impeding their ability to maintain their current operations or grow.“The costs of bringing in a foreign worker are much higher compared to those associated with the hiring of someone already in Canada,” Christina Santini, CFIB’s director of national affairs, said in an emailed statement. “When employers turn to temporary foreign workers, it’s because they can’t find someone already in Canada.”

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Economy

Federal money and sales taxes help pump up New Brunswick budget surplus

Published

14 hours ago

September 16, 2024

Anne Joseph

FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.

Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.

The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.

Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.

Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.

Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.

Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.

This report by The Canadian Press was first published Sept. 16, 2024.

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Economy

Liberals announce expansion to mortgage eligibility, draft rights for renters, buyers

Published

18 hours ago

September 16, 2024

Anne Joseph

OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.

She says the changes will come into force in December and better reflect the housing market.

The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.

The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.

On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.

Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.

Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.

The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.

The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.

This report by The Canadian Press was first published Sept. 16, 2024.

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Economy

Statistics Canada says manufacturing sales up 1.4% in July at $71B

Published

18 hours ago

September 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.

The increase followed a 1.7 per cent decrease in June.

The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.

Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.

Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.

In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.

This report by The Canadian Press was first published Sept. 16, 2024.

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