Canada’s rapid population growth, due to high levels of immigration, has worked to reduce costs associated with an aging population while spurring other economic challenges, according to one economist. 

Carrie Freestone, an economist at RBC, said in a report Wednesday that there is now a shift in public attitudes toward immigration, which has resulted in a cap on non-permanent residents and limits on international study permits. She said these recent policy moves have been in response to the impact of population growth on housing affordability. However, the report said immigration has “long been viewed” as a strategy to slow the “pace of population aging.” 

“But, reducing immigration also has longer-run economic costs. The Canadian population—like many advanced economies— is getting older. The share of the population that is over age 65 is increasing rapidly as the large baby boom generation flows through to retirement,” Freestone said. 

She also highlighted in the report that caps on non-permeant residents are likely to curb population growth, as Canada’s population will be at least 2.5 per cent smaller than it otherwise would be in 2027. 

However, despite the recent caps on newcomers, Freestone said Canada’s population will continue to rise, as the migration rate is nearly double that of the U.S. 

“Even with immigration caps in place, the hit to Canadian finances from an aging population will be much smaller than in other countries, because of migrants,” she said. 

Freestone said an aging population can create an imbalance between economic output and consumer demand. 

“It will add to structural labour shortages, higher price pressures, and structurally higher interest rates in the economy,” the report said. 

“It also creates a large government funding gap as income tax revenue growth slows while demand for services, particularly for things like healthcare, accelerates as the population gets older.”