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In summary. Canada is in a population trap ("populationtrap"), where rapid population growth hinders economic progress by requiring all available savings to maintain the existing capital-labor ratio. To escape from this population trap, the country must rethink its demographic ambitions and adapt them to economic realities.

Canada is often seen as a model for immigration. No longer, as according to the National Bank of Canada, excessive population growth puts pressure on resources and infrastructure, hindering living standards and economic growth.

One home for every 4.2 working people

In the news. Canada's population grew by 1.2 million people by 2023, a significant increase that is straining the country's economic standing.

  • Since Justin Trudeau took power, immigration policy has been dictated by the Century Initiative think tank. Ignoring the consequences, the number of immigrants has doubled in the past decade.
  • Economists at the National Bank of Canada suggest in a report that Canada's annual population growth should be limited to 300,000 to 500,000 people to avoid the population trap.
  • The current rapid growth is creating shortages, especially in housing, with only one home being built for every 4.2 working people is. That is far below the historical average.
  • Policymakers need to match population growth to the available capital stock, the economists write, not just housing.

Zoom in. That has implications for the housing market. Average rents in Canada reached a record $2,178 in December 2023, up 8.6% from the previous year.

  • The capital share per capita dropped dramatically to about 1.5% in 2023. Compare that to a peak of nearly 4.5% in the 1960s.

Population growth of 3.2% is five times higher than OECD average

Zoom out. This trend is often observed in emerging economies and requires an increase in savings or a reduction in population growth. Or both.

  • Canada's population growth rate of 3.2% over the past year was five times higher than the OECD average.
  • All this does not bode well for Prime Minister Trudeau:
    • According to Conservative opposition leader Pierre Poilievre, Canadian cities have become "crime zones" under Trudeau's rule. Nor is the necessary action being taken to reduce violence.
    • The Conservative Party of Canada has a comfortable lead (10 percent) over Trudeau's Liberal Party of Canada in all polls. But elections are not scheduled until 2025.

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