Canada’s migration reset offers Australia lessons—and warnings

Canada is reducing temporary migration, and annual population growth has slowed from 3.1% in early 2024 to 0.5% now. The experience has become central to Australia’s debate over whether a sharp migration cut would damage the economy or improve living standards.

The Canadian government aims to reduce temporary migrants from a peak of 7.6% of the population in 2024 to 5%. It has cut arrivals, particularly international students, made extensions harder and granted some temporary migrants permanent status.

Canada’s economy is adjusting

A CD Howe Institute report estimates that Canadian employment could fall this year and next, while real GDP growth may be no more than 0.5% in 2026. Long-term growth could average little more than 1%.

Report authors Don Drummond and Parisa Mahboubi said the changes reflected demographic adjustment rather than a broken economy. Nathan Janzen, chief economist at the Royal Bank of Canada, said employment could decline while unemployment still falls, with the per-capita economy improving.

Universities have been hit particularly hard by tighter rules. The government has kept exceptions for workers in areas with acute labour shortages, including agriculture and care.

Australia faces different conditions

Jonathan Kearns, chief economist at Challenger, said Canada’s post-pandemic population surge was much larger than Australia’s. Canada’s population remains 5% above its pre-Covid trend, compared with just 0.2% for Australia.

Canada began tightening migration after interest-rate increases and amid high unemployment. Australia’s unemployment rate is 4.6%, while employers are facing widespread labour shortages.

Westpac chief economist Luci Ellis said Canada’s resilience also reflected its recovery from a recession, meaning its experience cannot simply be applied to Australia.

Australia’s political dispute

One Nation leader Pauline Hanson has proposed cutting Australia’s temporary migrant population by more than 750,000 over three years, targeting international students and family members of skilled migrants. Her plan calls for negative net overseas migration for three years, followed by an annual cap of 130,000.

That compares with Labor’s longer-term target of 225,000 and the latest official estimate of 292,000 in the year to March. Home affairs minister Tony Burke said the One Nation plan would damage Australian services and the economy.

The Canadian analysis also warns of long-term risks if low population growth becomes permanent: by 2060, the economy could be 11.5% smaller than official projections, with weaker revenues and higher debt ratios. Janzen said labour shortages would become a structural feature without immigration.