RBC report finds Canada’s cap on immigration targets will cost billion in lost revenue over next five years
The federal government’s plan to scale back Canada’s annual immigration targets will lower revenues by billions of dollars over the next five years, according to a new RBC report that urges Ottawa to take a cautious approach to new spending.
Royal Bank of Canada economists Cynthia Leach and Rachel Battaglia’s release Tuesday, which looks ahead to Finance Minister Chrystia Freeland’s coming fall economic statement, says fewer immigrants will translate into lower consumption and employment growth for the economy as a whole – resulting in a significant negative impact on federal finances.
Ms. Leach, a former economist with the federal Finance Department, said in an interview that Ottawa should stay within its self-imposed targets to control the deficit and debt-to-GDP ratio.
“I do think it’s important for the government to stick to its fiscal anchors‚” she said.
Ms. Leach said the government is facing several sources of economic volatility, including the immigration changes and talk of higher tariffs from U.S. president-elect Donald Trump.
The economists project that revised immigration policies will lower federal revenues by about $50-billion over five years, which is only partly offset by a $30-billion fiscal improvement tied primarily to lower-than-anticipated interest rates. The overall fiscal landscape has worsened by about $20-billion over five years compared with the 2024 budget estimates, according to the RBC report.
Prime Minister Justin Trudeau announced in October that Canada’s permanent resident numbers will be lowered to 395,000 in 2025, down from the previous target of 500,000, and then to 380,000 in 2026 and 365,000 in 2027. The government also said it will be working to reduce the number of temporary residents, including international students and people on work permits.
The government has not yet announced a date for the fall economic statement. The House of Commons is scheduled to sit until Dec. 17.
The Globe and Mail reported last week that the government has been looking at alternatives to delivering the economic update on the floor of the House of Commons because of a continuing procedural battle with the opposition over the government’s refusal to fully release documents related to a green technology fund.
Ms. Freeland referenced the Conservative-led filibuster Tuesday when asked why the minority Liberals have not yet released an economic update.
“We believe there should be a fall economic statement, and we are working on ways to deliver one,” she said at a news conference on Parliament Hill.
Ms. Freeland’s April budget projected that the deficit for the fiscal year that ended March 31 would be $40-billion, just barely within the fiscal anchor, or target, of $40.1-billion she announced in last year’s fall update.
However more than eight months after that fiscal year came to an end, the government has not yet released the public accounts that will show whether that target was actually met.
Parliamentary Budget Officer Yves Giroux at a committee meeting Tuesday repeated his long-standing concern that fiscal year-end results should be released by the end of September, so that MPs have the information they need to review spending estimates for the current fiscal year.
Mr. Giroux released a report in October that said the deficit for the 2023-24 fiscal year is on track to be $46.8-billion, meaning the government will have missed its target, though he has cautioned that he cannot be certain.
The government has also pledged to keep the debt-to-GDP ratio on a declining trend, but Mr. Giroux told MPs that fiscal target could also be missed.
“Based on our assessment, it is quite possible that the declining debt-to-GDP ratio will be at high risk this year and next,” Mr. Giroux said Tuesday.
Ms. Freeland said the final deficit figure will be released before the end of the year and did not answer directly when asked if her fiscal targets will be met.
“Canada does have a strong fiscal position,” she said.
The Liberal government’s most recent high-profile economic announcement was to approve a two-month GST holiday on a selection of specific goods and a plan to send $250 cheques to most working Canadians in the spring.
That type of policy is viewed critically in the RBC report, which says “broad-based and demand-side initiatives like cash transfers don’t tend to solve the underlying problem and they risk exacerbating inflationary pressures while complicating the role of monetary policy.”
This article was first reported by The Globe and Mail
