On March 21, immigration minister Marc Miller announced reductions to the number of non-permanent people in Canada over the next three decades. ( THE CANADIAN PRESS/Adrian Wyld ) ( The Canadian Press )
The American government’s just announced plans to smooth- cap momentary resident numbers should pave the way for interest rate cuts to happen quicker and more often, but could have “adverse consequences” for the general economy, according to Desjardins.
The proportion of non-permanent residents ( NPRs ) would be reduced from the current 6.2 % of the population to 5 % over the next three years in accordance with plans announced by immigration minister Marc Miller on March 21.
” A reduction in online NPRs of this scale would be unparalleled”, Desjardins Senior Director of American Economics Randall Bartlett wrote in a printed notice, saying the change had “material repercussions” for the business.
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A more thorough evaluation of the scenario is expected in Desjardins ‘ April economic perspective, according to Bartlett, who wrote that the changes increase the likelihood of a Bank of Canada interest rate reduction in June. If the situation persists, Bartlett asserted that “our base situation for more price cuts than anticipated by the consensus of economists is even more likely to materialize.”
According to Bartlett, reducing the News people by half a million to around 2 million would involve more NPRs to keep than enter Canada, and this shift “has forced us to update our people growth forecast significantly lower.”
Canada’s rapid population growth has been a focus of recent political and economic talk, especially its effect on accommodation. Two months after Miller’s reduction of international student visas by 35 %, Miller made his announcement last week.
Results on GDP, work and beyond
As a consequence of next week’s statement, Desjardins expects Canada’s constantly sluggish real GDP per capita development to get” stronger than formerly projected” because of higher productivity growth. However, according to Bartlett, the significantly slower projected population growth would have a bigger impact on the overall real GDP growth, leading to a decline.
Desjardins ‘ perspective on employment is constrained. The bank expects employment growth to be slower, but still positive. However, the unemployment rate should rise, Bartlett said, because NPRs are less likely to be unemployed than other groups. Therefore, unemployed Canadians could make up a larger percentage of those who are either employed or seeking employment by excluding them entirely from the workforce.
With higher unemployment and slower real GDP growth, Bartlett wrote, easing inflation would cause the Bank of Canada to cut its benchmark rate, likely at a faster rate than previously anticipated.
Lower inflation” should also help Canadians regain some of the ground lost during the pandemic, providing a modest tailwind to real earnings growth.” This, Bartlett wrote, will be good news for individuals, but “wo n’t be enough to offset the drag on consumption coming from the slower pace of population growth”.
For the federal government, the changes would likely lead to lower revenue, Desjardins noted. According to Bartlett, this might lead to bigger deficits and more federal government debt. There may be some advantages at the provincial level, according to Bartlett, but “aging will be an inescapable drag on provincial finances, and reducing the number of NPRs will only exacerbate pressures on public finances, absent a significant boost in productivity.”
The immigration changes may provide some relief in terms of housing and the delivery of public services, according to Bartlett, but macroeconomic effects could be significant. If population growth is what largely prevented Canada from recession in 2023, then that tailwind will largely vanish.
John MacFarlane is a senior reporter for Yahoo Finance Canada. Follow him on Twitter @jmacf.
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