Canada has been cornered into a "population trap" intensified by its immigration policies, states a recent report published by one of the country's largest banks.

The special report, co-authored by National Bank economists Stéfane Marion and Alexandra Ducharme, warned that while they think immigration tends to be good for a county's potential GDP, "all good things have their limits."

The term "population trap" can be defined as a scenario where increases in living standards aren't possible because the population is growing so fast that all available savings are utilized to maintain the current capital-labour ratio, notes the report.

The economists pointed to Canada's population growth in 2023 as 3.2 per cent — five times higher than the average of the Organization for Economic Co-operation and Development (OECD).

This type of growth was seen in all ten provinces, which saw their population increase twice as fast as the OECD average.

In 2023 alone, Canada's population increased by over 1.2 million.

Ducharme and Marion said Canada's annual population growth shouldn't exceed 300,000 to 500,000 to "escape" the population trap phenomenon.

Canada's current goal for permanent residents in 2024 is 485,000, and it has a target of accepting 500,000 new permanent residents in 2025 and 2026.

National Bank of Canada

In November, the federal government said it would work on "recalibrating" the number of temporary resident admissions to "ensure this aspect of our immigration system also remains sustainable."

One of the largest groups of temporary resident admissions is post-secondary students, who have significantly increased in number in recent years.

The federal government is exploring ways to slow Canada's temporary population growth.

In December, Marc Miller, minister of Immigration, Refugees, and Citizenship, announced new measures for international students looking to study in Canada. On Monday, Miller went as far as to say the feds were considering a cap on international students.

The report described Canada's population growth as "extreme relative to the absorptive capacity of the economy," and the impacts of this are particularly evident when it comes to our housing supply.

Canada's housing supply deficit has reached a new record high of just one housing starts for every 4.2 people entering the working-age population, it noted.

National Bank's economists argued that although the federal government has introduced programs to accelerate supply, those measures barely offset the impacts of Canada's booming population growth.

They estimated that Canada would have to double its housing construction capacity to about 700,000 starts per year, which is "an unattainable goal."

A challenge in ramping up Canada's housing supply also stems from labour shortages, which have led to higher construction costs.

National Bank of Canada

Canada's overall productivity has been stagnant, and the country's GDP has stalled since the pandemic in 2020.

The country's population is growing so rapidly that "we do not have enough savings to stabilize our capital-labour ratio and achieve an increase in GDP per capita," the economists said.

"We currently lack the infrastructure and capital stock in this country to adequately absorb current population growth and improve our standard of living," they concluded, adding that the key solution to this issue is to slow Canada's population growth significantly.