Bank of Canada Report: Aging Population and Lower Immigration Reshaping Economy
A Bank of Canada report finds that Canada's population growth slowed to 0.5% in 2025 following federal immigration cuts, while the median age has risen above 40. The demographic shift is expected to ease housing pressure but weaken broader economic demand, increase healthcare costs, and potentially drive up wages and inflation through labor shortages.
Canada’s rapidly aging population and declining immigration levels are fundamentally reshaping the country’s economy, according to a new report from the Bank of Canada.
In the first half of this decade, Canada’s population grew at an annual rate of three per cent, a sharp contrast to the 1.2 per cent average recorded over the previous 50 years. However, that rapid expansion came to a halt in 2025, when population growth slowed to just 0.5 per cent—the lowest rate in more than a century. The slowdown immediately followed the federal government’s decision in 2024 to reduce immigration levels.
The report indicates that reduced immigration is expected to lower pressure on housing costs, which had been strained during the period of high population growth. At the same time, the decline in new arrivals is projected to cause a sharp drop in demand for other goods and services, leading to slower overall economic growth.
Demographic aging is also accelerating. The median age in Canada has increased from 26 in 1971 to over 40 in 2026. This older population profile will increase demand for travel services, pharmaceuticals, adaptive living products, and supportive home care. It is also expected to raise government spending needs for hospitals and long-term care, potentially requiring higher taxation to fund health services.
Furthermore, the report warns that fewer young workers are available to replace retirees. The resulting labor shortages could lead to higher wages in affected sectors and contribute to broader inflation through rising prices.