Canada's demographic shift is underway as population growth slowed to 0.5% in 2025, marking the lowest rate in over a century.
From Rapid Expansion to Historic Slowdown
That trajectory shifted dramatically in the early 2020s, when immigration policies and an influx of temporary residents pushed annual population growth as high as 3%. While this rapid expansion successfully boosted the labor pool and eased acute labor shortages, it also generated intense structural friction across housing markets and public social services.
To cool these pressures, the federal government began scaling back immigration targets in 2024. Consequently, many temporary residents have departed, fewer new arrivals are entering the country, and annual growth plummeted to 0.5% by 2025. Until 2025, the country’s population had not actually declined, despite the birth rate falling below replacement levels for more than 50 years.
An Aging Population and Shifting Domestic Demand
Beneath the changing migration numbers lies a deeper demographic reality. The median age in Canada has climbed from roughly 26.1 years in 1971 to over 40 today. With birth rates remaining below replacement levels for more than 50 years, the massive post-Second World War baby boom generation has largely reached retirement age.
This graying population consumes and produces differently than a younger workforce. Retirees frequently downsize into smaller, easily maintained housing and allocate a larger share of their budgets toward leisure travel and healthcare services—including pharmaceuticals, adaptive living products, and supportive home care. Because older people spend more of their money on health care, and retirees may increase spending on flights and accommodation, the shift in demographic composition is expected to alter the cost of services across these sectors.
| Demographic Indicator | Historical Context | Current Trend (2025–2026) |
|---|---|---|
| Median Age | ~26.1 years (1971) | Over 40 years |
| Annual Population Growth | ~1.2% (long-term average); up to 3% (early 2020s) | Slowed to 0.5% in 2025 |
| Birth Rate | Below replacement level for over 50 years | Continues below population replacement needs |
Labor Constraints and the Challenge for Monetary Policy
As baby boomers exit the workforce and younger cohorts arrive in smaller numbers, the overall size of the Canadian labor force contracts. This structural tightening limits the economy’s overall production capacity.
The Bank of Canada explicitly notes that it cannot set immigration policy or reverse an aging population. Yet, because these structural shifts directly govern the twin economic pillars of production and demand, policymakers must factor them into calculations aimed at keeping inflation anchored to the 2% target. The Bank of Canada has previously addressed the difficulties of economic outlooks during turbulent times, noting in past commentary that while it is pleased to be here today and to have this opportunity to talk about the Bank of Canada’s outlook for the Canadian economy and to update you on our monetary policy actions,
it remains sensitive to the broader context of North American economic challenges.
