What Population Growth Means for the Economy and Inflation

Impact of Inflation

When newcomers move to Canada, they must purchase a number of necessities to help them settle in. This increases the demand for goods and services, which in turn has an impact on inflation.

Not all newcomers affect the economy in the same way. For example, because of their higher tuition fees, international students typically add more to consumption than many other freshmen. Overall, however, the initial boost to spending from the recent hike in freshmen had very little impact on inflation.

But newcomers also need housing, and that’s a different story. Canada has long had housing supply challenges for a number of reasons, including:

  • Zoning restrictions
  • Long clearance processes
  • Shortage of construction workers

The result is that new housing has not been built to keep pace with population growth over the years.

Along with these housing supply challenges, the recent surge in newcomers has increased pressure on rents and house prices. And this has affected inflation.

Ultimately, Canada needs more housing, and the recent focus by all levels of government to increase construction is a welcome development.

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