Canada's migration reset offers mixed lessons for Australia's economic debate

The argument over Australia's migration policy has sharpened into a stark choice: cut the intake sharply and restore living standards, or risk economic damage by slashing the numbers. One Nation's leader Pauline Hanson has staked out the hardline position, proposing to reduce temporary migrants by more than 750,000 over three years—primarily by tightening rules on international students and family members of skilled workers. To reach that target, net overseas migration would need to turn negative for three years before settling at a permanent cap of 130,000 annually. The government's Labor ministers counter that such cuts would devastate services and economic output. Hanson's response points north: Canada, she argues, has already proven that lower migration restores prosperity.

Canada's experience is real, and it is dramatic. Over the past two years, the country has engineered a sharp reversal in population growth without, so far, triggering economic collapse. The government did not announce a specific migration target. Instead, it rolled out a suite of policies designed to shrink the temporary migrant population from 7.6 percent of the total in 2024 down to 5 percent. International students bore much of the weight. The result: annual population growth plummeted from 3.1 percent in early 2024 to just 0.5 percent today.

Economists studying Canada's adjustment offer a measured reading. The CD Howe Institute, a leading Canadian think tank, published analysis in May titled "Resetting Expectations." The authors, Don Drummond and Parisa Mahboubi, modeled a sobering scenario: employment could fall this year and next. Real GDP growth in 2026 might reach only 0.5 percent, with long-term growth averaging little more than 1 percent annually. Yet they framed this not as crisis but as the normal operation of a labour market responding to demographic shifts. "Canada's economy is not broken," they wrote. "It is adjusting." Nathan Janzen, assistant chief economist at the Royal Bank of Canada, echoed this view. The per-capita economy, he suggested, is actually improving even as total employment contracts—a counterintuitive outcome that makes sense only when you account for a shrinking population.

But Australian economists urge caution before treating Canada as a template. Jonathan Kearns, chief economist at Challenger, points out that Canada's post-pandemic immigration surge was far larger than Australia's. Canada's population still sits 5 percent above its pre-Covid trend line; Australia's sits just 0.2 percent above. Canada's migration crackdown also occurred in a specific economic moment—high unemployment following aggressive interest rate hikes by the Bank of Canada. Australia, by contrast, faces a tight labour market with unemployment at 4.6 percent and widespread labour shortages across sectors. Luci Ellis, Westpac's chief economist, notes that cyclical factors have helped Canada weather its migration reset. The country was recovering from a recession when it tightened the rules. Australia is not.

The longer-term challenge cuts deeper. Both Canada and Australia are aging societies. Fewer working-age people will support growing numbers of retirees. The CD Howe analysis shows that if Canada's current low-growth era became permanent, the economy would be 11.5 percent smaller by 2060 than official projections suggest. The fiscal implications are stark: structurally weaker tax revenues and higher debt ratios. Janzen acknowledges that without immigration, labour shortages will become a permanent feature of Canada's economy. The consensus among Canadian policymakers is that the current tightening is temporary—a reset before returning to historical immigration levels.

Australia's debate, then, sits at a crossroads. One Nation's proposal would deliver the kind of dramatic population slowdown Canada has achieved. But the economic contexts differ in ways that matter. Ellis raises a separate concern: Australian employers have grown dependent on overseas labour, from chefs to agricultural workers, and this reliance has eroded the incentive to train and hire locals or offer higher wages. By choosing high population growth with a large temporary component, she argues, Australia has made it easy for employers to look offshore whenever they need a worker. That convenience comes at a cost—the degradation of the local workforce's skills and willingness to train. The Canadian experience shows that a sharp migration reset is economically survivable. What it does not show is whether Australia's particular labour market, demographic profile, and employer practices would respond the same way.