The federal government slashed immigration targets to levels that will flatten population growth as Prime Minister Justin Trudeau admitted Thursday the government did not get the balance right after the COVID-19 pandemic.

The government had targeted bringing in 500,000 new permanent residents in both 2025 and 2026.

Next year鈥檚 target will instead be 395,000 new permanent residents, and that will fall to 380,000 in 2026 and 365,000 in 2027.

鈥淚n the tumultuous times as we emerged from the pandemic, between addressing labour needs and maintaining population growth, we didn鈥檛 get the balance quite right,鈥� Trudeau said Thursday morning.

鈥淲ith the plan we鈥檙e announcing today, along with previously announced measures, we鈥檙e making our immigration system work better.鈥�

The change comes after significant criticism of the Liberal government鈥檚 increases to immigration and the impact of strong population growth on housing availability and affordability.

The federal government estimates Canada鈥檚 population will decline slightly by 0.2 per cent in 2025 and 2026, before returning to growth of 0.8 per cent in 2027.

Statistics Canada recently reported that the population on July 1 was a whopping three per cent higher than a year earlier. Between 1998 and 2018, annual population growth was less than 1.5 per cent.

The Canadian Press reported in January that internal documents obtained through an access-to-information request showed federal public servants warned the government two years ago that large increases to immigration could affect housing affordability and services.

But Trudeau said on Thursday that businesses and provinces have also been part of the reason why the immigration system got out of control.

鈥淔ar too many corporations have chosen to abuse our temporary measures, exploiting foreign workers while refusing to hire Canadians for a fair wage,鈥� Trudeau said.

鈥淎ll while under the watch of provinces, some colleges and universities are bringing in more international students than communities can accommodate, treating them as an expendable means to line their own pockets. That鈥檚 unacceptable, and it needs to change.鈥�

Ottawa is also aiming to reduce the proportion of temporary residents 鈥� which includes temporary foreign workers and international students 鈥� to five per cent of the population over the next three years, down from 7.2 per cent in July.

The federal government says that means the non-permanent resident population will decrease by 445,901 in 2025, 445,662 in 2026 and will increase modestly by 17,439 in 2027.

Business groups reacted negatively to the news, arguing it will hurt the ability of employers to fill labour shortages.

The Canadian Chamber of Commerce said the plan is 鈥渄isappointing for businesses across the country that, in recent months, have had to deal with abrupt and constant changes to immigration policy.鈥�

鈥淪ignificantly decreasing our labour pool will impact thousands of these employers across Canada struggling to find the workforce they need to operate and grow,鈥� the chamber said in a statement.

The Canadian Federation for Independent Business said the 鈥渄ramatic cut鈥� to the targets will hurt businesses who, despite rising unemployment, are facing hundreds of thousands of job vacancies.

The Bank of Canada鈥檚 recent business outlook survey found labour shortages are now below the historical average.

The Liberals鈥� pivot on immigration follows a rapid increase to the number of new permanent residents in Canada and a ballooning number of people coming to the country on a temporary basis. Federal ministers have conceded that has put pressure on housing, health care and affordability.

NDP Leader Jagmeet Singh and Conservative Leader Pierre Poilievre both reacted by blaming Trudeau for ruining the immigration system in the first place.

鈥淭rudeau鈥檚 last minute pre-election reversal cannot be believed. He can鈥檛 fix the immigration system that he broke,鈥� Poilievre said.

Singh said Trudeau鈥檚 announcement is a 鈥渕inor tweak of 20 per cent鈥� and doesn鈥檛 address the 鈥渟erious challenges鈥� Canadians are facing when it comes to housing and health care.

Immigration Minister Marc Miller said the lower numbers will help with the housing shortage, estimating that by 2027, Canada will need to build 670,000 fewer homes to close the gap.

The federal government plans to prioritize temporary residents for permanent residency, expecting they will fill more than 40 per cent of the permanent residency spots.

鈥淭hese people are a young labour pool. They鈥檙e skilled, they鈥檙e here,鈥� Miller said.

鈥淭hey鈥檝e begun their process of integration and it doesn鈥檛 place the additional demands on the housing, health care and social services that we see with someone that comes directly from another country. It makes sense.鈥�

The federal government is also increasing its francophone admission target for outside of Quebec to 10 per cent in 2027, up from six per cent this year.

In a new report published by BMO, senior economist Robert Kavcic writes that the plan will 鈥渢ake stress off the economy and infrastructure that has become almost debilitating in recent years.鈥�

In addition to taking pressure off home prices and rents, Kavcic says the slowdown in population growth will also help reduce slack in the job market.

As high interest rates sent a chill through the economy, Canada鈥檚 unemployment rate climbed to 6.5 per cent in September, up a full percentage point from a year earlier.

Young people and newcomers have felt the brunt of the job market slowdown, facing significantly higher unemployment rates compared to other workers.