Australia's fertility rate and the future

Abstract

The effects of the COVID-19 pandemic on Australia's health system, the economy and social cohesion of the country are still felt but effect on birth rates and future generations is of profound significance. During the first year of the pandemic the news was particularly grim: Australian Bureau of Statistics (ABS) data¹ revealed that 3 00 000 babies were born for the first time since 2007, and the estimated total fertility rate (TFR—the total number of children born to each woman if she were to live to the end of her child-bearing years) had fallen to 1.58, the lowest in Australia's history and representing a fall of 56% from the peak in 1961 (when the TFR reached 3.55).

A slight rebound in the number of babies born was observed in 2021—perhaps the result of people delaying pregnancy rather than abandoning the idea altogether—the situation again appeared grim with the release of the 2022 birth statistics. Australia's TFR has remained below 1.7 since before the pandemic, the longest period in the nation's history.² The results prompted calls from former Australian Federal Treasurer Peter Costello—architect of the ‘Baby Bonus’ initiatives of the early 2000s—to call for new policy measures to increase Australia's birth rate.³ Yet while the pandemic appears to have exacerbated the ‘baby bust,’ the pre-pandemic year 2019 also had an historical low TFR of 1.66 babies per woman. Indeed, Australia's birth rate had been in established decline well before the pandemic (Fig. 1). Putting this in a global context, too, the fall in fertility rates seen in Australia is hardly unique: across the globe birth rates and resulting TFR estimates have been in decline since the 1960s (Fig. 2).

Population is influenced by births, life-expectancy and immigration. Immigration has boosted the availability of human capital, and stimulated the economy in Australia but the contribution of immigration to long-term population growth remains uncertain. Studies suggest that migrants commonly have, as a group, higher TFRs,⁴ yet this has not proven to be the case in Australia: ABS data reveal that the fertility rates of overseas-born mothers have been lower than those of Australian-born mothers since 2007 (Fig. 3).

Estimates of the TFR allow comparison with a second important metric—the replacement fertility rate (RFR): the TFR at which newborn girls would have an average of exactly one daughter over their lifetime. The RFR is important because it represents the rate at which a population exactly replaces itself from one generation to the next. In high-income countries replacement-level fertility requires an average of 2.1 children per woman. In countries with high infant and child mortality rates, the average number of births may need to be much greater. Replacement-level fertility rates will keep a country's population steady but will not lead to population growth if mortality rates remain unchanged and migration has no effect. Virtually all high-income countries now have TFRs well below replacement level, with population increases dependent upon migration. Migrants generally do not arrive as newborns, so migration-based population increases distort the age distribution of a population with a skew toward older age in the population pyramid with a resulting inexorable flow-on increasing the proportion of older people in the population.

In the most recent Intergenerational Report, released by the Australian Treasury in 2021,⁶ the significance of falling birth rates for the Australian economy was addressed as follows: ‘The Australian economy is projected to grow at a slower pace over the next 40 years than it has over the past 40 years… Slower population growth is the main reason for the expected slowdown in economic growth.’ The Treasury comments were predicated on concerns that, ‘for the first time in an intergenerational report, the population projection is being revised down.’ An ageing population has a number of well-recognised and interrelated effects: an increased need for social services; increased demand for health care; increased demand on pensions; a reduced labour supply and likely reduced productivity of older participants in the labour market; and a likely reduction in unemployment in the younger members of the population.⁷

A number of factors may have contributed to reduced fertility for Australians. A 2021 survey reported by the Australian Government's Centre for Population⁸ listed the ten highest-rated as those in Box 1. There is a close negative correlation between the education level of women and the number of children they have. This may reflect, at least in part, that time spent in education tends to delay the age at first birth—and the later the first birth, the less opportunity there is to have subsequent children. Women who live in urban areas are more likely to have a smaller family. Another important factor, identified in the HILDA study,⁹ is child care: ‘There is little doubt that access to affordable and high-quality child care looms large in the minds of many parents with young children.’ Yet the situation is complex, as there is evidence from Australian studies that women of higher socioeconomic status have fewer children.¹⁰ In summary, then, there are a host of factors that appear to weigh on the minds of women and couples as they make a choice whether to have a baby. Some of these factors are difficult to develop policy responses to—for example having ‘someone to love’ in your life. Other drivers of fertility should be fairly and squarely in the province of the Treasury to address, and address quickly.

With birth rates in Australia—and in most high-income countries—falling fast, the situation has the potential to detonate an economic and social time bomb. Can we find ways that encourage Australian women to have more babies? Fertility decisions are among the most important choices that people will make, and convincing large numbers of women/couples to have an ‘extra’ child will be no easy task. Pronatal policies introduced in high-income countries around the world have had, at best, patchy success. Australia's own ‘baby bonus,’ a suite of financial incentives for new parents introduced in the mid-2000s had a very modest effect on the birth rate.¹¹ There is no single government initiative, payment, or tax incentive with any real prospect of increasing Australia's birth rate. Instead—and if there is general support for trying to increase the birth rate in Australia—we need to become a family friendly society. This will mean starting a national conversation about the long-term economic importance of having children, supporting current and prospective parents, as well as supporting family members such as grandparents who will undoubtedly have to bear much of the burden of raising children. This would have to become our social purpose for the next 25 years.

The first step will be moving babies and children up the national priority list. To justify this will require taking the community along on the fertility journey. Unfortunately, most political objectives barely span the electoral cycle. If we are to increase Australia's population through birth, then a very long-term view will be required. As an example of just how high are the stakes, we need only look to Japan where the twin threats of catastrophically low birth rates and a ballooning elderly population are rapidly coalescing.¹² At the beginning of 2023, Japanese Prime Minister Fumio Kishada told the world that ‘Japan is standing on the verge of whether we can continue to function as a society.’

Women in Australia are investing time, effort, and money increasing their education¹⁴ and higher education levels usually make life better for people, but the trade-off will be further reductions in birth rates. For this reason, increasing the flexibility of educational options will need to be an early and key policy target. Education will need to be flexible for both women and for their partners.¹⁵ Age is influential as conceiving a pregnancy is more difficult as age increases for both partners.

The most common family size in Australia is two children, yet studies report that the most commonly desired family size is actually three children.¹⁶ This suggests that economic incentives to increase birth rates might usefully be targeted at a third child, a so-called stepped approach. These ideas have been carefully evaluated by Australian economic researchers, taking the approach that families might respond to different incentives for a first child as compared to a third or fourth child.¹⁷ The nature of incentives would need to be broad as well, and include support of ‘quality childcare, provide additional support to children at all school levels (including afterschool care centres) as well as schemes which provide support to university students.’

One of the key opportunity costs for women of having children is lost income and superannuation, and opportunities for career advancement. There is economic interest in the effects of paid parental leave policies, which allow some compensation for lost income due to time taken away from the workforce. Maternity and paternity leave schemes have been introduced globally and in OECD nations. Australia has had some paid parental leave for over a decade now. Cumulative evidence from overseas ‘suggests that well-paid maternity leave has a positive effect on fertility, at least in the short term.’¹⁸ The evidence from the introduction of paternity leave quotas is more mixed but worthy of consideration and trial in an Australian setting.

For better or worse, it is important to understand and accept that the appropriate biological age for women to have children is between 20 and 35 years and these years are spent often at university or in career development (Fig. 4).^{19, 20}. Society will need to facilitate sufficient social change to support women who wish to optimise their fertility. These social changes need to be underpinned by clear recognition of reproductive choice and that some women may not wish to have children. However, it is in supporting those women who wish to have children that the greatest gains can be made. Case studies from around the world demonstrate there are few low-hanging fruit left, and no easy answers. The ‘baby bust’ is a unique and existential crisis, never before encountered in human history. To overcome it, we will need to be adaptive and insightful. Let us pool our resources to find the best solutions so we do not follow the course of some countries and learn from those countries which have maintained their TFR at or around 2.1. We are all stakeholders in this matter, and should be in this for the end game, the long game. Let us make this part of our political agenda.