The Stats Guy: What ‘COVID baby boom’? Australia’s birth rate is at record low

This week, Simon Kuestenmacher analyses Australia's low birth rate and if it even matters.

This week, Simon Kuestenmacher analyses Australia's low birth rate and if it even matters. Photo: TND

Australia has seen record low birth rates year after year for the last 12 years.

Today we will be exploring why the birth rate is so low, who is still having babies, where no one is making babies, how to make sure Australians are going to make more babies, and whether all of this actually matters.

Quick word upfront: Technically, we differentiate between the total fertility rate (average number of children born to a woman over her lifetime) and birth rate (number of live births per 1000 residents).

In common parlance, birth rate is used when talking about the total fertility rate. From a macro perspective, it doesn’t matter which definition we use since the trends stay the same.

From the 1930s to the early 1960s, Australia saw increasing birth rates – topping out at 3.5 in 1961. Looking at this chart, you can see why the Baby Boomer generation (born 1946-1963) is as big as it is.

Then in 1961, the contraceptive pill was introduced to Australia. The birth rate dropped immediately. And in 1975, no-fault divorces led to a further drop in births as unhappy couples split up before adding more kids to the family.

By the way, that is the reason why Gen X is an extraordinarily small generation (plus they were born in a decade of super low migration). A slow but steady decline followed and was only interrupted by a temporary baby blip from around 2004 to 2014.

It’s still debated why the birth rate went up. Baby bonus? People following then-treasurer Peter Costello’s demand to have “one for mum, one for dad, and one for the country”?

Whatever the reason, birth rates are now at record lows. Contrary to belief, there will be no corona baby boom, either. In past pandemics, and in times of economic uncertainty, people have always had fewer, rather than more, kids.

Today’s parents are older than ever before – compared to their parents, people have kids about five years later in life. About half of all births in Australia are from mothers aged over 32.

It makes sense that couples end up having fewer children if they start having kids later in life. There just isn’t enough time left to add more kids to the family.

A more highly educated female population (Australian women outperform men in primary, secondary and tertiary education) and a much higher female workforce participation rate are also linked to smaller families. Add to this the freakishly high childcare costs, plus a housing affordability crisis, and it becomes obvious why having a large family is simply not an affordable option for most Australians.

Looking at the suburbs with the lowest birth rates across each state and territory, we quickly see inner-city neighbourhoods have extremely low birth rates. This is partially driven by the fact that these neighbourhoods are typically occupied by people that have not yet reached the family formation stage of the life cycle.

However, in European cities, some inner suburbs offer at least some family-sized housing options. When faced with the decision of whether to retain an inner-city lifestyle or start a family, a sizeable number of couples choose the former option.

What should we do if we wished to counter the trend of low birth rates? Generous parental leave policies would be one option. Universal free childcare would probably help even more. Making family-sized housing much more affordable would help, too.

These three options are all extremely expensive, and probably wouldn’t even increase the birth rate all that much.

This leads us to a rather important question. Do we actually want more babies? Should we invest time and money in convincing people to have more babies?

Demographic time bomb

The reason why a very low birth rate is often referred to as a demographic time bomb is the risk of living in an ageing society with a shrinking workforce. This means an ever-shrinking pool of workers needs to finance the retirement of an ever-growing pool of retirees. Demographically speaking, this is the most undesirable population profile.

However, Australia doesn’t rely on births to counter this undesirable trend. We can simply continue to import new workers through our skilled migration scheme. Economically speaking, this might even be the wiser choice. People cost the state money from before the day they are born until the day they start paying taxes (they start costing the state money again once they retire).

It’s rather clever to grow a country’s population via migration rather than a natural increase (more births than deaths). The costs of raising and educating migrants were carried by another nation. International students, one in six of whom become permanent residents, even pay Australia massive fees for the privilege of being educated here.

As long as Australia keeps ordering migrants into the country via the skilled migration scheme at the same rate Millennials order delicious butter chicken on UberEats, Australia can afford to be utterly uninterested in falling birth rates.

Only in a scenario where Australia moves away from running a migration-based economy will the very low birth rate become a topic of concern.

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