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Baby slump: Australian newborn deficit to hit budget bottom line

The 2019-20 budget assumed a rise in the nation’s fertility rate to 1.9 babies from the 1.78 recorded in 2018. Instead, the fertility rate was falling even before the advent of the pandemic.

Analysis compiled by respected Australian National University demographer Peter McDonald, in work for the government’s Centre for Population, forecasts the fertility rate to drop to 1.59 next year and rise to 1.69 by 2024 before resuming a downward trend to 1.62 by the end of the decade.

Professor McDonald estimates the difference between the 2019-20 budget and his forecast equates to 56,000 fewer babies every year from 2019 to 2024.

More than half of that is due to the high original forecast in last year’s budget, while the rest is the impact of coronavirus.

The average fertility rate for that five year period is expected to be 1.69 babies per woman – the lowest level on record.

Some births will be deferred, Professor McDonald expects, accounting for the rise in the fertility rate in 2024. Most of those deferred babies are assumed to be first births rather than second or subsequent children.

BIS Oxford Economics’ chief economist Sarah Hunter said a fall in the fertility rate would not have an immediate impact on the budget but it did raise important long-term issues.

BIS Oxford's Sarah Hunter says a drop in the fertility rate will leave a long term impact on the budget and the Australian economy.

BIS Oxford’s Sarah Hunter says a drop in the fertility rate will leave a long term impact on the budget and the Australian economy.Credit:Christopher Pearce

Dr Hunter said lower fertility ultimately reduced the size of a nation’s labour force and cut tax collections of the federal government.

“It ultimately reduces how big the economy can be,” she said. “This is going to have a material impact over the longer term.”

The lower fertility rate will also have a severe impact on the delayed intergenerational report that maps out the long-term health of the budget. When released in 2015, it was based on a forecast fertility rate of 1.9 all the way out until the 2050s.

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Australia’s fertility rate has been at or above 1.9 on only 11 occasions since 1980. The last time it occurred was in 2012, in the wake of a small baby boom that started before the global financial crisis. Since then it has fallen by almost 14 per cent.

Mr Frydenberg said in July that the best way to boost the fertility rate was to make people more confident about the nation’s economic future.

“People should feel encouraged about the future and the more children that we have across the country, together with our migration will build our population growth and that will be good for the economy,” he told the National Press Club.

Labor’s home affairs spokeswoman Kristina Keneally, who raised concerns about the forecast fertility rate last year, said the government would have to use the budget to find a way to encourage more births.

“The July budget foreshadowed a drop in the fertility rate “due to weaker economic conditions and outlook”, meaning the Morrison recession is not putting people in the mood,” she said.

“If the government wants parents to procreate, Josh Frydenberg and Scott Morrison must create a plan for jobs and economic growth.”

Laura Mehew, and her husband Cheyne, both 30, had their first child Tessa nine months ago, while paying off a mortgage at their home in Bradbury, in Sydney’s south-west.

Laura worked as a project officer and executive assistant, took a contract job while pregnant, but then lost it after maternity leave due to the pandemic.

“I think it’s highly likely we don’t have another child,” he said. “We can provide comfortably for one, but two is a stretch.”

Cheyne continued his job as a warehousing and logistics manager but with their income halved, the pair had to dip into Laura’s super during the first few months postpartum, despite their strict budget, because they did not qualify for government assistance.

Laura Mehew and her husband can afford to look after one child but say economic circumstances mean they're not planning to have a second.

Laura Mehew and her husband can afford to look after one child but say economic circumstances mean they’re not planning to have a second.Credit:Rhett Wyman

“We try not to live week to week. We have a budget and put money away for bills but baby products are expensive,” she said.

She said her parents had helped, loaning her money earmarked for an overseas holiday which was cancelled due to the coronavirus.

“Unless you’re in a comfortable position, it’s a risk [to start a family right now]. We thought we were in a good position but you can’t plan for everything.”

Their dog, Jack, recently suffered a slipped disc and the resulting surgery cost several thousand dollars.

She said she’s been applying for a couple of jobs a week for the past few months, but that the job market is barren right now.

With Matt Bungard

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