Will giving families extra money boost our birth rates?

In case you’ve missed it, we are now days away from a federal election being called.

With this comes an onslaught of policy proposals from politicians desperate to retain their seats, and from those aspiring to find a way into the corridors of power.

Sadly, not all of these proposals are created equal. While some come fully costed by Treasury and are marked with official launches, others are – how do I put this politely? – more of a hot take from a usually well-intentioned but uninformed pollie rather than the culmination of listening to our nation’s most eminent minds.

The Australian birth rate is the lowest it’s ever been.Credit: Getty Images

One such hot take came late last week from Queensland senator Matt Canavan, who has come up with what he believes to be a pretty nifty idea to increase our national birth rate and get people onto the property ladder at the same time. A real “two birds one stone” policy, you could say.

Per Canavan’s proposition, which the Nationals member shared with The Daily Aus, couples wanting to buy their first home would have access to a low-interest-rate loan of $100,000 after having a child. If the couple went on to have a second child, 30 per cent of the loan would be wiped, and if they had three children, the loan would be cleared entirely.

LNP senator Matt Canavan.Credit: Alex Ellinghausen

The policy, he says, would extend to those in de facto relationships and same-sex couples, and those who become parents via surrogacy or adoption. In instances where a couple hoped to have more than one or two children but was unable to for reasons beyond their control, the debt would not be reduced or wiped.

I’m sorry, but what in the Handmaid’s Tale?

According to the Australian Bureau of Statistics, our national birth rate has been on a steady slope down for decades. The most recent peak was recorded back in 2008, when the fertility rate – that is, the number of children born for every Australian woman – was 2.02.

In 2023, though, that rate fell to 1.5. Also known as the “replacement rate”, these numbers represent how a population replaces itself from generation to generation. To stay the same or see a population grow, the fertility rate needs to be 2.1 or greater.

In Sydney, the 2023 fertility rate was 1.55; it dropped to 1.41 in Melbourne. So great is the decline that every major Australian city recorded a figure below 2.1. Not great.

According to data from the University of NSW, it costs between $100,000 and $300,000 to raise a child until the age of 17 in Australia.

It’s clear that housing affordability and the general cost of living is playing a huge role in people’s decisions to have children, and how many children they will have. For example, the Centre of Population notes that while living costs for working families rose 55 per cent after 2007, average wages rose 70 per cent. That sounds fine until you factor in house values, which soared 150 per cent over the same period.

So while Canavan is right – that chief among the reasons Australians are having fewer children (or none at all, in a growing number of cases) are housing affordability and the cost of living – they are not the only reasons.

Nor is a huge loan masquerading as a financial incentive so women will have more children the solution.

This proposal hasn’t been adopted by the Coalition as policy, but Canavan says he has raised the idea within the Nationals party room, and that “some” of his parliamentary colleagues support it.

So, for the sake of healthy public debate, let’s say the Coalition forms government in coming months, this policy gets up, and couples suddenly find themselves eligible for a low-interest loan after the birth of their first child.

The first obvious problem is that these growing families or other first-time buyers will probably be competing on the same properties in the same areas, meaning that just like the Coalition’s previous idea to allow first-time buyers to access their superannuation, property prices will be driven up because, suddenly, everyone has $100,000 more to play with.

The government loan could also allow a couple to increase their borrowing capacity, which isn’t an inherently bad thing, but if one of the two people in that partnership is going to have as many as three children, that’s going to be a huge chunk of time out of the workforce and without a full-time salary going towards those mortgage and government loan repayments.

Then, there’s the associated costs of having a child. Data from the University of NSW shows it costs $100,000 to $300,000 to raise a child until the age of 17 in Australia. So if a couple took full advantage of Canavan’s idea and pocketed $100,000 in exchange for three children, they’d still end up spending between $900,000 or, at a minimum, three times what the senator is offering.

The Centre of Population notes that while living costs for working families had rose 55 per cent from 2007, housing rose 150 per cent.Credit: Simon Letch

It’s not Canavan’s concern with our fertility rates that I find to be dystopian in and of itself.

Lower birth rates are a serious issue that many countries are dealing with. The list of implications and issues that come with dropping rates – particularly when combined with Australia’s rapidly ageing population – are justifiably causes for concern.

Sooner or later, whoever is in government will have to introduce policies that find viable long-term solutions. But his decision to try to financially incentivise women’s reproductive rights is where it veers into alternate reality territory.

Sure, there are situations in life where throwing money at the problem is the right course of action. Need a haircut? Pay a hairdresser and consider the problem solved in under an hour. Need a car service? Most mechanics accept cash or credit. But social issues as complex as housing, the cost of living, fertility rates and gender inequality?

As they say in Canavan’s home state of Queensland, yeah, nah, mate.

Victoria Devine is an award-winning retired financial adviser, bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. She is also the founder and co-director of Zella Money.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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