The mortgage or the baby? Fertility dropping to record low

Australians hoping to start a family are delaying or giving up entirely as the cost of housing skyrockets, the adviser to state and federal governments on population has warned amid signs the nation’s birth rate has dropped to an all-time low.

The Centre for Population has used a new report on population trends to admit that “low fertility is here to stay”, arguing that fresh policies were needed to support people who want to have or start a family.

The high price of housing has been blamed for Australia’s falling fertility rate, which is tipped to fall to a record low this year.Credit: iStock

The drop-off in people having babies is so rapid that some economists now believe the states may have to reduce their expected spending on schools through the 2030s because there will be fewer students.

The fertility rate – the average number of children born to a woman over her lifetime – fell to a record low of 1.5 in 2023. It has dropped by 25 per cent since 2008, with the decline accelerating over the past six years.

The Centre of Population found that while a range of social and economic issues were tied to the drop in Australia’s fertility rate, the cost of housing – including rents – was a growing impediment to people wanting to have children.

It found that while living costs for working families had increased by 55 per cent since 2007 and average wages had lifted by 70 per cent over the same period, national house values had jumped by 150 per cent.

Homeownership was an important milestone for those planning to start a family, but the cost of entering the property market made it increasingly difficult for people to buy a house or apartment.

“Higher housing costs make it increasingly difficult for young adults to achieve their homeownership goals prior to starting a family,” it said.

“This causes people to postpone childbearing until they are financially ready to purchase a property.”

The Australian National University carried out a study in 2021 on issues people took into account when deciding on having children. Three of the top four were economic factors, including the general cost of raising children and the ability to buy a home.

The Population Centre, which was created by the Morrison government to provide all levels of government insights into the nation’s changing demographics, said it was clear that Australians wanted more children but felt they could not.

It urged all governments to look at new potential policy changes.

“Noting the gap between fertility intentions and outcomes, policies that support people to have the family size and composition they aspire to should be prioritised,” it said.

Earlier this year, Treasurer Jim Chalmers – a father of three – told this masthead he believed it would be better for the nation if birth rates were higher, but he ruled out reintroducing a policy such as Peter Costello’s “baby bonus”.

“I think people are leaving it later. And sometimes, that means you get timed out. But there are a whole range of reasons people’s preferences are changing. It’s expensive to raise kids,” he said.

While some have credited the baby bonus with a small lift in the fertility rate after its introduction, particularly among couples with at least two children, many demographers have raised doubts about its long-term impact.

While the national fertility rate fell to a record low last year, analysts from Oxford Economics believe it could fall to just 1.44 in 2024.

Based on Medicare ultrasound data, the organisation said after a small “baby bump” in 2021 due to the COVID-19 pandemic, the fall in fertility rates had resumed.

In the year to March, total births fell to 289,700, the lowest number since 2006.

High house prices are forcing people to choose between a home and children.Credit: Flavio Brancaleone

Oxford’s analysts believe the deterioration in housing affordability was now acting as a drag on the fertility rate.

“Housing costs have rebased higher since 2021, and wage growth has failed to keep pace with inflation, causing negative real wage growth in recent years,” the analysts argued.

“The impact has been more significant for younger households, where rents and mortgage repayments tend to represent a higher share of household costs.”

Oxford warned that if fertility rates fall much further to around 1.45, which would mean 62,000 fewer babies between 2025 and 2030, the number of school-age children would start to decline in the next decade.

The fall in children going to school could reach 8200 a year, a significant enough drop that would affect government planning for schools and the types of homes offered by the private residential construction sector.

“The implications for required school investment are considerable and a non-trivial impact accrues to housing type requirements,” it said.

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