What if Australia’s fertility rate keeps falling?

Dec 16, 2020

The ABS recently released births data for 2019 noting a very sharp fall in fertility to the lowest in our history. This was no surprise now that the Government had at last stopped forecasting a sharp rise in fertility.

Rather than forecasting Australia’s fertility rate rising to 1.9 births per woman as it did in the 2019 Budget, the Government now appears comfortable with the prospect that our long-term fertility rate may settle at around 1.6 births per woman.

But what if it keeps falling as it has in countries such as South Korea (0.98 births per woman); Japan (1.37 births per woman); Spain (1.35 births per woman); Italy (1.32 births per woman); Greece (1.29 births per woman); Poland (1.44 births per woman); Croatia (1.43 births per woman); Taiwan (1.18 births per woman); Singapore (1.22 births per woman); Hong Kong (1.36 births per woman); Serbia (1.44 births per woman); Portugal (1.31 births per woman); Canada (1.51 births per woman); and Thailand (1.5 births per woman).

Differences in fertility rates are largely explained by three main factors – availability of affordable contraception; education of girls; and support for families with young children.

For Australia, the key to preventing fertility falling further and possibly into the low fertility trap that the above countries find themselves in will the level of support for families with young children, including childcare and early education opportunities.

If fertility was to fall into the low fertility trap – generally defined as a fertility rate below 1.5 births per woman – population ageing would further accelerate and bring forward the year in which deaths exceed births. If Australia’s fertility rate did fall below 1.5 births per woman, deaths could exceed births as early as 2030 if net migration was around zero and sometime during the 2050s with net migration at 175,000 per annum.

Deaths in 2019 reached a record 169,000 (see Chart 2). Deaths will continue to rise strongly over the next 20 years, reaching over 200,000 by 2027. The rate of increase in deaths will accelerate once the early baby boomers start approaching 80 years of age (ie around 2035).

In the meantime, we will see an acceleration in the stock of retirees in Australia which have increased from around 2.9 million in 2008-09 to around 3.9 million in 2018-19.

This will result in a steady decline in tax revenue per capita and a major increase in the costs of the age pension, health and aged care. It will also put downwards pressure on average monthly hours worked per adult aged 15+.

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