Declining fertility rates are a worldwide phenomenon, with Australia no exception. Australia’s fertility rate has fallen to a record low of 1.5 births per woman – well below the 2.1 needed for population replacement. This report examines both the drivers of fertility decisions and the lessons from past policy interventions.

The decline in fertility has been driven by three factors: later parenthood, a decline in the number of children per mother, and an increase in the share of women not having children. Using the Household, Income and Labour Dynamics in Australia (HILDA) Survey, we show that fertility decisions today are shaped by multiple factors, with financial pressures, career-family trade-offs, and access to child care becoming increasingly important, particularly for young women.

Declining fertility is unfolding alongside, and contributing to, population ageing, with implications for labour supply, consumption, and productivity. Policymakers may decide they need to respond by implementing measures that seek to increase fertility. We look at what lessons can be learned from past policies that provided supports to new parents – the First Child Tax Refund, the Baby Bonus and Paid Parental Leave. We find that:

• The universal $3,000 Baby Bonus boosted births, particularly among low-income mothers and those in their 20s and 30s but had little effect on high-income families.
• The First Child Tax Refund and Paid Parental Leave, by contrast, had limited impact on fertility.

Together, the evidence shows that financial incentives can be effective but are not a silver bullet to Australia’s declining fertility. In fact, there are no simple solutions. Policymakers considering new measures must account for the trade-offs involved. Universal schemes have large fiscal costs and can have uneven impacts, while more complex or targeted policies may fail to shift fertility at all.