Australia’s fertility rate has dropped to a historic low level of 1.5 births per woman, well below the replacement rate of 2.1 required to maintain a stable population (Australian Bureau of Statistics, 2023). One factor affecting fertility decisions may be the availability of childcare, as it helps reduce financial and logistical barriers to child-rearing. Grandmothers are a vital source of informal childcare support for many families. However, policies that increase the labour market participation of older women, such as raising the Age Pension eligibility age from 60 to 67, may reduce grandmothers’ availability to provide childcare.

This note investigates an underexplored trade-off in policy design: how measures encouraging work among the older population can unintentionally impact their offspring’s fertility rates. Specifically, it investigates how changes to Age Pension eligibility age may have reduced grandmothers’ availability for childcare, subsequently influencing their daughters’ fertility decisions. Given Australia’s low fertility rates and aging population, this note highlights the trade-offs in designing policies that encourage labour force participation among older people without negatively affecting fertility.

Our results show:

• The increase in the pension eligibility age delayed grandmothers’ retirement, increasing their employment rate from 25% to 36%, and hours of work by 3.9 hours per week.

• Having a grandmother who qualifies for the pension based on her age increases the likelihood that her daughter will have a child, from 69% to 73.5%, and increases the average number of children per woman from 1.47 to 1.56. This effect on the average number of children per woman is comparable to the impact observed with the introduction of paid parental leave policies.

• Among daughters in lower-wealth households and those with lower educational attainment, grandmother’s pension eligibility had a larger effect on fertility, suggesting that access to grandparental childcare may play a greater role in fertility decisions for these groups.

• The increase in pension eligibility age reduces grandmothers’ ability to provide childcare by keeping them in the labour market longer. Grandmothers who are age-qualified for the pension are more likely to provide childcare, whereas those who work longer hours are less available for caregiving.