Finance Finance News Treasurer’s big baby push: Frydenberg encourages reproduction, but no Costello-style baby bonus

Treasurer’s big baby push: Frydenberg encourages reproduction, but no Costello-style baby bonus

Twitter Facebook Reddit Pinterest Email

Treasurer Josh Frydenberg gave his best Barry White impression on Friday, encouraging Australian couples to head to their bedrooms for the sake of the economy.

But he stopped short of reviving Peter Costello’s cash-for-kids Howard-era ‘baby bonus’ incentives.

In a speech to the National Press Club, the Treasurer warned Australia’s population growth will be “effectively halved” by border closures and record low birth rates.

That’s bad news for the nation’s economy because population growth spurs demand for goods and services, allowing businesses to sell more, earn more, and hire more.

Population growth’s role in the economy became a hot topic in 2019, when several economists argued Australia had fallen into a ‘per capita’ recession – effectively meaning economic growth was in reverse when population growth was factored out.

And with the rate of population growth now predicted to fall to 0.6 per cent next year – its lowest since 1916-17 – Mr Frydenberg is keen to see birth rates lift.

But he isn’t looking to re-introduce the baby bonus scheme, which ran from 2004 until the 2013-14 budget.

I won’t go as far as to say, like Peter Costello, ‘one for the mother, one for the father and one for the country’,” Mr Frydenberg said.

“But what I can say is that people should feel encouraged about the future, and the more children that we have across the country, together with our migration, we will build our population growth and that will be good for the economy.”

Mr Frydenberg said his plan is to create “a strong economy for [children] to be born into”, so would-be parents are encouraged to start – or grow – their families.

Labor leader Anthony Albanese agreed that creating a strong economy is the most effective way to drive up Australian births.

But the two differed greatly on the best way to build that stronger economy.

How the economics stack up

The effect a strong economy will have on fertility rates is debatable, according to RMIT school of business senior lecturer Sarah Sinclair.

Speaking to The New Daily, Dr Sinclair said that a strong economy can sometimes give families the confidence to have children.

But the cost of raising a child under these circumstances can, perversely, be more expensive to some households than it would be to have a child during a recession.

That’s because parents often lose income by taking time out of work to raise their kids. When one parent is already out of work, this is no longer a factor and it can make more sense to have a child then.

As for a Costello-style baby bonus, that has its share of problems.

Research conducted by Dr Sinclair and colleagues found that during the original 10-year run, the rate of childbirth in Australia during the original baby bonus years was higher than the trend rate.

But there were several other factors at play – notably childcare rebates – which may have played a role in that boost. And because the bonus was paid to all families, this meant many of the recipients simply brought forward their plans.

The program was costly, too. Although government only paid $3000 – $5000 per child (depending on the year the scheme was in effect), the actual cost per additional child born above what was naturally expected climbs to $43,000 each.

So you can’t put a price on happiness, but you can put a price on a bundle of joy.