Why Australia’s population and fertility outlook has become a zero-sum game: ‘Someone has to lose’

The cost of living and Australia’s fertility rate are colliding. (Source: Getty/Yahoo Finance)

Demography is destiny, as they say. The popular maxim is attributed to French philosopher and “father of sociology” Auguste Comete and asserts that a nation’s future is tied to the generational composition of the population.

The idea has become increasingly pertinent in the 21st century. In recent decades we have seen how falling fertility rates have impacted nations such as Japan, South Korea and China in particular, each with a very different demographic evolution over time.

And Australia is treading a similarly worrying path.

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With the release of the latest Australian fertility rate data, it is now our little corner of the South Pacific where alarm bells should be ringing.

During the 2024 calendar year, Australia’s fertility rate (TFR) at a national level was 1.48 babies per woman. This is significantly below 2.1 which is generally considered replacement level.

To put this into perspective, a decade ago when Australian free to air television was running stories on Japan’s challenges with its fertility rate, the country’s TFR was 1.45 babies per woman.

Australia is following a similar trajectory. (Source: ABS/Yahoo Finance)

If we break the stats down by the regions in Australia, a highly divergent picture begins to emerge.

At one extreme, in the ACT, fertility rates are just 1.34 babies per woman. That’s lower than in China immediately prior to the pandemic after years of the one child policy which was relaxed in 2015.

Proportionately more babies are being born outside the cities. (Source: ABS/Yahoo Finance)

At the other end of the spectrum, in New South Wales excluding Sydney, the fertility rate is 1.91 babies per woman.

If NSW, again excluding Sydney, was its own country, it would have one of the highest fertility rates in the developed world and would only be lagging developing nations such as India or the Philippines by 0.03 percentage points.

Greater NSW is not far off replacement rate. (Source: ABS/Yahoo Finance)

Aside from the notable difference in fertility rate outcomes in the city versus the regions, another interesting factor is where mother was born.

Australian-born women have a significantly higher fertility rate than that of migrant women, with 1.64 babies per woman in 2024, compared with 1.25 for women born overseas.

When looking at the top five nations for the mothers having children in Australia in 2024, there is a significant difference in fertility rates.

The highest is held by mothers born in New Zealand, with 1.69 babies per woman. At the other end of the spectrum is Chinese born mothers, with 0.85 babies per woman.

Aside from New Zealand, migrants have fewer babies in Australia. (Source: ABS/Yahoo Finance)

Exactly what factors are influencing falling birth rates remains a matter of debate. But there is evidence and research to suggest that the cost of living, most notably the rising cost of housing has been a significant factor.

According to a paper from the Korea Research Institute for Human Settlements, for each 10 per cent rise in annual house prices, the total fertility rate would decline by 0.02. While a 10 per cent annual rise in rents would drive a decline of 0.0247.

While this may not sound like much, the effect is compounded over time, resulting in a highly significant impact.

This echoes the findings of a HSBC report on birth rates which found: “a 10% increase in house prices leads to a 1.3% drop in birth rates, and an even sharper fall among renters”.

There is an argument to be made that historically cheaper housing costs in areas outside the nation’s major capitals has played a role in delivering higher fertility rates in the regions.

On average, regional areas have a fertility rate more than 25 per cent higher than the capital city in the same state, resulting in an average fertility rate of 0.36 more babies per woman being born.

According to property data giant Cotality, the cost of housing has skyrocketed since the pandemic, with the cost of servicing a mortgage on the median house nationally up from 27.5 per cent of median household income to 48.7 per cent and the cost of rent up from 26.7 per cent to 34.1 per cent.

That situation appears to be anathema to larger family formation.

While it may be an uncomfortable issue for policymakers, housing and by extension fertility rates are increasingly a zero-sum game. If young young couples wanting to have more children are to win out, other, long established winners will need to lose.

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