Fertility and family policy in Australia

Research Paper No. 41 – February 2008

3. Implications of these trends

In the past, concerns about the declining fertility rate tended to focus on the need to increase the population - needs that could also be addressed through immigration. After World War II, the message "populate or perish" was widely promoted. In recent times, however, attention has shifted to address implications of low fertility rates for the age structure of the population (e.g., Productivity Commission, 2005).

An important question is whether or not there will remain a sufficient labour supply to support the elderly, taking into account the fact that the proportional representation of the other main dependent group (those too young to work) is shrinking. The issue is becoming increasingly critical, given that the first of the baby boomers turned 60 years old in 2006.

In relation to this issue, the Intergenerational Report 2002-03 (Treasury, 2002) identified emerging fiscal issues over the longer term associated with an ageing population. While the report suggested that Australia is well placed to meet the challenges of an ageing population, it noted "the current generation of taxpayers is likely to impose a higher tax burden on the next generation" (p. 1). Some social commentators have argued that such circumstances will create growing resentment between the generations (Encel, 2002).

Demand for services will also change, given the different needs of the elderly and younger populations in such areas as housing, health care, leisure and education. There is considerable evidence to suggest that families are the most significant support network for the elderly. The increasing rate of childlessness, coupled with family breakdowns and children pursuing jobs interstate or overseas, will mean that many elderly parents will be either "functionally" or "actually" childless (Rowland, 2003; Weston, Qu, & Soriano, 2003).

The workforce itself will age if policies directed towards encouraging later retirement are effective. This will increase wisdom shaped by an accumulation of knowledge; however, there will be a relative loss of young adults, whose age-related talents often produce important technological advancements (McDonald, 2002; McDonald & Temple, 2006).2

In addition, concerns have been expressed about the repercussions of a stagnation or fall in the size of Australia's labour force (McDonald & Kippen, 2000) and the likelihood that, if the fertility rate fell below 1.6 and Australia's current net immigration levels were sustained, then the absolute size of Australia's population would shrink - a trend that would spiral over time (ABS, 2002; McDonald, 2000a). For those concerned about the impact of Australia's growing population on environmental sustainability, this may be seen as a welcome prospect.

Questions have been raised as to whether some of the challenges of a low fertility rate and an associated ageing population can be addressed through increasing immigration. Empirical analysis by McDonald and Kippen (1999) suggests that the capacity for immigration to affect the age structure is quite limited. While the first 80,000 migrants affect age structure, McDonald and Kippen showed that for levels of net immigration above 80,000 the magnitude of their effect on the age structure of the population diminishes.

2 Also see the edited transcript of an interview by Keri Phillips with Professor Peter McDonald and Dr Catherine Hakim for the ABC’s The Europeans program (Phillips, 2002).