Decreasing costs in the federal budget is good news, usually — but not when the cause is fewer babies

Buried in the federal budget papers was a figure that saves the bottom line almost half a billion dollars — yet, no one's really talking about it.

Amid accusations of government spending being out of control, there's one payment that's paradoxically on the decline.

But instead of being a cause for celebration — I mean, we are in structural deficit, so if we are spending less you'd think there would be a sigh of relief — it isn't a happy story.

It reflects a demographic freight train coming for our country.

The payment I'm talking about is paid parental leave (PPL), which according to the federal budget papers is expected to decrease by $92.1 million in 2024-25 and $521.3 million over the five years from 2023-24 to 2027-28.

The budget papers say the reduction is largely "reflecting a reduction in expected recipient numbers driven by lower-than-expected births".

While we usually breathe a sigh of relief when the budget shows a reduction in pressure, on this one, the problem it reflects is deeper and more worrying.

It also explains why Treasurer Jim Chalmers said in one of his many interviews before the budget was delivered that it would be "better if birth rates were higher".

Australians are having fewer babies

The revisions to PPL expenses are relatively small in the context of the overall program, particularly because the government's investment in PPL increases over the forward estimates as the scheme expands to 26 weeks.

The budget also commits $1.1 billion (and $0.6 billion per year ongoing) over the forward estimates to pay superannuation to people on PPL — something women have long been calling for.

But at the 2024-25 budget, the government lowered its fertility assumption relative to MYEFO due to actual fertility in 2022-23 being lower than forecast. Treasury says that since the onset of COVID, there has been increased volatility in the "total fertility rate".

The treasurer touched a raw nerve when he raised the nation's birth rate. The headlines suggested he was telling us to all go out and have babies, and some people described him as out of touch for not understanding how hard it is to have a baby in a cost-of-living crisis.

The truth is his comments were more nuanced than that, but nuance is also on the decline in our debates. There was no Peter Costello-style baby bonus — one for mum, one for dad, and one for the country — in his language or in the budget he delivered.

But the government is acutely aware that families are "under the pump" as the treasurer likes to say — and without that pump reducing its pressure, having children will become harder for many.

If you don't believe me, survey any random woman of child-bearing age and you will work it out pretty quickly. It's hard to get ahead even without children. The stark reality is hard to ignore.

Australia's current birth rate is 1.6, which is well below the "replacement rate" of above 2.1 births per woman. For a population to grow, countries need families to have more than two children to replace their parents and account for infant mortality.

Mixed messages in the debate

When you juxtapose these numbers with the parallel debate we are having about immigration, the mixed messaging becomes pretty apparent. We need more people in the short and long term — but we haven't quite worked out how to accommodate migrants and how to make Australians think it's worth having more babies.

And are you ready for the real zinger? In the budget, the forecast number of births increased slightly due to higher expected migration. That's right, immigration is helping our baby-making problem.

Amid a polarising debate about how many migrants we are letting into the country and how many of our houses they are living in — a defacto debate about whether we want a big Australia, a debate we have had before, and will have over and over — we are on our own numbers, without the help of migrants, shrinking.

Dr Liz Allen, a demographer and senior lecturer at the Australian National University, told the ABC that Australia is facing significant demographic headwinds like most countries, with an aging population living longer and not being replaced through births.

"Something has to give, and it's not women — we've done enough, we're perishing without a blanket," she says. 

"The barriers to having a child are now insurmountable. Housing affordability, gender inequality, financial insecurity, and climate change make for an unstable and uncertain future. Young Australians are carrying the burden of the nation's future and the burden is simply too much.

"Young Australians have seen the generational bargain crumble and are being denied a future because of the failings of politics past. Australians have lost hope in the future — there is no certainty of tomorrow."

She argues that from a demographic perspective, the trouble with below-level births and an aging population is that it's not sufficient to meet the needs of the workforce.

"Simply, the local Australian population cannot meet the economic needs of the nation and this has the potential to see living standards go backwards," she says.

"Immigration helps offset the adverse consequences of an aging population."

The debate over migration

Which brings me to the fight over immigration numbers. In the short term, there is no doubt that our capacity to house new migrants is a genuine issue. Even the Reserve Bank governor has said that immigration has put pressure on the housing market.

But the uncomfortable truth that many economists have pointed out is that without immigration we would be in recession — without foreign students a lot of the lower-paid workers we rely on, from delivery drivers to Pizza Hut workers, would disappear.

In his budget reply on Thursday, Opposition Leader Peter Dutton proposed cutting Australia's permanent migration program from 185,000 to 140,000 for two years — or by 25 per cent. The permanent intake would then increase to 150,000 in the third year, and 160,000 in the fourth year.

With many people given permanent residency already living in Australia, the opposition's policy to cut permanent migration by 25 per cent may ultimately only have a small impact on net overseas migration.

But Dutton also says that if a Coalition government is elected, he would introduce a two-year ban on foreigners buying existing homes, cut the number of international students and reduce overseas net migration from 260,000 to 160,000.

He offers what sounds like a simple, uncomplicated solution that he says would free up more than 100,000 homes over the next five years.

This number is highly contested, but part of its political potency is in how easy it is to sell. And this goes to the opposition leader's strategy — this whole going-back-to-basics plan is also about communicating something simple to understand. It will now be Labor's job to demolish it on the grounds that it may be too good to be true.

Dr Allen says a cut to the permanent migration program won't have an impact on the net overseas migration numbers, that is, Australia will continue to see the recent historical average of immigration even with reduced permanent numbers.

"Most people granted permanency are already in the country. What will occur with a reduced migration program is increased temporariness. Increased temporariness has the potential to erode social cohesion," she says.

So get ready for a wild debate on immigration while we push aside the elephant in the room: women and families are finding it harder to have children in a world that keeps getting more complicated.

Patricia Karvelas is the presenter of Q+A, which returns tonight at 9.35pm on ABC TV, RN Breakfast and co-host of the Party Room podcast.