An economic analysis of the Australian Baby Bonus

The Australian Baby Bonus offering parents $3,000 on the birth of a new child was announced on 11 May 2004. While the Baby Bonus has received academic attention, and ample media commentary on its implications and outcomes, there are no comprehensive studies to date that have considered whether the Baby Bonus has had a sustained effect on the national fertility rate, nor any that have attempted to disentangle the effects of policy from macroeconomic influences and underlying demographic trends in fertility choice in Australia during the same period. <br><br>The availability of five years of birth data following the introduction of the Baby Bonus allows a more comprehensive analysis of the policy outcomes than is current in the literature. First, a significant increase in birth numbers 10 months following the announcement of the Baby Bonus is identified, and this overall increase was sustained up to the end of the observed period. <br><br>Given the importance of separating policy effects from prevailing demographic trends such as postponement and subsequent recuperation, the analysis is extended to identify any heterogeneity across maternal age and parity² .<br><br>Applying multivariate time series analysis to population data from the Victorian Perinatal birth data register VPDC (N = 1,671,774, T = 312), changes in the mean level and growth of age and order-specific birth ratios following the policy introduction are examined. All age groups except teenagers show a positive fertility change following the policy’s introduction. The results suggest that the policy may have elicited changes in fertility behaviour, evidenced by a higher growth in fertility of younger maternal age groups (from 20 to 29 years of age), which has been sustained past 2008, even as a growth in birth ratios of older cohorts was stabilising. <br><br>An analysis of parity, across specific age groups suggests the observed change in fertility reflects permanent fertility increases over the period of study, rather than simply an adjustment of the timing of births. The analysis also controls for time-varying macroeconomic variables often put forward as an explanation for the increased fertility levels. <br><br>------------------------------------------------<br>Anderson (2007); Balter (2006); Drago et al. (2011); Einarsdóttir et al. (2012); Gans & Leigh (2009); Gray at al. (2008); Heard (2010); Jackson and Casey (2009); Lain et al. (2009); Langridge et al. (2010); McDonald (2005); Parr and Guest (2011); Risse (2010); Sinclair et al. (2012).<br>²The number of times a woman has given birth to a fetus with a gestational age of 24 weeks or more<br>