Former prime minister John Howard weighs in on baby bonus, advocates for former policy to boost falling births

Former prime minister John Howard has criticised both sides of politics for failing to have tax policies to encourage couples to have children after prominent figures from his own Liberal Party spoke out against the idea of reviving his baby bonus.

Hungary spares young mums under 30 from having to pay income tax while Singapore offers parental grants of close to $78,000 in Australian dollars.

But in Australia, fertility levels have plunged to a record low despite the Federal Government earmarking a record $17 billion this financial year for universal childcare subsidies.

The major parties and One Nation aren’t planning to bring back the Howard government’s lump sum baby bonus, which disappointed the former Liberal leader.

“The baby bonus helped to lift the fertility rate and should never have been removed by the Rudd government,” Mr Howard told The Nightly.

“The tax system remains unsympathetic to couples who want more children.”

Mr Howard has weighed into the baby bonus debate after Liberal shadow treasurer Tim Wilson scotched the idea of reviving it to boost a plunging birthrate in Australia.

“We always, of course, encourage people to form families and have children but whether or not just having a baby bonus, which is where that question is alluding, will actually solve the problem, I remain sceptical,” Mr Wilson told ABC Radio National on Tuesday.

The Howard government didn’t have unanimous support in Cabinet for its initial $3000 lump sum baby bonus introduced in 2004 with former immigration minister Philip Ruddock, a moderate in the Liberal Party, confirming he also didn’t believe it really boosted the birthrate long term.

“I don’t think it has a significant impact in terms of the way in which our population grows,” he told The Nightly.

“My view is that people look for families that are suitable for their circumstances and the circumstances of the time.”

While Mr Ruddock advocates more skilled immigration in coming decades to slow down the ageing of the population, social researcher Mark McCrindle said tax benefits to get couples to have children in their twenties was the answer beyond just cheaper childcare subsidies, even if it didn’t involve reviving the baby bonus.

“As for baby bonus, it worked last time around 20 years ago and that was the primary driver of that turning around of a decade-long declining birthrate into a positive one and a replacement rate one,” he said.

“Will the same policy work? Probably not.”

Unaffordable housing was the key reason couples were delaying having children, McCrindle Research focus groups found.

“These are twentysomething Gen Zs — we found they still want to have children but the number one reason they’re not or delaying is cost of housing,” Mr McCrindle said.

“It’s an economic blocker and therefore there should be economic solutions — there’s the tax incentive, tax reduction pathway, there’s income splitting opportunities, there should be some financial support for young people because our nation needs these children.

“Right at the time that we’re investing the most in childcare, we’ve got the lowest birthrate ever and falling so clearly, universal funding of childcare is not speaking the language of young people today.”

Hungary offers mothers under 30 an exemption from paying personal income tax while Singapore pays $S70,000 ($A77,852) to parents by the time their child turns 17, including a $S10,000 ($A11,100) baby grant for every newborn.

Treasury’s Intergenerational Report this week warned Australia’s fertility rate was in danger of plunging to a record low of 1.34 by 2065-66, down from an existing record low of 1.481, as the number of people aged 85 and over tripled in four decades’ time and the proportion of the population aged 65 and over almost doubled.

This would see immigration make up all of Australia’s population growth, compared with 74 per cent now, as deaths outpaced births in the 2060s.

Australia’s fertility rate briefly rose above the replacement level of “two” in 2008 for the first time in three decades.

This was four years after the Howard government and its treasurer Peter Costello introduced a $3000 lump sum baby bonus for each newborn.

An e61 Institute paper released earlier this year argued that baby bonus had boosted the fertility rate among mothers with low to no taxable income.

The fertility rate began falling again during the global financial crisis, after Kevin Rudd’s Labor government amended the baby bonus from a $5000 lump sum to 13 instalments of $385 from the start of 2009.

His successor Julia Gillard axed it in May 2013, with the Coalition failing to revive it under Liberal PMs Tony Abbott, Malcolm Turnbull and Scott Morrison.

The Gillard government introduced a paid parental leave scheme in 2011 and in 2026, Prime Minister Anthony Albanese’s Government has boosted childcare subsidies to $16.9 billion this financial year, and extended paid parental leave.

Coalition industry frontbencher Andrew Hastie this week voiced support for the baby bonus, as a senior conservative in the Liberal Party.

“Sure. I’m pretty open-minded about it,” he told the ABC.

“Peter Costello’s baby bonus of 20-odd years ago seemed to work at the time, although economists and people who know are mixed about their views on whether that actually worked.”

The Nightly understands other senior conservatives in the Liberal Party support reviving the baby bonus but are not agitating internally for a policy change.