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The global baby bust

Recently, Treasurer Jim Chalmers said that Australians should have more kids. John Howard even challenged the Treasurer to bring back the baby bonus. Across the globe, leaders are concerned about declining birth rates and shrinking populations, with many government leaders seeing this as a matter of national urgency. They worry about shrinking workforces, slowing economic growth, a shrinking tax base and underfunded pensions; and the vitality of a society with ever-fewer children. Smaller populations often come with diminished global clout and greater vulnerabilities.

Fortunately, Australia is relatively well positioned, being an extraordinarily attractive destination for migrants – even though its birth rate mirrors that of other developed countries. But migrants can make a huge difference to low-population countries: when I migrated to Australia in 1988, the population was 16.5 million; today it is 26.8 million. The Australian Bureau of Statistics (ABS) projects that Australia’s population will reach between 34.3 and 45.9 million people by 2071. But we are one of the lucky few.

A major turning point

Indeed, the world is at a startling demographic milestone. Sometime soon, the global fertility rate will drop below the point needed to keep the world’s population constant. It may have already happened. Fertility is falling almost everywhere, for women across all levels of income, education, and labour-force participation. The falling birth rates come with huge implications for the way people live, how economies grow and the cultural norms we take for granted.

In high-income nations, fertility fell below replacement in the 1970s and took a leg down during the pandemic. It’s dropping in developing countries, too. India surpassed China as the most populous country last year, yet its fertility is now below replacement. Some demographers think the world’s population could start shrinking within four decades – one of the few times it has happened in history.

A year ago, Japanese Prime Minister, Fumio Kishida, declared that the collapse of the country’s birth rate left it “standing on the verge of whether we can continue to function as a society.” Japan’s population today is 125 million; by 2100 it is projected to fall to just 63 million, and of those, 40% will be 65 years old or older.

In 2017, when the global fertility rate (how many babies a woman is expected to have over her lifetime) was 2.5, the United Nations thought it would slip to 2.4 in the late 2020s. Yet by 2021, it was already down to 2.3, close to what demographers consider the global replacement rate of about 2.2. The replacement rate, which keeps the population stable over time, is 2.1 in rich countries, and slightly higher in developing countries (where fewer girls than boys are born, and more mothers die during childbearing years).

Source: Wall Street Journal

In 2017 the UN projected that the world population, then 7.6 billion, would keep climbing to 11.2 billion in 2100. By 2022 it had lowered and brought forward the peak to 10.4 billion in the 2080s. That, too, is likely out of date. The Institute for Health Metrics and Evaluation now thinks it will peak at around 9.5 billion in 2061 and then start declining.

Source: Wall Street Journal

Historians refer to the decline in fertility that began in the 18th century in industrialising countries as ‘the demographic transition’. As lifespans lengthened and more children survived to adulthood, the impetus for bearing more children declined. As women became better educated and joined the workforce, they delayed marriage and childbirth, resulting in fewer children.

But now, it appears that birth rates are low or are falling in many diverse societies and economies.

Some demographers see this as part of a ‘second demographic transition’, a society-wide re-orientation toward individualism that puts less emphasis on marriage and parenthood and makes fewer or no children more acceptable. If people prefer spending time building a career, on leisure, or relationships outside the home, that is more likely to conflict with having children.

And that’s not just in Western countries. Urbanization and the internet have given even women in traditional male-dominated developing world villages a glimpse of societies where fewer children and a higher quality of life are the norm. People everywhere are plugged into the global culture.

Sub-Saharan Africa once appeared resistant to the global slide in fertility, but that too is changing. The share of all women of reproductive age using modern contraception in that region grew from 17% in 2012 to 23% in 2022, according to Family Planning 2030. And once a low fertility cycle kicks in, it effectively resets a society’s norms and is hard to break.

Source: Wall Street Journal

Economic implications of the baby bust

With no reversal in birth rates in sight, the attendant economic pressures are intensifying. Since the pandemic, labour shortages have become endemic throughout developed countries. That will only worsen in coming years as the post-crisis fall in birth rates yields an ever-shrinking inflow of young workers, placing more strain on healthcare and retirement systems.

The usual prescription in advanced countries is more immigration, but that has its own problems. As more countries confront stagnant populations, immigration between them for ‘skilled migrants’ is a zero-sum game. Historically, Australia has sought skilled migrants who enter through formal, legal channels, and we have been fortunate enough to have plenty of candidates to choose from. But many developed countries, like the US and the UK, have been resisting recent inflows of predominantly unskilled migrants, often entering illegally, and claiming asylum. High levels of immigration can also foster political resistance, often over concerns about cultural and demographic change. Unfortunately, it is no coincidence that the rise of the extreme right-wing in countries like Germany, Sweden and Italy has followed on the heels of very large intakes of migrants, often from countries that do not share similar cultures.


Paul Zwi is a Portfolio Strategist at Clime Investment Management Limited, a sponsor of Firstlinks. The information contained in this article is of a general nature only. The author has not taken into account the goals, objectives, or personal circumstances of any person (and is current as at the date of publishing).

For more articles and papers from Clime, click here.


June 30, 2024

When the carrying capacity of an environment becomes overwhelmed by the numbers of a species then those numbers stabilize or decline, even to the point of the species becoming extinct. The state of Australia’s natural environment & its continuing destruction by we oh so clever humans tell us that we have reached our carrying capacity. Time for a rethink on economic growth, folks.

July 01, 2024

Been hearing that refrain for over a century, back when the current population would have been totally unthinkable. But the combination of market forces and human ingenuity was neglected by Malthus and continues to be given insufficient weight by panic merchants today.

June 29, 2024

Looking forward to population decline. Maybe I can finally afford a house!

June 29, 2024

"finally afford a house": When the die off is quicker than the rate at which houses become un-occupiable, might find some dilapidated houses to pitch a tent in.

Peter B
June 29, 2024

“. . . Australia’s population will reach between 34.3 and 45.9 million by 2071.”
This is not “lucky.” We cannot look after ourselves with the population we have now. Housing, infrastructure, debt, crime, poverty, water, pollution, global warming, power supplies . . . Our impact on the environment is greater than its carrying capacity. Perhaps it will be a good thing that our population goes down as we are so destructive to other species, the environment and of course, each other. Look at the current wars and conflict with the very real threat of nuclear war. Are more people going to improve our situation? I doubt it. More people will find justifications for arguing over the division of spoils. We live with finite resources. Having less people might make us think about becoming more efficient and reducing our unsustainable demands. But then there is the risk of wealth being concentrated in even fewer hands.

June 27, 2024

Notwithstanding all the difficulties that Paul has described, it is a fact that declining birth rates will ultimately assist. I only have to mention some; like scarcer energy issues (need for nuclear and renewables) plus pollution, global warming etc etc; just to mention a few. The onus for this has fallen on the more advanced countries and they have been the enablers.

June 27, 2024

There are some truisms in what both Disgruntled and Economist say !

June 27, 2024

So in short, Governments are now confirming that capitalism is a Ponzi Scheme, it needs more and more people to come on board.

George B
June 27, 2024

Or at least its become that ever since governments worked out that they can spend more and more our children's money and get away with it as long as there are more children coming along to pay for it.

June 27, 2024

Nonsense. Other economic systems before capitalism required more and more people to look after the sick and elderly. And because so many children died young families needed even more babies to increase the chances of there being enough young adults to care for their elderly folk.
That's why there used to be lots and lots of births. Capitalism has provided a huge efficiency dividend through enabling medical research and breakthroughs so that we can have 2-3 kids.
No way is capitalism a Ponting scheme - it genuinely creates wealth and improvements in living standards.

Ian Radbone
June 27, 2024

As a capitalist who spends a lot of time punting on the ASX, capitalism certainly looks like a Ponting scheme to me! :)

Stephan E
June 27, 2024

You hit it for 6, Ian.

June 27, 2024

Ian what you are doing is not capitalism. The companies whose shares you are speculating on are the capitalists, employing the capital that they raise to build businesses. You are just trading in and out of their capital playing a zero sum game with other punters. You're just a fringe dweller.

And arggh with auto correct - clearly I meant to say Ponzi scheme not Ponting.

June 28, 2024

It is a Ponzi scheme, the example you gave was/is typical of poorer regions. Africa, India, Asia etc They didn't have the Capitalist system in place so it is a moot point.

If it wasn't we could have a zero gain targets. Immigration/births matching emigration and deaths.

Targeted inflation is purposeful in devaluing the dollar requiring us to work longer.

My brother and I collected Coke and Fanta 900ml bottles for the 20 cent return.
40 cent s got us minimum chips and 4 potato cakes from the fish and chip shop.
You might get a Masterfoods Squeeze Tomato Sauce Sachet for that now.

I was born in the late 60's. Primary School in the 70's and then High School in the 80's It was less common for women to be working back then, I can recall only 2 mothers working fulltime back then of myself and school friends mums. My mother and one other friend's mum worked full time. All the rest were stay at home mums or worked part time.
The push was on though to get mothers in the workforce. Boost GDP and business. More money flowing through the economy.

Then we had the push for immigration to boost numbers and GDP

June 28, 2024

Disgruntled, do you even know what a Ponzi scheme us? Because you haven't described one yet.


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