Changes in Household Expenditure Associated with the Arrival of Newborn Children

Abstract

An understanding of the changed financial circumstances of families with newborn children is important to a range of current policy debates, including those surrounding the provision of family assistance, women’s attachment to the labour force and paid parental leave. Although there is a body of Australian research on the costs of raising children, in most cases this has been undertaken to enable the calculation of child support entitlement or to evaluate the effects of policy designed to reverse the effects of an ageing demographic. These studies do not report specifically on expenses associated with the arrival of newborn children. To address this gap in the evidence base, the current study investigates changes in household expenditure associated with the arrival of newborn children for three groups of families—those experiencing the arrival of their first, second, or third and subsequent-born children. Household spending items in Waves 6 and 7 (2006 and 2007) of the Household, Income and Labour Dynamics in Australia (HILDA) survey are used to estimate whether different categories of expenditure typically increase or decrease for couple families with the arrival of newborn children. This study shows that a range of expenditure categories are influenced by the arrival of a new baby. Parents of first-born children increase expenditure on health care and clothing. Parents of second-born children increase expenditure on health care, and on meals eaten out and takeaway; however, they decrease expenditure on child care. Parents of third and subsequent-born children increase expenditure on health care.