THE baby bonus has been branded an "unbelievably expensive" way to boost the birth rate that should be comprehensively overhauled in conjunction with the raft of payments to families.

As pressure mounts on the Rudd Government to find billions of dollars in savings in the May budget, economists have called for a review of the current "mishmash" of family payments, two different Family Tax Benefits, two types of childcare payment and the Baby Bonus - to ensure the $17 billion a year serves a more coherent policy purpose.

Griffith University's Ross Guest, supported by influential economists Bob Gregory and Chris Richardson, said failing to means-test some family payments was creating too much middle-class welfare. The programs also led to inefficient and costly churning between tax receipts and welfare payments.

But Prime Minister Kevin Rudd yesterday said the baby bonus was safe.

"The baby bonus is absolutely safe," he told Fairfax radio.

"We committed ourselves to its retention before the election and we will stick with it.

"You've got to look at the data, and I think it has had an impact in terms of nudging up slightly the birth rate in the country.

"Some may dispute that, but I think it's effective and most mums and dads that I've run into certainly welcome that cheque arriving."

Parents having a baby today receive a one-off $4187 payment regardless of household income, increasing to $5000 after July 1.

The Child Care Tax Rebate was increased by Labor from 30 to 50 per cent of parents' out-of-pocket expenses to a new cap of $7500 per child, again regardless of income. And, if a mother is not working, she can claim more than $3000 a year under Family Tax Benefit Part B, whatever her partner earns.

Many mothers who do not necessarily need the baby bonus would not pass up the opportunity to take it, reasoning that every bit of financial help from the Government is welcome. But those in more comfortable income brackets argue the extra money does not affect their decision to have children, with some considering the bonus a defacto maternity leave payment from the Government.

"I can see, most definitely, there are groups of people who would have children for the bonus, but in our situation it didn't really make much difference to us," Sydney's Carla Steege, who collected $4000 with the arrival of her daughter Annabell 10 months ago, said.

Ann Pearson, a 37-year-old strategist with AMP, gave birth to her first son seven weeks ago and recently claimed the baby bonus.

A single mother living in the inner-Sydney suburb of Redfern, Ms Pearson said she hoped the baby bonus would not become means-tested because "if it was, I probably wouldn't have gotten it".

The payment will allow Ms Pearson to spend more time with her new son before returning to her job:

"When I got it, I put it straight on to my mortgage. It means, with the mortgage being that bit lower, I can have a more time to spend with Aidan at home before I go back to work," she said.

Professor Guest said a strong case existed for Labor to use the budget to rationalise these disparate family welfare policies, "bundling them together as one family support payment".

"The baby bonus is just not an effective expenditure. We pay for every birth and most parents would have a first child anyway, irrespective of the bonus," he told The Australian.

Former treasurer Peter Costello introduced the baby bonus in 2004, citing it as a measure to improve the nation's fertility rate.

He urged Australian couples to have "one for the husband, one for the wife and one for the country".

Last financial year, it cost the government $1.16 billion, a figure that will climb as it increases to $5000. With more women having their first babies in their 30s, and richer women having more children, the baby bonus is increasingly ending up in the hands of wealthier families.

Despite Treasury's concerns, Wayne Swan this week ruled out any change to the baby bonus and said Australia's middle class did not receive too much welfare.

But economist Professor Gregory said the baby bonus remained an inefficient means of improving fertility and the Government should consider treating all family welfare measures as "a whole".

"If it was put in place to get more children, then it's unbelievably expensive. Every new mother gets it, but you might only get a few extra babies that wouldn't have been born regardless," said Professor Gregory, from the Australian National University Research School of Social Sciences.

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