Background:  In 2004, the Federal Government introduced the baby bonus, a one‐off payment upon the birth of a child.
Aims:  To assess the impact of an increase in the number of births on maternity services in New South Wales following the introduction of the baby bonus payment in July 2004.
Methods:  A population‐based study, using NSW birth records, of 965 635 deliveries from 1998 to 2008 was carried out. The difference between the predicted number of births in 2005–2008, estimated from trends in births from 1998 to 2004, and the observed number of births in NSW hospitals in 2005–2008 were calculated. We also estimated the increase in cost to the health system of births in 2008 compared with previous years.
Results:  Compared with trends prior to the introduction of the baby bonus, there were an estimated 11 283 extra singleton births per year in NSW hospitals by 2008. There were significant increases in the number of deliveries performed in tertiary, urban and rural public hospitals; however, the number of deliveries in private hospitals remained stable. Compared with predicted estimates, in 2008, there were over 8700 more vaginal deliveries, over 1000 more preterm births and over 45 000 extra infant hospital days each year. Compared with 2004, in 2008, the estimated cost of births in NSW hospitals increased by $60 million,
Conclusions:  The increase in births following the introduction of the baby bonus has significantly impacted maternity services in NSW.