Key Points:

Labor Leader Kevin Rudd may have ogled strippers in New York, but Prime Minister John Howard and Treasurer Peter Costello have engineered a revolution in Australia's bedrooms.

A new study has confirmed that middle Australia is producing more babies, encouraged by money from the Government and a long, golden run for the economy.

The study, by social demographer Mark McCrindle, reports that Australian births last year rose to 265,900 - just 10,000 short of the all-time high recorded in 1971.

McCrindle said that for the first time in a generation Australia's total fertility rate has increased, rising from a historic low of 1.7 children per woman to 1.8, the highest since 1995.

This remains well below the 1961 baby-boom peak of 3.5 and means that Australians are not producing enough children to replace themselves.

But McCrindle said that the fertility reversal had been produced by more women opting for more children - again for the first time in a generation. More than a quarter of all women are now having two children, and most new mothers are aged over 30.

And while federal financial support for new parents is the highest on record, the emerging baby boom is not evident among the poorest families.

They continue to have more children, but their fertility rates have not changed.

Instead, the extra children are being produced by middle-income families, encouraged not only by government cash but also by changing social attitudes and community support. "The social desirability of having children today in Australia is high, encouraged through policy at a national level and viewed positively at a social level," McCrindle said. "[Costello's] encouragement of 'one for mum, one for dad and one for the country' seems to have got some traction."

But while they may be taking Howard's money and Costello's advice, Australians continue to spurn the Prime Minister and his conservative Coalition Government, turning to an opposition led by a committed Christian now squirming from the revelation that he visited a New York strip joint while under the influence of too much wine.

The latest Newspoll in The Australian, taken at the weekend after the news of Rudd's indiscretion broke, showed that Labor remains ahead in the race for this year's election.

The party has 55 per cent of the two party-preferred vote that determines elections under Australia's preferential voting system.

Even more painful for Howard is the big hit his government has taken in the management of the economy, with national security the biggest card in its election pack.

Some 47 per cent said Howard would best manage the economy - 6 per cent down since July - while preference for Rudd's economic skills rose 3 per cent to 31 per cent.

And Rudd remained the preferred prime minister, 7 percentage points ahead of Howard.