The Australian Bureau of Statistics Data showed 264,300 births were registered in the year to June 2006,a 3.3 per cent increase over the previous year.
"That is the highest number of births in over 30 years,"federal Treasurer Peter Costello told parliament on Thursday.
"And in addition to that,the total fertility rate rose from 1.79 to 1.83,the highest fertility rate in 11 years."
"This is something to be welcomed by all Australians that the number of births has increased and the fertility rate which has been falling continuously since 1961 has actually bottomed and turned."
Mr Costello said Australia was one of the few countries in the industrialised world where the fertility rate had increased.
"I would encourage all Australians,as I have previously,to have one for mum,one for dad and one for the country,"he said.
"I think,as we have focussed attention on the importance of the fertility rate,I think as we have focussed Australians'attention on the challenges of the ageing of the population,many people have changed their attitudes to having a family and I think that's a good thing.
"I also believe,Mr Speaker,that the government's policies in relation to families have been very important."
Mr Costello listed increasing child care places,the introduction of the child care rebate and the baby bonus and the increase in the rate of family benefits as policies that had helped lifted the fertility rate.
But he said Australia was still below the 2.1 birth rate required to replace the population.
Including deaths,interstate and overseas migration,Australia's growth rate was 1.3 per cent,the highest annual growth rate in the past five years.
Australia's population increased by 265,700 people,reaching 20.6 million.
Western Australia became Australia's fastest growing state in the past year,recording a population growth rate of 2.0 per cent.
Queensland was second with a rate of 1.9 per cent,including the highest rate of interstate migration.