The cost of raising children in Australia has skyrocketed in the past five years, with middle-income families spending up to $458 a week to raise a child.

A report from AMP and the National Centre for Social and Economic Modelling (NATSEM) looked at the cost of raising children in Australia across all income groups.

It has found middle-income families have had the biggest increase in costs, and are now spending up to 50 per cent more than in 2007.

"The cost of (raising) two children to the age of 21 is about $800,000, Ben Phillips, a NATSEM researcher said.

"So it's incredibly expensive, and the main drivers of this are the big ticket items such as food and transport and recreation."

The report also found that at every income level, it is more expensive to raise a child as they get older, with those aged 18-24 the most expensive.

"Older kids certainly cost a lot more than younger kids and that does have ramifications in terms of those family payments," Mr Phillips said.

NATSEM chart showing weekly costs of a child by total income and age of child ( NATSEM )

Parents choose to spend more on education

A major factor behind the increase, is that many middle-income families are opting for private school education.

"Included in this is the cost of things like university and to some extent the cost of private school education," Mr Phillips said.

"That has been one of the big drivers here. A lot of families are choosing to spend their money in that sort of a way.

"So parents are actually choosing to spend more money."

The report found parents sending their kids to private schools spent an average of $216 a week on fees, compared with $12 for public schools and $81 for Catholic schools.

Government subsidies for child-raising costs, by income level. ( NATSEM/ABC News Online )

For families on the lower-income end of the spectrum, the average cost of two kids is much lower, at about $450,000.

Mr Phillips says much of that cost is met by the Government.

"We actually found around 85 per cent of their costs were actually paid for effectively by the Government, either through family payments or baby bonuses or school kids bonus," Mr Phillips said.

"You still find that the lower-income families actually face a higher proportionate cost relative to their income."

Food and transport eat into family budget

Food continues to take a big chunk of the family budget, with the report revealing low-income families now spend $89,000 on food for two children from birth to the age of 24.

Transport costs have also snowballed in recent years, accounting for about 20 per cent of family income.

"We're looking at bigger cars, more cars, airfares," Mr Phillips said.

"There's higher petrol costs for things like driving the children to soccer on the weekend.

"When you've got a young family, taking them overseas or even domestically, you've got to pay a lot more for the airfares."

NATSEM chart shows what low-, middle- and high-income parents spend on their kids. ( NATSEM )

Income rise not matching cost of living

While costs have risen by half since 2007, the average household income has only grown 25 per cent over the same period.

That is squeezing family budgets like never before, something Brisbane mother of three Jane Campbell knows only too well.

"It's extremely expensive and I think part of that expense is the practicalities of life, and that is that teenage boys eat so much for a start," Ms Campbell said.

"But it's also the social pressure of them having to have certain things in order to fit into a particular social group.

"X-Box, the latest skateboard, you know, the right type of shoes and that sort of thing."