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I think contraception is kind of coincidence. The biggest change is society becoming less conservative. This meant that women were able to access contraception but it's no the main reason for drop of birthrate. Women starting careers means they are less interested in spending a decade or two raising 5 kids. Being single or living in informal relationship was also normalized. Basically the model of family where woman stays at home and has a kid every year or two was replaced by both parents working and sharing responsibilities. People have 1 or 2 kids to satisfy the need of having their own family unit and stop.
And yes, the replacement number is a fairly xenophobic concept. The narrative is that GDP has to keep growing. To constantly grow the economy you need more workers (or offset the decline with increased productivity but when population numbers fall fast that's difficult). So the narrative from capitalists is that we need to hit replacement levels or the economy will suffer. If people don't want to have kids then we will need immigrants and this is turned into replacement theory and used as propaganda by far right. So the far right wants to return to traditional family to save us from immigrants. And how do you return to traditional family? Less rights for women, harder access to contraception and abortion and, of course, no rights for same sex couples.
So right now in Europe Spain is for example openly saying their future depends on immigrants and is welcoming them (the current government does at least) while Poland is still very much opposed to any immigration and didn't make any social progress in decades (no same sex marriages, difficult access to IVF, banned abortion).