Federal Treasurer Joe Hockey has come under fire for being out of touch after telling ABC radio that the Government’s planned fuel tax increase wouldn’t hurt poorer Australians.
“Now, I’ll give you one example: The change to fuel excise, the people that actually pay the most are higher income people, with an increase in fuel excise and yet, the Labor Party and the Greens are opposing it,” he said.
“They say you’ve got to have wealthier people or middle-income people pay more. Well, change to the fuel excise does exactly that. The poorest people either don’t have cars or actually don’t drive very far in many cases. But, they are opposing what is meant to be, according to the Treasury, a progressive tax.”
The following day, Mr Hockey issued a media release explaining his comments.
He said his statement relied on data from the Australian Bureau of Statistics, which showed that the 20 per cent of households with the highest incomes pay over three times more in fuel tax than the 20 per cent of households with the lowest incomes.
“The Australian Bureau of Statistics data is not something that I’ve concocted, it is the reality. These are dealing with the facts,” Mr Hockey said.
“The fact of the matter is that I can only get the facts out there and explain the facts, how people interpret them is up to them.”
Mr Hockey has since said he is sorry, after Prime Minister Tony Abbott refused to back his comments. The Treasurer has caused a stir, but were his comments factual?
ABC Fact Check takes a look at whether “the poorest people” really don’t have cars, don’t drive very far and, as a result, don’t pay as much as people on high incomes for fuel.
‘Poor people don’t have cars’
In his media release, Mr Hockey published the following chart showing that 35 per cent of the lowest-income households have no car, whereas just 16 per cent of the highest-income households are carless.
The media release said the source was Treasury estimates, based on the 2011 Census and on ABS socio-economic data.
The chart implies that about 24 per cent of Australian households have no car or other vehicle.
The ABS represents the same Census car ownership data, adjusted for economic status in five not 10 bands, in a survey series called “Car Nation”.
The results paint a different picture to Treasury’s graph.
Car Nation shows only about 11 per cent of people in the lowest of five bands don’t have a car, while the Treasury figures suggest that number is above 30 per cent.
A chart from the ABS 2011 Census shows the number of passenger vehicles per household by relative advantage and disadvantage.
Fact Check contacted Treasury about the discrepancy. Treasury pointed to the fact it included responses that were “not stated” and “not applicable” in the category of “no cars”.
The total number of people who put on their Census form that they had no car was about 687,000. The number of responses “not stated” was about 534,000, and the number of “not applicable” was 958,000.
Including “non stated” and “not applicable” figures adds nearly 1.5 million responses to the “no car” category.
Professor Graham Currie from the Institute of Transport Studies at Monash University has been studying “forced car ownership” and “transport poverty”, which arises as a result of transport affordability stress on lower income households.
From 2001 to 2011, Professor Currie says car ownership by low income households increased by 93 per cent.
His figures relate specifically to Melbourne, where his research is focused. There, he found that in 2011, about 78 per cent of all low income households had one car, and 22 per cent had two or more cars.
This proportion has increased steadily over time, he told Fact Check. For those households with two or more cars, the cost of running the vehicles represented as much as 50 per cent or more of their total income.
The Monash data goes on to show that for low income households in the urban fringe of outer Melbourne, the figures were much higher: 87 per cent have at least one vehicle, with 28 per cent of households having two or more.
“Lower income groups tend to prefer to live in fringe areas due to home affordability, but this results in higher transport costs,” he said.
‘Poor people don’t drive far’
Professor Currie says his research in 2008 found the average travel distances for people who live on the urban fringe of Melbourne was 16.4 kilometres each trip. For inner area residents, which are typically higher income, it was 6.4 kilometres per trip. “The implication is that they have higher costs for travel and longer travel times,” he said in an article published in August.
“Fringe travel is almost entirely by car because there is little public transport; only 29 public transport bus vehicle trips per week were supplied on average in fringe urban areas [in Melbourne] while there were 4,387 on average for inner urban residents.”
“Nearly 90 per cent of Melbourne’s growth area residents used their own car to travel to work in 2011,” Professor Currie said. This compares with metropolitan usage of about 65 per cent.
People on higher incomes ‘will pay the most’ fuel tax
Below is the ABS data the Treasurer cited on household spending. It shows the highest income households are spending 3.3 times as much on petrol as the lowest income ones.
The 2009-10 household expenditure survey containing Mr Hockey’s figures shows that the proportion is the same if diesel, which also attracts fuel excise, is included.
There is more recent ABS data on household fuel spending that Mr Hockey could have used. This data comes from the 2012 household energy consumption survey, published in September 2013.
It shows the highest-income respondents spent $70 a week on petrol and diesel and the lowest-income respondents spent $42 a week. That’s 1.7 times more – not the 3.3 times that Mr Hockey’s chosen figures show.
Fact Check asked the ABS about the difference between the survey data used by Mr Hockey, and the more recent figures. A spokesman for the ABS said the 2012 household energy consumption survey uses “equivalised household income figures”, but the survey Mr Hockey used doesn’t.
Equivalised figures are adjusted to take into account different household sizes and composition.
“When using income as an approximate means of ranking households according to relative standards of living, it is more appropriate to use the equivalised measures,” the ABS said.
On that basis, it would have been “more appropriate” for Mr Hockey to use the more recent data, which shows the highest income households spend 1.7 times more on their fuel than the lowest income households.
Returning to the 2009-10 survey that Mr Hockey did use, he left out other findings which point to a different conclusion from the one he drew.
The survey shows that high-income households contain more than twice as many people as low-income households. They averaged 3.4 household members, whereas low income households averaged just 1.5. That alone accounts for the vast bulk of the difference in spending. On a per capita basis, average spending on petrol in 2009-10 was $15.84 a week in a high-income household and $10.91 in a low-income one.
This equates to the high-income households spending 1.45 times the low-income ones, again much lower than Mr Hockey’s 3.3 times.
Is the fuel tax ‘progressive’?
A survey carried out in June 2014 by consumer group One Big Switch, (and surveyed 75,000 people compared to the ABS survey which surveyed about 10,000), found that the biggest average fuel bills are in the south western suburbs of Sydney, the north-east and north-west of Melbourne and the northern and southern suburbs of Brisbane.
“Not only do poorer households spend a higher proportion of their budgets on petrol, they often spend more on average because of where they live,” One Big Switch said in a statement released on August 14 in response to Mr Hockey’s claim.
Another conclusion from the 2009-10 survey is that high income households have far more money to spend. On what they told the ABS, they averaged incomes of $3,937 a week, whereas the lowest-income group claimed to earn an average of just $367 a week. These figures imply that petrol ate up 4.5 per cent of the incomes of low-income households, but only 1.4 per cent of the incomes of high-income households.
On those figures, a tax on petrol is anything but progressive, as Mr Hockey said. In proportion to income, it falls three times as heavily on the poor as on the rich, which makes it regressive.
It is also clear from the 2009-10 survey that high income households outspent low income households on virtually everything. Of the 593 items in the household expenditure survey, excluding some arising from blurred definitions, there are only 13 in which the poor outspent the rich, the most important of which were spending on hospital and nursing home bills (because 40 per cent of the low-income group are over 65), rail fares for holidays in Australia (ditto), roll-your-own cigarettes and LPG.
While low-income households on average reported spending $559 a week, high-income households reported spending $2,160 a week (the figures exclude taxes, superannuation and other forms of saving). Economists who doubt the credibility of the income data prefer to use the spending data as the base for making judgments on whether a measure like this is progressive, regressive, or simply proportional between the haves and have-nots.
That data points to a different conclusion again. The household expenditure survey found petrol accounted for 2.9 per cent of spending by low-income households, compared with 2.5 per cent of spending by high-income households. That suggests the fuel levy is more proportional than regressive.
Either way, Mr Hockey cannot claim that this tax measure is progressive. If income is used as the benchmark for comparison, it is regressive. If consumption data is the benchmark, then as a share of spending, the tax rise would be roughly proportional in its impact across the income range.
High income Australians spend more in absolute dollar terms on fuel, so will pay more fuel tax than lower income households.
However, as a proportion of gross income and weekly spending, fuel bills hit lower income families harder.
Census data and research from independent experts shows that people on lower incomes have enough cars and drive far enough to feel the impact of raising the fuel tax more than those on higher incomes.
Mr Hockey’s statement is misleading.
- Joe Hockey, interview with ABC Local Radio, August 13 2014
- Joe Hockey media release August 13, 2014
- Joe Hockey, interview on 2GB, August 15, 2014
- 2011 Census of Population and Housing
- Australian Bureau of Statistics, ‘Car Nation’, Australian Social Trends July 2013
- Graham Currie, ‘Where the Wheels Came Off’, Insight Magazine, August 2014
- ABS 2012 Household Energy Consumption Survey Australia, released September 2013
- ABS 2009-10 Household Expenditure Survey Australia, released September 2011