Treasurer Joe Hockey is in political hot water for his comment yesterday that indexation of fuel excise would mostly hit high-income earners because “the poorest people either don’t have cars or actually don’t drive very far in many cases”.
Is he right? A recent paper, Exploring trends in forced car ownership in Melbourne, by Professor Graham Currie and Dr Alexa Delbosc from Monash University’s Department of Civil Engineering, throws some light on the question in regard to car ownership.
Mr Hockey is right that lower income households have lower rates of car ownership relative to the rest of the population. (1)
As the exhibit shows, low income households in Melbourne are considerably more likely to have no vehicle than other (i.e. high income) households. This is especially true in Melbourne’s outer suburbs where they’re thirteen times more likely to be without a car than other households. (2)
Lower income households in Melbourne are also much less likely to have multiple cars; only around a third as many have two or more cars as other households. An important point though is that the ratio is much the same for the outer suburbs as it is for Melbourne as a whole.
So the Treasurer is right that rates of car ownership are lower for the “poor” relative to the “rich”, whether measured in terms of households without a car or households with multiple cars.
However what he overlooks is the great majority of lower income households nevertheless have a car irrespective of where they live.
In Melbourne as a whole, 77% of low income households have at least one car and 23% have two or more. It’s higher in the outer suburbs where 87% have at least one car and 29% have multiple vehicles.
That means any increase in the cost of driving will potentially affect the great majority of low income households. The main story here isn’t so much about location (although it’s definitely an issue) but rather that low income households in Melbourne, at least as they’re defined by the researchers, are far more likely to have a car than not.
There’s a very compelling case for the Government’s proposal to restore indexation of petrol excise, but it’s not true to suggest that most low income households don’t have cars and so wouldn’t be affected (see Shouldn’t the Greens and Labor be supporting fuel excise indexation?). (3)
Lower income households are defined as earning less than $800 per week. They comprise 29% of all households in Melbourne (and 28% of outer suburban households).
38% of all lower income households in Melbourne live in the outer suburbs.
In an earlier paper, Currie and Delbosc found that low income households in the outer suburbs who don’t have a car tend to live in locations of higher public transport accessibility (see Transport disadvantage in the suburbs)