Treasurer Joe Hockey is facing a fresh round of criticism for being out of touch and not understanding the impact of his budget on the less well off after suggesting “poorest people either don't have cars or actually don't drive very far in many cases”.

Mr Hockey made the comments on Wednesday as he argued the government's proposed rise in fuel excise was a progressive measure that would cost people on middle and higher incomes more.

The Treasurer said the Coalition was asking "everyone to contribute, including higher income people" by restarting indexation of fuel excise, a measure Labor has labelled a new fuel tax.

Contrary to Mr Hockey's claim, a 2001 research paper from the Parliamentary Library states that "petrol and diesel excises are regressive in that people on low incomes pay a higher proportion of their incomes in the form of excise than people on high incomes, given the same level of fuel use".

And in a June 2014 submission to the Senate Economics Committee inquiry into the proposed excise rise, the Australian Automobile Association stated that: "Research indicates that the people who use their cars most frequently are in the outer metropolitan areas and rural and regional areas where there are lower incomes, less jobs, and little or no access to public transport"

"The AAA is concerned that individuals in these areas will bear the highest cost increases of indexation changes."

Labor leader Bill Shorten, welfare groups and crossbench senator Ricky Muir have rounded on Mr Hockey, labelling the Treasurer's suggestion fallacious and based on incorrect assumptions.

“Are you serious, Joe Hockey? Are you really the cigar chomping, Foghorn Leghorn of Australian politics where you're saying that poor people don't drive cars?," Mr Shorten said.

“Joe Hockey says [poorer Australians] don't drive cars yet they don't give them another alternative. It is almost as if the Treasurer believes that poor people should be sleeping in their cars, not driving their cars.”

St Vincent de Paul Society chief executive John Falzon said the claim was “completely fallacious”.

“This is a massive assumption on the Treasurer's part. In fact many low income households are heavily dependent on quite old motor vehicles that are not terribly fuel efficient as their only means of transport," he said.

“Cheaper housing is often located in areas far from necessary infrastructure and jobs and so they find themselves having to travel long distances at times. And they are often very poorly served by public transport.”

Uniting Care National Director Lin Hatfield-Dodds said the rise in fuel excise would disproportionately affect poorer people.

“Proportional to their income, these sorts of measures end up costing people who are poor more than people who are wealthy," she said.

“That's just maths,' she said

“To put the fuel excise up as an example of fairness in the budget is a bit of a stretch, if we want to make the budget fairer we could look at less impact overall on vulnerable Australians and more impact on people who can afford to meet the costs.”

Australian Motoring Enthusiast Party Senator Ricky Muir said that in rural and regional areas, people needed to use their cars, "regardless of wealth".

"Coming from the country, I know firsthand, when you live a fair distance from work and there's no public transport, people from all backgrounds use their vehicles a lot."

smh.com.au