Poorest 20% spend more than three times as much of their income on petrol, Australia Institute analysis reveals

The lowest-income earners in Australia spend the greatest amount on petrol as a proportion of income, according to new analysis, undermining claims by Joe Hockey that the increase in fuel tax is “progressive” because the wealthiest pay more.



The treasurer used Australian Bureau of Statistics figures to defend his comment that “the poorest people either don’t have cars or actually don’t drive very far in many cases”.

But the figures on car ownership and spending on petrol circulated by Hockey’s office did not include any examination of the spending as a proportion of income, which would indicate how much of an impact it would have on family budgets.

A new analysis of those figures suggests that the lowest-earning group paid more than three times the proportion of their income on petrol as the highest group.

The analysis by the Australia Institute, a progressive think-tank, replicated Hockey’s figures that the lowest-earning 20% of households paid an average of $16.36 per week on petrol in 2009-10, rising to $53.87 for the highest-earning 20% of households.

But when expressed as a percentage of mean income for those same groups, the petrol spending represented 4.54% of income for the lowest-earning households but only 1.37% for the highest-earning ones.

While Hockey’s figures show each income group spends more on fuel in absolute terms than the next-highest-income group, the analysis based on share of income presents an opposite trend.

David Richardson, senior research fellow at the Australia Institute, said progressive taxes were designed to ensure higher income earners paid a proportionately greater share of their income than lower income earners.

The figures showed Hockey was wrong to argue fuel excise was progressive rather than regressive, Richardson said.

“These figures clearly show that the fuel excise is going to impact most heavily on the poorer sections of society,” he said.

“He’s being a bit cute in the sense that the higher your income the more you spend on pretty well everything and petrol is no exception but proportionately there are things the poor do spend more on like fuel and food.

“Putting it another way: yes, it’s true that the highest income group pays a bit more than three times what the bottom does [in absolute terms] but they earn 11 times the income of the bottom.”

Richardson noted that the figures dealt with averages, so there would be low income earners and high income earners who did not spend anything on fuel or spent a lot on fuel.

The treasurer made the comments in an ABC interview on Wednesday when he was attempting to counter the argument that the suite of measures disproportionately affected lower-income groups and spared wealthier groups long-term pain.

He cited the government’s yet-to-be-legislated decision to reintroduce twice-a-year indexation of fuel excise in line with the consumer price index, with the $2.2bn to be raised over four years earmarked for road projects. The former prime minister John Howard froze fuel excise to counter community concern over rising fuel prices.

Hockey said: “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. 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 [Labor and the Greens] are opposing what is meant to be, according to the Treasury, a progressive tax.”

Hockey said his comments reflected “the facts”, but the opposition leader, Bill Shorten, called on the treasurer to “apologise to Australians for insulting them”

The shadow treasurer, Chris Bowen, said Hockey had released figures “selectively in a valiant attempt to try to defend his argument” which failed to take into account the actual impact on household budgets.

“I say to the treasurer: come here to Cabramatta, come to western Sydney, and tell people of low incomes that they don’t drive cars or they don’t drive very far,” Bowen said on Thursday.

“The treasurer has made a hash of selling his budget but he’s made a hash of it because it’s a bad budget … He fundamentally misunderstands the impact of his budget, his own budget, on the Australian people. If he doesn’t understand the impact of his budget no wonder he has failed to sell his budget to the parliament or to the people.”

Labor’s agriculture and rural affairs spokesman, Joel Fitzgibbon, said people in rural and regional Australia often drove older vehicles with poor fuel efficiency. “The North Shore-based treasurer is completely out of touch,” he said.

The Liberal senator Cory Bernardi, who opposes tax increases, told the ABC: “Ultimately the treasurer needs to be accountable for his own words, and I’m sure he’s got some facts and figures that will support exactly what he said, but we don’t need distractions and quite frankly I know from personal experience and my engagement with the community that those in the lower socioeconomic group tend to spend more as a percentage of their income on transport and the basic necessities of life than do those who are wealthier.”

Hockey was asked during a radio interview on Thursday whether his comment about poor people sounded callous and insulting.

“I am sorry if that’s the case but the fact is that the Labor party says that it’s an unjust initiative, an unfair initiative, higher income people aren’t paying enough,” Hockey told 2UE.

“Well, here is an initiative where higher income people pay on average three times the amount of lower income households in the fuel excise. But Labor is obviously opposing it. Now, there is an enormous amount of inconsistency on their part, they’re not sticking to their principles.”

Hockey brushed off criticism about his sales efforts on the budget.

“The fact is that no-one is going to be cheering for less government spending on them and very few people come up to me and say can you please increase my taxes. But, we are doing it because it is right for the country. Because if we do not do it now, what will need to be done in the future will be far more painful. It is much like trying to convince a patient that has early signs of cancer that you need to take action now to address it, and address the problems in the budget, and address the problems with your health, because if you don’t take action now the difference is going to be far more dramatic in the future.”

Hockey said he would not deliver a mini-budget reworking major budget measures, arguing his critics wanted him to do so to foster a “level of panic [but] we are not in panic mode”.

The New South Wales Nationals senator John Williams said Hockey “could be correct” when he asserted that higher income earning people spent more money on fuel, but lower-income people outside the major cities had few alternatives to driving.

“The problem in rural and regional areas is that the low income earners have to spend a lot of money on fuel because they don’t have access in many many cases to public transport,” Williams said.

“Low income earners do have to spend a lot more money on fuel in country areas than in the cities.”



While acknowledging the financial impacts, Williams said he supported reintroduction of indexation of fuel excise because it would fund much-needed road projects.