The release of Australia’s first Transport Affordability Index by the Australian Automobile Association (AAA) reveals the average Australian family is spending up to $22,000 every year to get around. – Australian Automobile Association, media release, August 22, 2016.
A new report, commissioned by the Australian Automobile Association and compiled by SGS Economics and Planning, has estimated transport costs for a typical household in Australia’s capital cities. The calculations factored in public transport spending and car costs such as registration, fuel, insurance and tolls.
In a media release accompanying the report, the Australian Automobile Association said that “the average Australian family is spending up to $22,000 every year to get around.”
Is that accurate?
Checking the source
The Conversation asked SGS Economics and Planning and the Australian Automobile Association to clarify several aspects of their calculations. You can read their full response here.
The SGS Economics and Planning full report explains in detail the assumptions that underpin their snapshot of transport costs for a typical household in Australia’s capital cities.
Their hypothetical household in each capital city featured a couple in their 30s with children. The adults were employed, lived in a detached house and had two cars, which were driven 15,000 and 10,000 kilometres per year. The car that drives 10,000 kilometres per year is assumed to be ten years old and owned outright. The car that drives 15,000 kilometres per year is assumed to be less than three years old, purchased new and financed with a car loan. In addition, one member of the household is assumed to travel by public transport into the CBD and home again, five days a week.
In each city, the hypothetical household is assumed to live in middle to outer ring suburbs, with a relatively high population density, good access to public transport, and – in the case of the Sydney, Melbourne and Brisbane householders – use toll roads to access the CBD.
These assumptions and estimates contained in the report appear valid to me. Overall, the report seems to be a reasonable attempt to deconstruct transportation costs. Assumptions about both cars being used for more than 10,000 kilometres per year while one person commutes daily via public transport could be questioned, but this would only make a difference at the margins.
Report finds national average annual transport cost is closer to $17,000
The Australian Automobile Association said the report “reveals the average Australian family is spending up to $22,000 every year to get around” – but the key phrase there is up to.
The authors of the report looked at two consecutive quarters of transport data – Q1 of 2016 (quarter one, January to March) and Q2 of 2016 (quarter two, April to June). The report found that:
Annualised figures reveal a total transport cost for Q2 of $21,791 in Sydney, while the annual cost for Hobart is $7,691 less, at $14,100.
So the figure of $22,000 relates to Sydney, not the national average. The higher costs in Sydney relate to tolls, registration and compulsory third party insurance, the report said.
In fact, the researchers estimated that the national average transport cost for the second quarter of 2016 is around $323.36 a week, or an annual national average of $16,814.72, as shown in this table from the report:
So the Australian Automobile Association’s assertion that the report reveals the average Australian family is spending up to $22,000 every year to get around is correct – but just remember that’s the upper end of the estimates range detailed in the report, as this chart shows:
The report found that the national average annual spend on transport is closer to $16,814 or $17,000 if you round up.
Checking the numbers against other sources
The report’s estimate of roughly $17,000 in annual household transport costs for the national average is higher than transport cost estimates produced by the Australian Bureau of Statistics.
But it’s not uncommon for different economic models to produce different results – it all depends on what assumptions you factor into the modelling.
The last Household Expenditure Survey, conducted by the Australian Bureau of Statistics in 2009-2010, indicated that Australians spent an average of $193 per week on transport expenses. After adjusting for inflation, that is the equivalent of $221 per week in 2016, or $11,531 per year.
Included in the ABS survey’s definition of transport costs is motor vehicle purchase, fuel, registration, insurance, parts, public transport fares and several other expenses.
In their response to The Conversation, SGS Economics and Planning said the discrepancy was partly because the ABS’ Household Expenditure Survey:
… includes figures on transport costs from a range of households, from couple families with kids in the outer suburbs to inner-city singles who rarely drive to regional pensioners… We chose to focus on couple families with children and the costs they are likely to face as they are the most common family type in Australia… Couples with children are likely to have higher transport costs than other family types such as singles, single parents or couples without children, as they are larger and more likely to be working.
You can read more of their response here.
The ABS data treats the major part of a car purchase as an asset (i.e. is not included in expenses related to travel), so if you treat household motor vehicles as a cost rather than an asset you can get a number that approaches the annual figure in the recent SGS Economics and Planning report.
The report assumes regular toll road usage in the capital cities, which, of course, doesn’t apply to all of us. And it also makes the debatable assumption that one member of the household uses public transport regularly while another member uses toll roads with similar regularity.
Naturally, the biggest contributor to overall costs may be how expensive your car or cars are (and, thus, any associated repayments), the level of which is largely at the discretion of the household.
Overall, the SGS Economics and Planning report appears to be a reasonable attempt to deconstruct transportation costs, but is specific to a particular type of household within each city rather than all households who travel.
The Australian Automobile Association’s statement that the report “reveals the average Australian family is spending up to $22,000 every year to get around” is technically accurate, thanks to the inclusion of the qualifier “up to”.
However, it is worth noting that the $22,000 figure (which applies to a typical Sydney family) represents the highest end of the range of estimates contained in the report.
The report found that the national average annual spend on transport is closer to around $17,000, which is higher than transport cost estimates produced by the ABS in the past. – Matthew Beck
I agree with this FactCheck and its conclusion.
The really important missing cost is the time lost to travel, especially when it is over one hour per day. Marchetti’s constant, a concept based on the research of Italian physicist Cesare Marchetti, posits that anything more than an hour of travel time per day is problematic.
It would be interesting to compare options than the hypothetical “average Australian household” example given in the report. For example, both the dollar costs and time costs in Australia could be reduced by having one fewer car for the average family, and living in a location that allows that option to become viable.
My own research suggests that many cities around the world are increasingly opting for greater investment in public transport and higher density urban redevelopment, rather than building housing on the fringes of cities where houses cost less but transport costs are huge. – Peter Newman