Finance Minister Mathias Cormann recently announced the Government will push ahead with an increase in the fuel excise from November 10. The tax will then be increased every February and August in line with inflation.
Photo: Fuel tax impact exaggerated by Australian Automobile Association CEO. (AAP:
Senator Cormann said the impact would be modest. "A typical household using about 50 litres of fuel a week will pay an extra 40 cents a week for their petrol by the end of this financial year," he said.
In Question Time on October 28, Prime Minister Tony Abbott said: "Well, Madam Speaker, it will cost the average family 40 cents a week."
However Andrew McKellar, the CEO of the Australian Automobile Association (AAA), has rejected the Federal Government's figures, describing them as "wrong" and "disingenuous".
"Well, that's completely wrong, I completely reject those figures," he said.
"Our analysis shows over the next three years, if this is to be implemented, then the amount that the average motorist would pay every time you fill up about a 60 litre tank, that would be $2 to $3.
"So for the average motorist that's somewhere in region of $140 a year - that's far more than what the Government is suggesting.
"So I think they're being completely disingenuous when they suggest it would be as low as that."
ABC Fact Check assesses Mr McKellar's claim.
- The claim: Andrew McKellar says the average motorist will pay somewhere in the region of $140 extra a year with an increase in the fuel tax excise from November 10.
- The verdict: Mr McKellar is assuming a higher level of fuel consumption than is supported by official data. His calculation is also based on costs that won't apply for three years. His claim is exaggerated.
Paying tax on fuel
Taxes on fuel date back to Federation, and indexation of the fuel excise began in 1983 to keep pace with inflation. Indexation was abolished in 2001 to alleviate the impact of high petrol prices following the introduction of the Good and Services Tax.
At that point the excise was frozen at 38.143 cents per litre.
The 2014-15 federal budget announced that biannual indexation of the fuel excise linked to the Consumer Price Index would recommence on August 1, 2014. However, faced with Senate opposition, in October Senator Cormann announced a tariff proposal measure to give "practical effect" to fuel excise indexation. The measure, taking effect on November 10, allows the Government to claim the higher excise pending validation by Parliament within a year.
Promise check- No tax increases This promise is broken
1 of 78 promise checks
The Government's figures
It was following the May budget that Mr Abbott first said reintroducing indexation of the fuel excise would cost "average families" around 40 cents a week in the first year.
The Prime Minister's office confirmed to Fact Check that the Government's calculations were based on a Household Energy Consumption Survey, conducted by the Australian Bureau of Statistics in 2012 and released in September 2013.
It looked at money spent, rather than litres purchased, and found that average Australian households spent $59 a week on fuel, comprised of $51 on petrol and $8 on diesel. At the time the average petrol price was 144.3 cents per litre and diesel 150.6 cents per litre.
Combining these two figures produces an average weekly usage for all households of 35.3 litres of petrol and 5.3 litres of diesel, a total of 40.7 litres of taxed fuel. With indexation expected to add one cent per litre to the excise in its first year, that means the change would cost 40.7 cents per week.
Fact Check previously found the "40 cent" claim only applies to "the average household" which includes single occupiers, rather than "the average family" as Mr Abbott said. For some types of families, such as a couple with dependent children, fuel consumption is higher, and they will pay an average of 55 cents extra per week in the first year.
Senator Cormann has used slightly different language, referring to "typical households" spending as 40 cents more per week in the first year.
However, the Finance Minister also used a weekly fuel consumption figure of "about 50 litres", which is closer to the amount spent by a family comprising of a couple with dependent children, rather than an average "household".
The AAA's figures
The AAA provided Fact Check with the calculations by which they arrived at their claim that over the next three years the average motorist would pay an extra $2 to $3 per tank, totalling around $140 a year. The AAA makes a number of assumptions, including a 2.5 per cent annual inflation rate, which is in line with budget forecasts, and within the Reserve Bank of Australia's target range.
The AAA's calculations show that the fuel excise will add half a cent per litre from November 2014 to February 2015.
After the next inflation-linked increase in February, fuel will be just over one cent per litre higher than before indexation was reintroduced. This is consistent with estimates produced by the Parliamentary Library after the reintroduction of indexation was announced in the May 2014 budget.
The AAA calculates that the excise will be a little over two cents per litre higher than pre-indexation in the 2015-16 financial year, 3.21 cents higher in 2016-17 and by 2017-18, it will be 4.34 cents per litre higher than before indexation was reintroduced.
The AAA then assumes weekly consumption of 60 litres of fuel per week, or 3,120 litres of fuel a year, for what it describes as the "average motorist".
This produces a calculation that weekly spending will be 30 cents higher than pre-indexation between November 2014 and February 2015, 62 cents higher between February and August 2015, $1.27 higher in the 2015-16 financial year, $1.93 higher in 2016-17 and by 2017-18 will be $2.61 higher than before indexation was reintroduced.
The comparable yearly increases calculated by the AAA are $32.35 by August 2015, $65.88 in 2015-16, $100.25 in 2016-17 and $135.48 in 2017-18.
This last figure is close to Mr McKellar's claim that the increase will be "somewhere in region of $140 a year".
Using the ABS figures
If the excise increase were calculated using the ABS "average household" figure of 40.7 litres per week, rather than the AAA's assumption of 60 litres a week, weekly spending would rise by 21 cents between November 2014 and February 2015, 42 cents by August 2015, 86 cents in 2015-16, $1.31 in 2016-17 and $1.77 in 2017-18.
The comparable yearly increases would be $21.84 by August 2015, $44.72 in 2015-16, $68.12 in 2016-17 and $92.04 in 2017-18. All these figures are for the cumulative increase on the pre-indexation level of excise.
Using Senator Cormann's estimate of 50 litres per week, "typical households" will pay an extra $2.17 per week and $112.84 per annum in 2017-18.
Apples and apples
The AAA's sums for "average motorists" assume an almost 50 per cent higher weekly fuel consumption than ABS figures suggest for "average households". They're 20 per cent higher than Senator Cormann's figure of 50 litres per week for what he calls "typical households".
When Mr McKellar made his claim on October 28, the national average price of unleaded fuel was $1.43 per litre. This was close to the $1.44 cents per litre at the time of the ABS survey.
On this basis, 60 litres of fuel would cost Mr McKellar's "average motorist" $85.80.
The ABS data shows that expenditure level falls somewhere between the $81 per week spent by a "couple family with dependent children" and the $88 per week spent by "other one family households".
By way of comparison, a "lone person" only spends $24 per week on fuel for their vehicle.
The AAA told Fact Check their estimate is to "illustrate a point", and based it on a rough average of the capacity of popular small and medium-sized cars of between 55 and 70 litres. However the AAA was unable to provide evidence to support their assumption that the "average motorist" fills their tank once every week.
The verdict
In arguing against the Government's figures, Mr McKellar is assuming a higher level of fuel consumption than is supported by official data.
He is also making a comparison using weekly and yearly costs which do not apply for another two or three years.
Mr McKellar's claim is exaggerated.
Sources
- Tony Abbott, House of Representatives Questions Time, October 28, 2014
- Fuel Taxation Inquiry background report
- Commonwealth of Australia, Budget 2014-15
- Parliamentary Library, Reintroduction of fuel excise indexation
- ABS, Household Energy Consumption Survey
- Australian Institute of Petroleum, pump prices
