Reveals that the average Australian family is spending up to $22,000 every year to get around.

Overview
The Australian Automobile Association (AAA) commissioned SGS Economics and Planning (SGS) to design and develop the Transport Affordability Index to provide a snapshot of the costs of transport for a typical household in Australia’s capital cities, including public transport costs and costs associated with car use. This Index will be regularly updated to show how transport costs move over time relative to incomes. The baseline is quarter one (January to March) 2016.

The Index is based on the incomes and transport costs of a hypothetical household in each capital city. The characteristics of the household reflect the most common or average characteristics of the population. In some cases, household characteristics have been chosen to ensure some typical transport costs are well illustrated, while still being representative. The hypothetical household is identical across cities to allow for ready comparison.

The Index is designed so that the hypothetical household’s transport costs are influenced not only by changes in the prices of transport, but also by changes in transport patterns. The Index reflects the total weekly cost of all transportation expenses for the hypothetical household, as a share of income. Calculations are made for capital cities in each state and territory. National averages are calculated by simply averaging each jurisdiction’s result. (Note - a weighted average would have skewed the results towards the densely populated jurisdictions).

The Index includes a wide range of costs families face when they own a car. Broadly these fall into two categories: upfront costs and ongoing costs. Upfront costs include purchase costs for a new vehicle such as interest payments, registration, stamp duty, compulsory third party (CTP) insurance, driver’s licences and comprehensive car insurance. Ongoing costs are those which increase the more the vehicle is driven, namely fuel costs, tolls and car maintenance. Public transport costs for an average commute to work are also captured as these are fixed costs to many families and make up a growing share of weekly expenses.

While the AAA recognises that vehicle depreciation costs represent a significant, often hidden, cost to families, this cost has not been included in the Index. The Index seeks to account for actual weekly transport cash flow for an average Australian household, covering costs that need to be factored into the weekly family budget; depreciation is not usually accounted for in this way. Similarly, parking costs have not been included in the Index due to the lack of consistent data available on the cost to regular parking users in the respective capital cities and the price variation that exists between CBDs and suburban locations.

Finally, the Index seeks to compare the affordability of transport costs across Australia by comparing them with an estimate of the median weekly income of the hypothetical household. Total transport costs in each city are compared with the average income of a typical family in that city, as a way to illustrate the proportion of income spent on transport related costs.

As the Index is updated over time, a clearer picture will emerge of the key transport costs putting pressure on the budget of a typical Australian family, which may differ across Australia’s capital cities. The Index will allow the AAA to assess the impact of proposed government policy decisions with implications for the average weekly budget demonstrated in a timely, easy to understand format. Consumers will also be better informed about how their decisions around transport affect their overall household budgets.

The hypothetical household
The hypothetical household in each capital city is a couple with children – the most common type of household in Australia. The couple consists of a 38 year old woman and a 36 year old man – the average ages for a man and a woman in Australia. They live in a detached house and have two cars. Both are employed.

A typical Australian passenger vehicle is driven 13,800 kilometres per year, and is 9.8 years old. Therefore, the model assumes that the household’s two motor vehicles will be 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 a near-new vehicle (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 per 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 households, would need to use toll roads to access the CBD.