Transport in a cost of living crisis

There’s a lot of talk of the cost of living crisis at the moment. Many are doing it tough.

Transport costs are part of this – transport is vital for getting access to education and employment and other opportunities.

It got me thinking about what governments could do to relieve family budgets. What types of investment and intervention provide benefits, and how much? Let’s try and work it out.

The RACV’s car costs from 2022 (the most recent one I could find) provides information on the monthly costs of running a range of different cars – including loan payments, registration, memberships (RACV, presumably), insurance, fuel, servicing and tyres.

They don’t seem to include other costs such as tolls, parking or traffic fines. My assumption is it’s based on full-time on-site work, and/or the average kilometres of driving per year – in Victoria this is 12,400 km.

In their calculations, the loan often accounts for more than half the monthly cost. Some people wouldn’t have a loan, but the costs of sinking upfront capital cost into a vehicle, and owning it over time (eg depreciation) are substantial and might be roughly equivalent, so let’s go with it.

Base scenario: Let’s imagine a hypothetical family: they don’t regularly use public transport, and they run two relatively new cars: one small and cheap (Kia Picanto S) and one medium (Toyota Camry Ascent).

• Small car $746 + medium car $1123 = $1869 per month.

So, what could governments do to try and reduce these costs?

Scenario 1: What if the government somehow managed to cut fuel costs by 20%? This of course would cost billions to do – the temporary halving of fuel excise in 2022 (which resulted in about a 10% saving off the retail price of unleaded petrol) for 6 months cost a massive $2.9 billion.

But if they’re silly enough to do it, what’s the result for this hypothetical family’s budget?

• The total cost of the two cars goes down to $1807, just a 3.4% saving
• It’s a tiny saving because the vast majority of monthly costs aren’t fuel

Scenario 2: What happens if the government funds extra parking at a railway station so that one of the adults can drive to the station and catch a train the rest of the way to work?

This can cost millions for one station – the recently announced Frankston car park upgrade is costing $87 million for 500 additional spots – a record $174,000 per spot.

Let’s assume our hypothetical family uses the small car to drive to the station, and that as a result its driven 75% fewer kilometres. (I assumed this cut fuel and tyre costs by 75%, and servicing costs by 25%, with other costs such as car loans, rego and insurance remaining the same.)

Let’s assume they can pay for one of the adults to buy an Myki Pass up-front for the train journey – a Commuter Club pass, which is the cheapest type of annual pass.

• The total cost of the two cars drops to $1752 per month, but the Myki Pass costs at least $161 per month, for a total of $1903 per month. This is a total cost increase of 2.3%
• Using monthly Myki Passes instead of annual increases the cost further by about $23 per month
• Overall a cost decrease is likely if the commute is to the CBD (where parking costs are high) or involves expensive daily toll roads – these aren’t included in the RACV data

Scenario 3: What if instead of the station car park being expanded, the bus, walking and/or cycling routes to the station are upgraded, so one of them becomes a time-competitive option to get to the train? This lets our hypothetical family get rid of the smaller car.

• Just running the medium sized car costs $1123, plus the Myki Pass of $161 means a total of $1284 per month, a reduction of 31.3% from our base scenario. Now we’re talking!
• Again, the saving is higher if the car commute involved parking or toll costs.

Scenario 4: What if as well as one adult using PT to get to work, the hypothetical two kids also use it to get to school?

• It’s as above, plus two Myki annual School Passes, which are $60 per month, for a total cost of $1404 per month – assuming the remaining car still gets driven about the same amount. That’s a saving of 24.9% from our base scenario. Still quite good.

Scenario 5: What if PT is so good that both adults and both kids can use it for their daily commute? Let’s say they keep the medium sized car for non-commute trips, but its kilometres drop by 75%.

• The car running costs go down from $1123 to $977, which with Myki Pass fares added makes a total of $1419. This is still a saving of 24.1% from the base scenario.

Scenario 6: Same but they keep the smaller car.

• The smaller car with fewer kilometres drops in cost from $746 to $629 per month. Plus Myki fares makes a total of $1070 per month, a saving of 42.7%. Wow.

Scenario 7: The PT is so good for this family that they can get rid of their cars altogether and use PT all the time. (Perhaps they sometimes hire a car, but that’s beyond the scope here.)

• The only costs we now have are the Myki Passes, which add up to $441 per month, or a saving from the base scenario of 76.4%. Double-wow.

Here are the above numbers in graph form.

I also tried out the calculations with both cars using the smaller car cost. The dollar amounts were a bit different, but the percentage savings for the various scenarios didn’t change hugely.

What can governments do?

These numbers are very rough, and the modelling here is obviously very limited. Any resemblance to a real family budget might be entirely coincidental. (It would be nice to see some figures that let us model the cost of a cheap secondhand car, which might be a more common scenario for families facing budgetary pressures.)

But I think a few things are clear here:

• Trying to suppress the cost of fuel doesn’t make a huge difference to a family transport budget, because all the other costs of the cars are huge.
• Boosting park and ride may sometimes have its uses, but it may be counter-productive for household budgets if a car is still needed to access public transport.
• Myki fares are a drop in the ocean compared to the costs of owning and running a car.

Even a shift to electric cars may not help much. Fuel and maintenance costs will go down, but standing/capital/finance costs (at least in the next few years) will go up because for now, EVs are so much more expensive.

Any talk of trying to reduce family driving expenses is tinkering around the edges if people still have to drive to most places. The household budget impact is minimal, but the cost a government’s budget is huge.

Improving walking, cycling and public transport options nationwide also isn’t cheap of course. But upgrades targeted at suburbs that most need them would absolutely be affordable, especially if funding is diverted from equally local but often exorbitantly expensive car park upgrades or other road projects.

The real savings to a hypothetical family’s budget come if their transport options are good enough to reduce the number of cars they own.

It might be difficult to get many suburban families down to zero cars (scenario 7), but getting more of them to one car (scenarios 3, 4, 5, 6) is not unrealistic.

But governments need to stop investing in projects aimed at making driving easier, and start putting more effort into making the alternatives easier instead.