Fiscal Council estimates – the budget gap will grow in the long term

There is time to take countermeasures, as Fiscal Council President Christoph Badelt emphasized in a press conference on Tuesday morning. Because it is assumed that the corona measures will expire quickly from next year and will have no long-term impact on the fiscal situation. This would allow you to return to the growth path of the time before Covid.

As far as the interest rate environment is concerned, there is no hurry, emphasized Badelt. Nevertheless, steps should be taken to keep Austria crisis-proof and also to make relief possible. As far as the upcoming tax reform is concerned, the former Wifo boss urged that the work factor be relieved, which he currently hardly hears about. Badelt believes that the price of CO2 could definitely go high. But you will not be able to gain too much from it, since countermeasures to relieve the population would be necessary: ​​”This is not a fundraising project.”

In order to keep the budget in balance in the long term, the Fiscal Council can take a look at the health and pension systems. Extraordinary pension increases by 0.4 percentage points, such as those made between 2018 and 2021, would increase the long-term budget gap by 0.7 percent. In this sector it would make sense if the actual retirement age increases with age, i.e. to 64.5 years by 2070. This would reduce the gap by 1.1 percent as well as a permanent restriction on growth expenditure in the health system by just 0.3 percent .

These demography-related expenses are the main drivers towards the budget gap anyway. This is because they will rise by around 5.8 percent of GDP in the next 50 years or so – most of all in health, followed by long-term care and pensions. Investments – for example in the climate sector – could reduce the resulting gap, but not close it.

The Fiscal Council therefore wants politicians to think carefully about long-term expenditure. How far the long-term forecasts will change is something that the committee intends to show regularly in the future. This first sustainability report, presented today, is to be followed by a next report in one or two years.

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