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Mid-term Perspectives of the Austrian Budget Policy

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  • Gerhard Lehner

    (WIFO)

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    Abstract

    Austria's budget policy is focused on the goal of achieving a balanced household for the general government by the year 2002. This goal includes the states (Länder) and communities and thus requires intense co-operation between territorial authorities. The reasons for a balanced household are, on the one hand, the wish to safeguard the inter-generation "contract" and, on the other hand, to secure some leeway for future budgets and to strengthen Austria as a business location. The study analyses government household management in 1999 and the budget for 2000. Both budgets provide keystones for mid-range budget policy. At present, budget policy is strongly focused on issues of balance rather than structure. In 1999, the total state deficit was 2.1 percent of GDP. The Länder and communities achieved a surplus of 0.3 percent of GDP, whereas the Federal government produced a deficit of 2.4 percent. For 2000, the budget projects a loss of 2.2 percent of GDP (by the national accounts concept), while the other territorial governments are assumed to have a surplus of 0.5 percent. Accordingly, the total loss will be 1.7 percent of GDP. Revenues in 1999 rose at a lower rate than GDP, a trend that will continue this year. The tax reform and the second stage of the "family package" will dampen federal revenues in 2000. The revenue quota, still at 26.7 percent in 1998, will decline to 25.2 percent in 2000. The expenditure quota declined even more sharply from 29.2 percent in 1998 to 27.2 percent in 2000. The decline of the expenditure quote applies across the board to all components with the exception of debt interest payments. Expenditure on interest payments rises faster than GDP (from 3.9 percent in 1998 to 4.1 percent in 2000). This trend makes it abundantly clear that new debt must be scaled down and interest payments reduced. Other areas also show interesting trends: the propensity to invest is falling off and, remarkably, social expenditure is rising at a lower rate. However, the decrease in the federal contribution to the pension insurance system in 2000 is due mainly to "once-only effects", which need to be replaced by the effects of the pension reform as of 2001. Compared to former years, the Federal government is exercising more restraint not only with respect to social expenditure but also regarding transfers to other public organisations and enterprises. Funding of the Federal budget depends on tax yields, which are growing at a weaker rate than GDP due to the tax reform. Revenues from wage tax this year will decline to 11.2 percent, the lowest value since 1997. For the goal of a balanced overall household to be accomplished in 2002, and provided that the other territorial authorities achieve a surplus of about ATS 30 billion (1 percent of GDP), and also provided that the increased yield from the tax measures effective as of the start of 2001 will accrue exclusively to the Federal government, it would be necessary for the latter to reduce its expenditure quota by another 1.3 percentage points by 2002.

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    Bibliographic Info

    Article provided by WIFO in its journal WIFO-Monatsberichte.

    Volume (Year): 73 (2000)
    Issue (Month): 10 (October)
    Pages: 601-615

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    Handle: RePEc:wfo:monber:y:2000:i:10:p:601-615

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    Related research

    Keywords: Mittelfristige Perspektiven der Budgetpolitik; Mid-term Perspectives of the Austrian Budget Policy;

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