While inflation in Austria was well below two percent last year, it is now more than three percent. How bad is it gonna be
From Heinz Steiner
Life in Austria is becoming significantly more expensive. While the inflation rate was still quite moderate last year, it has been since the spring of this year new highs. In May, June and July it was officially 2.8 and 2.9 percent, respectively, and in August and September it climbed to 3.2 percent. And an end to the increase is not yet in sight.
Prices keep rising
On the contrary: further price shocks are to be expected. Because energy prices will likely remain high in the coming months and significant price increases for food are also to be expected. This means that Austrians can probably dig deeper into the Börserl for housing, transport and food, as well as the ORF already reported.
Economists are now already expecting Price increases of more than four percentwhich will eat up the savings of Austrians in view of the zero interest rate policy that has been in place for years. Not to mention the lower purchasing power of wages and salaries – because hardly anyone will receive an increase of more than four percent this year.
Four percent inflation?
After the Oesterreichische Nationalbank (OeNB) issued the Inflationsprognose increased to 2.2 percent for the year 2021, the economists there are likely to soon adjust their forecasts further upwards. Probably 2.8 to 3.2 percent. Especially when further large price jumps are to be expected.
However, a reaction from politics is hardly to be expected. For example, the federal government could reduce energy taxes and thus take some pressure off the market. But thanks to the participation of the Greens in government, such a step is very unlikely. After all, want this further increase the cost of energy anyway. In addition, the price increases pour significantly more money into the already tight budget, so that the People’s Party is unlikely to have any particular interest in tax reductions in the energy sector.
Do states want to apologize at the expense of their citizens?
In addition, there is the fact that a higher rate of inflation also devalues national debt. Years ago, experts warned that the states could use the low interest rate environment to implement an inflation policy and thus ensure a de facto devaluation of public debt. Even if the effect is not as strong at an inflation rate of around three percent, politicians could well have an interest in tolerating price increases of around five percent, to quasi to apologize in this way.
After all, the public budgets have suffered from the disastrous lockdown measures and a devaluation of debts due to inflation, as well as the associated higher tax revenues (e.g. sales tax, which makes up a large proportion) are likely to be decisive here. The citizens are, of course, the ones who sufferwhose savings melt away like butter in the sun and whose wages and salaries can hardly keep up with the price increases.