Inflation will hit Austrian households harder than previously thought! Because real wages, ie labor income adjusted for inflation, are likely to fall by 2.5% and thus at a “historically strong” rate. This is apparent from the current forecast of the National Bank.
The high inflation of 7 percent expected for this year has a drastic effect on purchasing power. The National Bank (OeNB) calculates that net real wages will fall by as much as 2.5% (see chart below). This is the strongest minus in 25 years. In December, the OeNB was still counting on 2.7%, in April 5.6%.
Higher nominal wages cannot compensate for inflation
It is said that the high level of collective agreements, 4% this year on average, will not be able to compensate for inflation. Next year, OeNB governor Robert Holzmann “only” expects consumer prices to rise by 4.2%. Because the wage agreements will also be higher than this year, a purchasing power increase of 1.4% is expected in 2023 and another 0.4% in 2024.
savings interest falls
However, war and high inflation are dampening economic growth to 3.8% this year and 1.9% in 2023. Continued strong consumer spending is likely to remain one of the driving forces. Over the past two years, households have saved an additional 20 billion euros. According to the OeNB, most of this will be reissued to support the economy. As a result, the savings rate falls from almost 12% last year to 8.4% this year.
Union raises the alarm
The OeNB’s high inflation expectations annoyed the ÖGB union. It cannot be that we are still waiting for measures to counter the sky-high prices,” said ÖGB President Wolfgang Katzian residential buildings.
The NEOS, on the other hand, seized the National Bank’s current economic forecasts as an opportunity to once again argue for the abolition of the cold progression. The effect of the 2022 tax reform has already evaporated, further income tax cuts are needed instead of “useless vouchers,” NEOS business spokesman Gerald Loacker said on the broadcast. Private consumption can also be supported in this way.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
