Help plan is coming – Wifo boss: ‘The package is expensive, but it can work’


The cabinet wants to counter the current wave of inflation with a multi-billion dollar aid package – but a few questions remain unanswered. The “Krone” spoke with Gabriel Felbermayr, director of the Austrian Institute for Economic Research (WIFO). He says that while the package isn’t exactly cheap, “significant parts of the measures could come into effect soon”. The end of the cold progression would also make the Austrian tax system better.

„krone“: Director Felbermayr, what do you think of the government’s anti-inflation package?
Gabriel Felbermayr: Given record inflation, the government is right to launch a generous package. It’s paddling, not messing around. And important parts of the measures can have an effect quickly, for example the very important valorisation of benefits. It is good that you provide direct support and do not intervene directly in the market mechanism. High prices would lead to behavioral changes among consumers and capacity expansion among providers. It is also good that completely new instruments are not invented. And very important: Finally the cold progression is put to an end. This makes the Austrian tax system in general better.

Do these projects really pay off, so people actually stay more in the stock market?
Yes Yes. The effects of inflation on purchasing power are noticeably reduced as more money enters the market. A family with two children and a low income can count on 3000 euros extra. Added to this are the effects of the previous inflation packages and the tax reform that is now starting to take effect. But inflation as such will not fall as a result of the package, so there is still a lot of money coming out of the market. It may even be that the package has a price-driven effect because demand, for example in the catering industry or leisure activities, increases.

Could or should something have been done better?
Not all measures are socially correct because they are not classified by income. That makes the package expensive. The postponement of CO2 pricing can also be criticized, although I can personally understand that. Most importantly, it really comes in the fall.

Can we as a state afford that?
The state can pay for the measures. Compliance with the Maastricht deficit criterion is probably not endangered. But it is clear that the scope for fiscal policy will be limited in the future. Structural reforms, for example in federalism, in the subsidy system or with regard to the effective retirement age, are becoming all the more important.

Source: Krone


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