Following a slowdown in the global economic momentum over the previous year, world GDP expanded moderately in the first quarter
of 2019. In line with this, domestic export growth weakened slightly. The domestic demand is supporting the Aus-trian economic
activity. GDP in Austria rose by 0.4 percent in the first quarter of 2019 compared with the previous quarter.
Under the impact of sluggish global trade, industrial activity in Austria has moved to a downward trend. On major export markets,
demand for Austrian manufactures nevertheless proves resilient (USA, CEEC). The temporary setback in German motor car production
and its repercussions on Austrian suppliers are gradually subsiding, and the USA-China trade conflict has eased. Moreover,
continued solid demand for services helps sustain overall economic activity. Annual average GDP growth in Austria is expected
to slow from 2.7 percent in 2018 to 1.7 percent in 2019; from the middle of the year, demand and output are set to stabilise,
with growth in 2020 staying around 1.8 percent.
The assessment of future economic development by Austrian industrial companies did not deteriorate further in February, optimistic
and pessimistic assessments now almost balance each other out. Against the backdrop of weak world trade, there are also positive
economic signals: in Germany, the situation in the automotive sector appears to be stabilising and the trade conflict between
China and the USA is easing.
The trade conflict between the USA and China is increasingly weighing on the global economy. In the USA, the government shutdown
dampened the optimism of private households. The German economy is still suffering from the upheavals in the automotive sector.
The Austrian economy is proving to be robust in view of the global burdens. Here as well, however, the majority of indicators
point to a downturn.
From the current strong pace driven by industrial output, construction and services, economic growth in Austria is set to
ease somewhat in 2019. While business investment is showing early signs of weakening, private household income and consumption
will benefit from solid wage increases and a lower tax burden. With fewer jobs being created, the reduction of unemployment
will lose momentum. The general government balance will turn to a surplus in the years to come.
The Austrian economy is in an advanced state of a boom. Labour market tightness is reaching a new high, solid income growth
is supporting private consumption, and industrial activity is cooling in line with the global economy.
The world economy is likely to have reached a cyclical peak in 2018. A gradual downturn is expected over the next years. Over
the forecast period 2019-2023, Austria's economy is projected to grow at an annual average of 1.7 percent, slightly down from
the 1.9 percent for the period 2014-2018, but exceeding the euro area average by about ¼ percentage point. Private household
incomes will benefit from the introduction of a "Familienbonus" (family bonus: income tax relief for house-holds with children),
which should support consumer demand mainly in 2019 and 2020. Over the entire forecast horizon, pri-vate consumption is expected
to increase by 1.7 percent on annual average, after +1.1 percent p.a. 2014-2018. Thanks to benign cyclical conditions, the
creation of new jobs will outpace labour supply growth until 2020, taking the unemployment rate down to 7.2 percent. Thereafter,
the labour force may again expand faster than labour demand, with the unemploy-ment rate edging up to 7.5 percent by 2023.
Inflation pressure is set to stay moderate over the medium term, such that the positive gap of domestic inflation vis-à-vis
the euro area should close. The consumer price index is anticipated to rise by an average 2 percent p.a. Under the projected
business cycle scenario and the underlying no policy change assumptions, the general government balance should be positive
over the entire period. Hence, the public debt ratio (general government debt as a percentage of nominal GDP) should fall
from 2018 to 2023 by around 14.5 percentage points to the benchmark value of 60 percent.
In 2017, the economic upturn in the Austrian manufacturing sector led to an improvement in the unit labour cost position compared
with the weighted average of all trading partners. Productivity increased more strongly than in previous years, while labour
costs in Austria rose only moderately. The Austrian unit labour cost position also improved in comparison with Germany and
the other EU trading partners.
The backlog of exhaust emission tests led to a considerable build-up of inventories and production losses in the German automotive
industry. Growth in industrial production also slowed down in Austria. However, this setback is not clearly linked to the
automotive supply industry. The situation on the labour market continued to improve in November. The rise in energy prices
should have peaked in October.
Supported by: Anniversary Fund of the Oesterreichische Nationalbank
Online since: 02.11.2018 0:00
This paper analyses the effects of the introduction of the tax relief for families family bonus (Familienbonus) and supplementary
child benefit (Kindermehrbetrag) on household income in Austria, using the WIFO-Micromod microsimulation model that is based
on the EU-SILC data. The average yearly (person-weighted) equivalised household income increases by 320 €, which corresponds
to a relative increase of 1.4 percent. For the families concerned, the reform leads to an increase in the corresponding income
by 733 € or 3.1 percent and to a reduction in the average yearly income tax burden by 1,556 €. The effects are most pronounced
in the medium range of the household income distribution. The total personal income tax revenue decreases by 1.5 billion €