Budget consolidation possible without restrictions for the population

The current good economic situation is a tailwind for budget consolidation at federal, state and local level. Nevertheless, fiscal policy faces huge challenges: "After the public debt ratio is expected to fall to below 60% by 2025, it will rise again from 2030 without significant reform measures and even exceed the current ratio in the medium term. The reason for this is demographics, which will have a particular impact on expenditure in the areas of pensions, healthcare and long-term care. Structural reforms are needed here," says Tobias Thomas, Director of the economic research institute EcoAustria. In addition, further progress should be made in consolidating budgets. "Budget consolidation is possible without massive restrictions for the population if we succeed in leveraging efficiency potential," says Thomas. A study by EcoAustria from 2015, for example, already shows efficiency potential for the federal government, provinces and municipalities of almost EUR 5 billion, including in the areas of healthcare, care, compulsory schools and administration. The aim is not to overhaul the system, but to learn from good solutions: "If public funds were used as effectively everywhere as in the most efficient federal state, expenditure could be reduced by billions without having to reduce the quality of public services," says Thomas. A comparison of public expenditure and performance results in Austria with those of other European countries reveals even more efficiency potential. "Countries such as Denmark, Finland and the Netherlands, for example, spend significantly less per pupil on education than Austria when adjusted for purchasing power, but regularly achieve better results in the PISA test," explains Thomas. If the efficiency potential is tackled consistently, it is possible to reduce expenditure and improve performance results at the same time.