Budget hearing: tackling structural reforms to pensions

Economic growth of 3.2% is forecast for Austria in 2018. This is the highest growth rate in eleven years. The 2018/19 double budget will benefit from this - particularly through higher tax revenue. "Nevertheless, it is a very disciplined budget. In the past, even in times of economic boom, the money tap remained firmly on. Since the state treaty was signed, the federal government has never achieved a surplus. In this respect, the double budget can be seen as a short-term signal for stable finances," says Tobias Thomas, Director of the economic research institute EcoAustria at today's budget hearing in the National Council. In the long term, however, fiscal policy faces huge challenges: "After the national 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 driver of this development is demographics. This will have a particular impact on the areas of pensions, health and care expenditure," says Thomas. Structural reforms are needed here: "If the retirement age were linked to life expectancy, contribution rates and pension benefits could be kept stable and the federal subsidy would not have to be extended any further," explains Thomas. The current pension system contains a problematic automatism: "It means that increasing life expectancy automatically leads to a longer period of entitlement and this automatically jeopardizes the sustainability of finances," says Thomas.