Spending cuts will not affect purchase power, survey shows

Austrians’ spending power will increase year on year in 2011 despite higher taxes and less welfare spending, a new study suggests.RegioData announced today (Tues) that it expected Austrians’ purchasing power to rise by 2.6 per cent next year compared to this year’s rate. The research agency said this increase meant people will have 450 Euros more available to spend.The company, however, also pointed out that the year on year improvement may range around only 0.6 per cent considering the inflation rate.RegioData explained the positive development was linked with the solid recovery of the Austrian economy and the country’s low unemployment rate.The Austrian National Bank (OeNB) announced only last week it expected the Austrian economy to grow by 2.1 per cent year on year in 2011. OeNB announced only in June that the country’s gross domestic product (GDP) could improve by 1.8 per cent next year compared to 2010.The institute also said it expected the federal jobless rate to edge down by 0.2 per cent by 2012. Around 4.5 per cent of people living in Austria are currently out of work. The Netherlands are the only European Union (EU) member state with a lower rate (4.3 per cent).RegioData’s prediction comes on the back of news that political leaders decided to raise taxes on cigarettes and mineral oil products. The coalition of Social Democrats (SPÖ) and the People’s Party (ÖVP) also agreed to reduce family subsidies.ÖVP Finance Minister Josef Pröll said in his 2011 budget speech the government planned to save an extra 8.27 billion Euros between next year and 2013, adding that additional revenue from higher and new taxes will at the same time make around seven billion Euros.Pröll explained he was confident that the Austrian budget deficit will shrink below three per cent of the GDP by 2014. It currently ranges around 4.5 per cent, up from 3.9 per cent last year and 0.4 per cent in 2008. Economists have, however, warned that the Austrian debt rate – which currently ranges around 70 per cent of the GDP – will soar further despite the austerity measures.Opposition chiefs hit out at the SPÖ-ÖVP coalition over its budget plans. Greens leader said the reduction of welfare spending was a “disgrace”, while Alliance for the Future of Austria (BZÖ) head Josef Bucher dismissed the 2011 budget as “almost perverted”. He claimed the government “did everything wrong.”Some commentators suggested the coalition should go “back to the start” and create a new budgets for the coming years from scratch considering the wide opposition against the recently announced measures.Pröll and SPÖ Chancellor Werner Faymann ruled out “lacing up” the presented package – but promised some “adjustments” before the government passes it later this month.New polls shown that support for the government parties is waning because of the tax increases and the lengthy war of words about how best to get the state’s finances in order.RegioData explained today Austria currently has the fifth-highest spending power in Europe at an average 18,200 Euros per year.The research firm considered various statistic material such as companies’ turnover, unemployment payment rates and family subsidy figures for its most recent survey.Austrians’ spending power jumped by 4.6 per cent year on year in 2009 despite the economic crisis, according to research agency KMU Forschung Austria. The group said Austrians had around 135 billion Euros of disposable income to spend last year.GfK Austria said Vienna city centre residents have the second-highest spending power in German-speaking Europe with 43,292 Euros ahead of people living in Höfe am Zürichsee (Lake Zurich), Switzerland (48,971 Euros). Nine of Austria’s top ten districts lie in Vienna, with Mödling – which is located just south of Vienna – coming fourth.The Swiss had an average spending power of 27,123 Euros last year, while Austrians had 19,664 Euros available. Germany came third with an average 18,904 Euros.Swiss bank UBS said recently Vienna had retained 24th place in its international spending power survey. The Swiss city of Zurich made first place in the financial institute’s study.Meanwhile, market analysts have said the Austrian retail sector could achieve a turnover of 1.75 billion Euros this year from the sale of Christmas gifts, up by three per cent year on year. Sales of home entertainment appliances and clothes in particular are set to soar.