Economic Stimulus Package Announced at Government Retreat

Federal Chancellor Christian Stocker (ÖVP) stated before the start of the government retreat on Tuesday afternoon that the published inflation figures were "not good news." An inflation rate of 4.1 percent is "far too high." Therefore, the topic will be intensively addressed during the two-day retreat, as well as measures to promote economic growth, "so that Austria gets back on the fast track."

The black-red-pink tripartite coalition has agreed on economic measures amounting to one billion euros. 600 million of this was already planned in the budget for offensive measures, the rest is to be freed up through reallocations and subsidy cuts. Planned are investment incentives, support for energy-intensive companies, and funds for broadband expansion. Additionally, smaller measures against inflation were agreed upon at a government retreat.

Specifically, the government agreed, among other things, on investment incentives by increasing the investment allowance from ten to 20 percent, and for ecological investments from 15 to 22 percent, starting November 1. For this, 220 million euros will be made available from the budget over the next two years. This is a "clear incentive to make investments and to bring forward investments," emphasized Minister of Economic Affairs Wolfgang Hattmannsdorfer (ÖVP) at a press conference on Tuesday.

Energy-intensive companies to be supported

Energy-intensive companies are to be supported with 75 million euros each this year and next year. The corresponding law is to be reviewed by the end of the week, according to Hattmannsdorfer. There will be relief in the energy levy. For broadband expansion, 40 million euros per year will be made available for the years 2027 to 2029. To mobilize more private capital, a location fund is to be created.

Measures against "shrinkflation" planned

In the fight against inflation, the focus is on food prices, especially on the EU in the fight against the "Austria surcharge" in the food trade. Meanwhile, some national measures are also planned. To counter "shrinkflation" - hidden price increases by reducing package contents - a legal regulation for mandatory labeling is to be developed by the end of the year. The government wants to seek a "joint effort against price increases in staple foods" with the domestic food retail sector.

Additionally, Statistics Austria is to set up a database for price monitoring from the beginning of 2026 to identify unjustified pricing policies along the supply chain. The existing price commission is to be restructured, and changes in base price labeling for better comparability and more controls are planned. The intervention possibilities of the Federal Competition Authority are to be strengthened, and it is to be supported in implementing comprehensive competition monitoring. The federal law to mitigate crisis effects and improve market conditions in the case of dominant energy suppliers will be extended until 2031.

The trade sector reacted with little enthusiasm. They do not bear the responsibility for the current inflation, explained Christian Prauchner from the Chamber of Commerce: "In this context, the question arises whether an expansion of the competencies of the Federal Competition Authority and Statistics Austria would actually make a meaningful contribution or whether, on the contrary, it could further increase food prices through even more extensive reporting obligations." However, the fight against the "Austria surcharge" is welcomed, and this is also seen as the "top priority" by the Trade Association.

Budget "on track" according to Marterbauer

Finance Minister Markus Marterbauer (SPÖ) pointed out the limited possibilities of the government regarding the economy and inflation. The budgetary situation does not allow for comprehensive economic measures, so the focus is on improving the framework conditions. In terms of the budget situation, they are "on course" budgetarily, especially at the federal level. Since most consolidation measures only came into effect on July 1, the second half of the year will be "decisive".

In the upcoming valorisations, everything must be done to combat inflation, emphasized NEOS State Secretary Josef Schellhorn. Companies must also be relieved through debureaucratization. The government plans to address this issue in a special council of ministers this year.

Labor market measures were also announced. From 2026, 50 million euros annually are planned for the "Action 55 Plus". The tax and levy reduction for working pensioners, mainly pushed by the ÖVP, is scheduled to come as planned in 2026. At the same time, the limit for minor additional earnings will be frozen until the end of 2027. A task force is to be set up on the recently hotly debated topic of part-time work to develop incentives and framework conditions for more working hours.

The counter-financing is secured, the government emphasized on Tuesday, but remained vague on the details. Reference was made to budget reallocations and cuts in subsidies. There is also apparent agreement that pensions - socially staggered - should be increased below inflation, i.e., below 2.7 percent. However, negotiations on this are still pending.

The package of measures is to be decided in the council of ministers on Wednesday. Shortly before the start of the two-day government retreat on the topics of the economy and inflation on Tuesday, there were again bad news: According to a quick estimate by Statistics Austria, the inflation rate rose to 4.1 percent in August, significantly above the inflation rate of 2.1 percent in the Eurozone. "Far too much," emphasized Chancellor Christian Stocker (ÖVP) at the start of the government retreat at noon. The government aims to reduce the inflation rate to two percent in the coming year.

At the government retreat, the program for the next six months is also to be set. For reasons of economy, the three-party coalition is meeting at the chancellery.

FPÖ: Investment Incentives Positive, But Too Late

The three-party coalition received rare approval from the FPÖ. The investment incentives were praised by economic spokesperson Barbara Kolm and budget spokesperson Arnold Schiefer as a "right signal", but from the Freedom Party's perspective, these measures could have been implemented as early as June with a corresponding blue motion in the National Council. Overall, the FPÖ accused the government of "only fighting symptoms" instead of analyzing causes.

The Federation of Austrian Industries (IV) and the Austrian Federal Economic Chamber (WKÖ) expressed satisfaction with the announced measures. Electricity price compensation for energy-intensive companies, debureaucratization, and the establishment of a location fund with growth incentives for startups are important impulses for economic growth, according to the IV. In the pension system and administration, it once again called for structural reforms. The WKÖ welcomed the plans to make longer working more attractive and called for the rapid implementation of the increase in the investment allowance.

The Austrian Trade Union Federation (ÖGB) once again urged for a cap on rent increases for free rents and a crisis mechanism in the planned Electricity Industry Act (EIWG) to intervene in price increases in the energy market.

(APA/Red)

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