OeNB Analysis: Government's Austerity Package Disproportionately Hits Low-Income Earners and Banks

Low-Income Earners Bear Disproportionate Burden

The core findings of the central bank are unfavorable for the lower income brackets. While other sectors record relief of between 0.2 and 0.4 percent, the measures weigh disproportionately on low-income earners. A historical comparison with the other three consolidation phases since EU accession in 1995 also shows that the share of revenue-side measures is currently significantly lower – the burden therefore weighs more heavily on lower incomes.

The bank levy is particularly significant, increasing the tax burden for the financial sector overall by 1.3 percent of gross value added. This burden thus hits a single sector considerably more than other sectors of the country.

Bank Levy Makes Financial Sector More Expensive

Net, the consolidation between 2025 and 2028 amounts to just over three percent of gross domestic product (GDP) in total. In the overall view, the latest consolidation package for 2027 and 2028 is relatively revenue-heavy, which according to the OeNB is offset by the reduction in non-wage labor costs from 2028 and expenditure cuts that have already been decided for some time.

Central Bank Skeptical of Deficit Target

The central bank remains skeptical regarding the achievement of the budgetary targets. It assumes that a deficit below three percent – and thus an end to the deficit procedure by 2028 – is unlikely. Overall, the OeNB assesses the austerity measures of the three-party coalition since 2025 as relatively growth-friendly and, in historical comparison, as quite expenditure-heavy.

The analysis thus sheds a more precise light on the distributional impact of budgetary policy to date. While the central bank considers the growth impact to be moderate, the social distributional effects – both between income groups and between sectors – are substantial.