Austria 2025 – Income Distribution and Private Consumption in Austria

Since the mid-1990s, domestic demand in Austria has been remarkably weaker than before. Private consumption growth in particular has been rather low. The slackening has been reinforced since the financial and economic crisis of 2008-09. The article looks into possible causes of this slowdown, with a special emphasis on income growth and distribution. We analyse different measures to strengthen private consumption and their effects on income distribution, demand and employment. A reduction of marginal income tax rates or a reduction of employees' social insurance contributions are found to have only marginal effects on the distribution of income and would therefore strengthen private consumption only to a limited extent. In contrast, an increase in social transfers in favour of low-income households would have markedly higher positive effects.