Long-term Perspectives for the State in Austria. Projections of the Public Household to 2060

Future shifts in the demographic structure, notably the rising share of older people, will have important implications for government budgets, since the dependent population increases in relation to the population of working age. This study analyses the influence of the demographic change and of other secular trends in the areas of old-age benefits, health care, education, nursing care, family support and unemployment compensation on public finances, taking into consideration the existing legal framework. The budgetary implications are compared with the fiscal targets deriving from the "deficit rule", i.e., a structural general government deficit no higher than 0.45 percent of annual GDP. Since future output strongly depends on the assumptions for the long-term trend in labour force participation, the projections are built upon two alternative scenarios: the common labour force projections of WIFO and IHS, and the labour force projections of the European Commission. In both projections, the government debt ratio is in the range between 50 percent and 77 percent of GDP in the long run, whereas compliance with the deficit rule would take it down to around 30 percent of GDP. A number of scenario analyses modify the underlying assumptions and highlight inherent risks to the forecast. The study also inquires into the causes and scope of the deviations of the new forecast from the previous long-term budgetary projections of 2013.