Zero percent inflation by the end of the year: savings for every household!

Zero percent inflation by the end of the year: savings for every household!

In Austria, the Momentum Institute has presented a comprehensive proposal to combat inflation, aiming to bring the inflation rate down to zero percent by the end of the year. According to the latest data, inflation was 4.1 percent in August 2023. In order to significantly reduce this number, the institute is planning measures such as price caps for food, energy and rents, which promise an average saving of 1,750 euros per Austrian household per year, reports Dolomite town.

The proposed price caps could significantly impact the inflation rate in various categories. It is estimated that the measures in the food sector could reduce the inflation rate by 1.8 percentage points, in the energy sector by 1.7 percentage points and in the rental sector by 0.5 percentage points. The Momentum Institute also makes it clear that a possible loss of income can be compensated for by increasing corporate taxes.

Market development and social impact

Although the official inflation rate is falling, many households, especially lower income groups, continue to feel the effects of inflation strongly. The inflation crisis appears to have been overcome for the time being, but the rising savings rate has nevertheless contributed to the slump in consumption. After all, prices rose by 20.3 percent from 2021 to 2023, which significantly increased the burden on low-income households. A study for the Ministry of Social Affairs looks at the different burdens of inflation and shows that the poorest 20 percent of the population are more than three times more affected than the richest 20 percent The press.

The distribution of inflation depends heavily on the spending structure of households. Basic needs such as food, housing and energy make up a larger share of the shopping basket in lower income groups. In the upper income groups, however, areas such as transport, restaurants and leisure are the main drivers of price increases. These differences make it clear that the measurement methods used to record inflation often underestimate the actual burden and that the financial scope for consumption and saving varies in different income classes.

Price regulation strategies

The Momentum Institute proposes a variety of measures to achieve the goal of a zero percent inflation rate. In addition to the reduction in VAT on food, which could reduce the inflation rate by 1.1 percentage points, a strict rent control is also being brought into play, which provides for a rent increase of a maximum of 2 percent per year. Such measures could significantly increase monthly savings for households and result in a relief of around 145.99 euros, as the institute notes.

In addition, greater regulation of energy costs could reduce prices by up to 20 percent, which would result in a further reduction in inflation of 1 percentage point. This combination of price controls is designed to be budget-neutral and to significantly minimize the burden on households without putting a strain on government coffers.

The scope of these measures is comprehensive and could bring about significant changes for the Austrian population. As the inflation rate remains a central topic in the public debate, many are watching developments with concern. The coming months will show whether the measures taken will actually have the desired effect in stabilizing the cost of living for all income levels.