Inflation – How inflation absorption works

May I recommend? Waldemar? the pet of Maximilian and Susanne Mustermix and their two children, Moritz, 14, and Lea, 10. The Ministry of Finance lets the family live in Graz, Susanne receives €2,500 gross per month as a full-time employee, Maximilian works part-time. They both commute to their place of work, he could also use public transport, so he gets the small commuter allowance. he needs the car to go to work, so he gets the big one.

The sample mix is ​​the original family the government uses to calculate the three-stage measures it has announced to ease inflation. In total this year this family will be relieved by 4,329 euros. However, tax measures that had already been decided the previous year but are now being pushed forward are also included.

As humorous as the story begins – the considerable amount is offset by the huge additional expenses of this family. And with an inflation rate in July of plus 9.2 percent compared to the previous year, these are huge according to a quick estimate by Statistics Austria. The drivers of already confirmed June inflation of 8.7% were fuel, food and household energy.

Reducing or delaying inflation

The narrative of the government and the opposition parties SPÖ and FPÖ to relieve the pressure is moving in completely different directions. “Rising costs worry many people, which we take very seriously,” Finance Minister Magnus Brunner (ÖVP) told “Wiener Zeitung”: “We mitigate the effects of inflation as best we can, but we can never make global developments 100 percent compensation”. In addition to the 18 billion euros of green tax reform, four billion euros will come from the anti-inflation packages of January and March this year and another 28 billion by 2026 – five of which should already come into force this year.

SPÖ president Pamela Reddy-Wagner sees it differently: The turquoise-green “only lags behind” when it comes to inflation: “The government only controls what is not possible.” They won’t give up – and will continue to demand price caps on energy, fuel and the suspension of VAT on food. FPÖ federal party chairman Herbert Kickle not only let it be known on the occasion of the price increases by Wien Energie and EVN that this is “modern robber barony in its purest form”. It is no longer acceptable for this black and green government to reject price caps on energy, fuel and basic food.

Vice-Chancellor Werner Kogler (Greens), like the ÖVP, again ruled out price caps and tried to explain why: “Any price cap would only hurt billions in Austria.” Austrian price subsidies would not stop at the border, but would also flow to neighboring countries, the “Wiener Zeitung” has already reported: “Thus we will provide half of Europe with our tax billions.”

Reimbursement of energy costs and suspension of additional costs

However, the billions in taxes that the government gets their hands on apparently aren’t being noticed to the same degree as inflation. In the first package, it was already 900 million euros that the suspension of the green electricity flat rate and the green electricity subsidy cost.

In the electricity bills of individual households, however, this amounts to just 110 euros less than last year. In addition, the Mustermix family received 150 euros through the energy voucher, which they could have credited to the electricity provider. To this end, the government estimated a total of 600 million euros, which Austrian households “have more to live on,” according to the January broadcast.

However, after Steiermark Energie increased the price of electricity from April 1, the family had to pay almost 21 euros more in monthly electricity costs with an annual consumption of 4,000 kilowatt hours – this amounts to 185 euros by the end of the year. In that sense, it would still be a “win” this year.

In the example, however, the Ministry of Finance obviously assumes that the family has a photovoltaic system on the roof of their house. Since he benefits from the reduction of the electricity tax from 1.5 to 0.1 cents according to the Ministry of Finance with 37 euros per year, he should assume an annual surplus of 4,000 kilowatt hours, fed into the electricity grid by the system of the Mustermix family every year .

Therefore, it is likely to be an 8-kilowatt peak system that produces 8,000 kilowatt-hours of electricity on average per year, estimates E-Control’s green energy expert Harald Proidl in an interview with the “Wiener Zeitung”. Ideally, the family would be self-sufficient in terms of electricity. However, consumption in summer with more daylight and time outdoors is lower than in winter. However, 75 percent of PV electricity generation takes place in the summer season, so in the winter season the family has to buy extra power, “otherwise it will be dark on December 24 after the Christmas tree candles are out,” he says. Proidl

However, if the family heats their home with natural gas, an additional €58 per month is due in Styria with an annual consumption of 15,000 kilowatt hours – by the end of the year the additional gas costs amount to €232 in these four months alone. .

Fuel prices and more promotion of travel

With inflation rates of plus 64 per cent for diesel and 55 per cent for premium petrol in June compared to last year, some fuel bills this year will be in triple figures. In Austria, most people drive to work; in fact, 60 percent of commutes are by car.

The core of the second package, worth a total of 2.3 billion euros, was a 50 percent increase in the passenger allowance and a quadrupling of the passenger euro by a total of 400 million euros. According to calculations by the “Wiener Zeitung”, Susanne Mustermix has been benefiting from this since May with 35 euros per month, her husband Maximilian receives 20.8 euros more per month.

However, for their 60 kilometers to work, which they travel about 20 times a month, they had to pay more to fill up their diesel cars, which consume about six liters per 100 kilometers: In May, the additional cost with inflation of 56 percent hundred , calculated by the ÖAMTC based on the median values ​​of E-Control, compared to the same month last year according to calculations by the “Wiener Zeitung” for Susanne and Maximilian. In June, refueling for the journey to work cost €58 each, up 67 percent compared to June 2021. And in July, up 64 percent compared to the same month last year, fuel costs per person were 57 euros. more.

The additional cost of €325 was offset by an additional €167 flat rate for commuters. There is a small commuting allowance for commuters where “the use of public transport is possible and reasonable”. Thus, Maximilian could have switched to public transport and saved on fuel costs. In any case, an annual ticket was 34 percent cheaper on average in Austria compared to the previous year.

Two additional family allowances of €180 should arrive soon to the Mustermix family, payment started this week. In the total relief of 4,329 euros, the state also includes the family allowance plus, which is up to 500 euros per child, but this will not be available until the beginning of next year 2023 with the annual adjustment, as well as 500 euros in the tax credit cost of living and the return of Maximilian’s social security, also known as negative tax.

However, in addition to energy and fuel costs, food costs are also skyrocketing – in June they were 11.3 percent more expensive than the same month last year. And because of the 50 percent price increase in feed, which is reflected in wholesale prices, the Mustermix family is likely to have to spend more on Waldemar than last year.

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