The Draft Federal Budget for 2006: Key Features and Trends in a Longer-Term Perspective

The draft federal budget for 2006 is shaped by the impact of the 2004-05 tax reform and the persistence of high unemployment. The deficits (in the Maastricht definition) in the general as well as in the federal government households will therefore narrow only to a limited extent. Expenditure and revenue continue to fall as a ratio of GDP, both for the central and the general government. The share of transfer payments in total federal spending is rising once again, with family benefits posting the strongest increase. Since 2000, emphasis on the expenditure side has also been given to infrastructure and research. On the revenue side, one-off measures are losing in importance over time. The longer-term trend towards greater reliance on indirect tax revenues is becoming somewhat flatter in 2006.