Sept. 26 (Bloomberg) -- The Austrian People's Party bid to regain control of the government by forcing early elections may fail as its Social Democrat coalition partners pull ahead in the polls.

With neither party attracting more than 30 percent of support in the latest survey, voters on Sept. 28 may re-elect the same Grand Coalition of the two biggest parties -- with the Social Democrats remaining in the chancellery -- that they've had since January 2007.

The Social Democrats are gaining support with proposals to halve the sales tax on food and increase aid to lower-income people. The pro-business People's Party has pledged to cut income taxes for middle-class families in 2010 and sell stakes in state-controlled companies such as Telekom Austria AG to help finance the social-welfare system.

``The People's Party really blew it as they didn't have an election campaign prepared'' to focus on a slowing economy and accelerating inflation, said Klaus Poier, a political scientist at the University of Graz in southern Austria.

Chancellor-candidate Werner Faymann's Social Democrats are at 29 percent, with his rival Wilhelm Molterer's People's Party at 26 percent, according to Vienna-based pollster OGM's final survey before election day. The poll of 800 voters conducted Sept. 19 has a margin of error of 3.5 percentage points.

Government Collapse

Austria's ruling coalition collapsed in July when the People's Party pulled out, seeking to exploit disarray of its Social Democratic partner over the leadership of outgoing Chancellor Alfred Gusenbauer. The Social Democrats had been trailing in the polls.

Yet since then, they have overtaken the People's Party with the promise to slash food sales tax to 5 percent from 10 percent. Underlining their working-class roots, the party says the tax cut won't apply to ``luxury items'' such as lobster, caviar or oysters.

Faymann, 48, who's also transport minister, has made cutting food taxes the cornerstone of a five-point platform. He sent legislation for the plan to parliament which this week approved four elements of the package including more spending for families with children and for people requiring nursing home care.

Parliament also agreed to Faymann's demand for earlier retirement for workers who do physically demanding jobs and to eliminate annual university fees of 726 euros ($1,065) -- a move to lure the young. This is the first general election to be held since Austria's voting age was lowered to 16 from 18.

Asset Sales

Molterer, 53, who is Austria's finance minister, is calling for more sales of state assets to help pay for care of the elderly. Molterer says Faymann's spending pledges risk increasing the budget deficit and may imperil planned tax cuts.

``The future questions for Austria are: how do we ensure economic growth and how do we keep full employment,'' said Molterer in a speech to parliament on Sept. 24.

Inflation was 3.6 percent in August after peaking at 4 percent in June, the fastest in 15 years. Economic growth is forecast by the government to ease to 1.4 percent in 2009, the slowest pace since 2003.

Molterer's campaign has been criticized for failing to stick to a consistent message and the newspaper Der Standard said he's ``fighting not just against his rival but also against his own image.''

State Sell-Off

Between 2000 and 2006, a People's Party-led Austrian government under Chancellor Wolfgang Schuessel cut pension and unemployment benefits and sold or reduced state holdings in companies such as Telekom Austria and the country's postal service, Oesterreichische Post AG.

A victory for Molterer would give him the chance to resume selling state assets. The state holds the biggest stakes in OMV AG, central Europe's biggest oil company, and Verbund, the country's biggest power company. The government's stakes are worth about 13 billion euros ($19 billion).

Faymann's Social Democrats oppose asset sales, saying the government should have a say in key infrastructure companies.

Three other parties are likely to make it into parliament, including the anti-immigrant Freedom Party, the Green Party and the nationalist Alliance for Austria's Future, which split from the Freedom Party in 2005.

The Freedom Party polled 18 percent, while the Greens got 11 percent in the OGM poll. The Alliance for Austria's Future, led by Joerg Haider, are at 8 percent, the poll showed. The Liberals, with 4 percent in the poll, may fail to get into parliament. Under Austrian election law a party needs at least 4 percent of the vote to win seats in the federal assembly.

Faymann has said he won't enter a coalition with the Freedom Party or the Alliance for Austria's Future, while Molterer said yesterday he'd be willing to talk to all parties to form a government.

Austria, the fourth-richest country in the European Union, has been governed by coalition governments since 1983.

To contact the reporters on this story: Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net; Matthias Wabl in Vienna at mwabl@bloomberg.net.

Last Updated: September 26, 2008 02:58 EDT