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Published on 31 May 2005. (The Economic Survey of Austria 2007 was published on 13 July 2007).
Executive summary
An Economic Survey is published every 1½-2 years for each OECD country. Read more about how Surveys are prepared.
The OECD assessment and recommendations on the main economic challenges faced by Italy are available by clicking on each chapter heading below. Chapter 1 identifies the challenges for which the subsequent chapters provide in-depth analysis and policy recommendations.
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Chapter 1. Economic issues and policy challenges
The Austrian economy could take advantage of various positive external developments, notably eastern enlargement of the European Union. Export competitiveness was strengthened, however mainly in areas with a traditional comparative advantage. While the labour market functions well overall, tensions become visible through high seasonal unemployment, high youth unemployment by historical standards and a growing, although still small incidence of long term unemployment. Government debt is still relatively high and fiscal consolidation relies to some extent on one off measures. Productivity growth is too much dependent on capital deepening and obstacles to labour force participation hold down trend growth. The key challenges for the Austrian economy to maintain its good economic performance include making the government sector more efficient, reforming federal fiscal relations, boosting productivity growth and removing obstacles to higher labour force participation.
Chapter 2. Fiscal policy issues
Fiscal policy faces considerable challenges in the short and medium term. The Stability Programme envisages achieving budget balance by 2008, requiring 4% of GDP expenditure cuts, which are not yet fully specified. Government debt is relatively high and significant ageing-related spending pressures will remain ahead. A medium-term budgeting framework is missing and fiscal-sustainability calculations are not available. The tax system is complicated and rates are high. The government introduced a major pension reform in two steps and is streamlining public administration on many fronts. Tax reform reduced corporate tax rates and the tax burden for households. Further reforms should primarily aim for making the government sector more efficient and improve budgeting procedures, make public administration reform more effective, complete pension reform, start with disability benefit reforms and reduce distortions of the tax system.
Chapter 3. Reforming federal fiscal relations
Key areas of public sector activity are subject to complex fiscal relations across the layers of government. Revisiting the distribution of tasks and funding principles within the federation is likely to have a very significant potential to improve public sector efficiency. Fragmentation of decision-making in some spending programmes, such as hospital care and social assistance benefits, needs to be overcome, concentrating financing and spending responsibilities on one government level. Strengthening co-operation between municipalities as well as amalgamations of small municipalities would allow to take advantage of scale economies in the provision of local government services. Stronger tax-raising powers of the municipalities and the states, reform of tax sharing rules, as well as improved budgeting procedures would raise the ability of sub-national governments to match supply of services to local demand patters and improve accountability to voters. The Constitutional Convention (Österreich Konvent) has fostered debate on constitutional reform, providing inter alia an opportunity to improve fiscal federal relations along these lines.
Of special interest: Fragmented decision making needs to be reduced
Read also ECO Working Paper 474 Reforming federal fiscal relations in Austria
Chapter 4. Fostering productivity growth and innovation
This chapter proposes reforms to raise productivity growth in Austria. The contribution of business start-ups to productivity growth could be raised, through reducing administrative burdens and improving the framework conditions for the provision of risk capital, notably venture capital. Steps should also be taken to raise competition in product markets, improving competition law enforcement, liberalising regulation of the services of the liberal professions and exposing incumbents in the electricity and telecoms industries to more competition. Obstacles to structural change originating in labour market regulation should be removed. Reforms in secondary and tertiary education can improve the skills base of the economy, strengthening its capacity to reap the productivity potential of new technologies, such as ICT. While R&D spending has increased in recent years, government support for R&D can become more effective.
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A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.
Ein Policy Brief auf deutsch kann als pdf Datei heruntergeladen werden. Es enthält die Gesamtbeurteilung und Empfehlungen der OECD auf den Seiten oben.
To access the full version of the OECD Economic Survey of Austria:
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Readers at subscribing institutions can go to SourceOECD, our online library.
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Non-subscribers can purchase the PDF e-book and/or printed book at our Online Bookshop.
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Government officials can go to OLISnet's Publication Locator.
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For further information please contact the Austria Desk of the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by Eckhard Wurzel, Andrés Fuentes and Maria Antoinette Silgoner under the supervision of Andreas Wörgötter.
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