Economic surveys and country surveillance

Economic Survey of Austria 2011

 

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The Austrian economy has weathered the crisis well on the back of an export led recovery. Austria, like other export oriented economies, was hit hard by the crisis but the currently strong recovery offers a golden opportunity to strengthen reform efforts, in particular in the following areas: i) subsidised avenues into early retirement should be eliminated; ii) work incentives of low skilled workers should be strengthened and their cost of employment reduced; iii) early child care infrastructure and full day schooling should be expanded; iv) education reforms should continue; and v) competition should be further enhanced in network services, as well as in liberal professions. These reform directions are essential for the future growth performance, because positive external shocks in the wake of European integration will most likely not continue with the same strength as in the past two decades, and drivers of growth will depend more on domestic sources.

Fiscal vulnerabilities, while low in international comparison, have increased. Public finances worsened markedly in the crisis, driven by discretionary stimulus, financial sector support measures and the operation of automatic stabilisers. The recent consolidation measures may not suffice to prepare for future risks and challenges, not least related to ageing. In these circumstances, Austria should make full use of the performance budgeting framework that it plans to introduce from 2013, for more assertive spending prioritisation and cost benefit checks. Despite some recent improvements, the tax structure also remains biased against employment and growth and offers room for reform.

 

 

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Key fiscal policy priorities should be: i) accelerating fiscal consolidation to bring the debt to GDP ratio below 60%; ii) taking more frontloaded action to meet foreseeable medium to long term spending pressures; iii) reforming the Domestic Stability Pact and the Fiscal Equalisation Act and implementing the fiscal framework reforms at all levels of government; iv) seeking efficiency gains in all major spending areas; and v) switching the tax burden away from labour and entrepreneurship toward less distortive taxes.

The highly regarded Austrian health system is very expensive and will face growing pressures in the future. The governance and funding structure of the system is excessively fragmented, makes too much use of inpatient care in hospitals, and entry and competition are de facto limited in most health markets. Individual agents have incentives that conflict with overall system efficiency. Lifestyle factors are also generally not supportive of good health outcomes and put additional pressure on costs. These pressures will increase in the years ahead with population ageing and higher costs of more sophisticated technologies.

The authorities have introduced several reform initiatives in recent years to face these pressures and  these should be continued and intensified in the following areas: i) more clearly assign performance, financing and spending responsibilities across government layers; ii) fully enforce the national capacity plan for inpatient and outpatient care; iii) introduce performance based payment mechanisms in both inpatient and outpatient care and increase competition in the pharmaceutical market; iv) promote disease management programmes in all chronic care areas; and v) give more prominence to the medium term fiscal outlook of the system, through spending projections and scenarios.

How to obtain this publication

 

The complete edition of the Economic Survey of Austria is available from:

 

Additional information

For further information please contact the Austria Desk at the OECD Economics Department at eco.survey@oecd.org.

The OECD Secretariat's report was prepared by Rauf Gonenc, Oliver Roehn  and Karin Fischer under the supervision of Andreas Woergoetter. Research assistance was provided by Béatrice Guerard.

www.oecd.org/eco/surveys/austria

 

 

 

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