Economic surveys and country surveillance

Austria: Strengthening domestic sources of growth would secure place as ‘Champions League’ economy

 

11/07/2011 - Austria should seize the opportunity provided by its robust, export-led recovery to strengthen reforms and reinforce domestic drivers of economic growth, according to a new OECD report.

The OECD’s Economic Survey of Austria says the global crisis revealed the particular vulnerabilities of export –orientated economies while the boost given to Austrian growth by deepening and widening European integration over the past two decades is likely to fade in the coming years.

To maintain the country’s current performance, which is among the strongest of the OECD economies; the survey recommends improving public sector efficiency and switching the tax burden away from labour and entrepreneurship toward less distortive taxes such as on property. A major challenge includes reforming the healthcare system as well as accelerating fiscal consolidation in order to bring Austria’s debt down to below 60% of GDP from more than 73% at present.

Presenting the survey in Vienna, OECD Secretary-General Angel Gurría pointed to the constructive actions of trade unions and businesses in supporting the Austrian economy and its impressive overall employment performance after the crisis. He said,  “The social partners go beyond their traditional role of negotiating wages and work conditions and take responsibility for preparing reform proposals.” He added: “This is one of the reasons Austria has been able to combine impressive economic and employment performance in a ‘Champions League ‘ of OECD economies while maintaining a high degree of social cohesion.” (read the full speech).

But, even though labour market recovered relatively quickly from the crisis, unemployment among low-skilled workers is high. To boost job creation, the survey recommends extending the “Kombilohn” “wage top-up” system. The OECD suggests cutting employer social security contributions for the most vulnerable workers in order to make their hiring more attractive and increase their employment perspectives. All subsidies which encourage early retirement should be eliminated while benefits and social transfers – which amount to 20% of GDP - should be better targeted, according to the survey.

But, even though labour market recovered relatively quickly from the crisis, unemployment among low-skilled workers is high. To boost job creation, the survey recommends extending the “Kombilohn” “wage top-up” system. The OECD suggests cutting employer social security contributions for the most vulnerable workers in order to make their hiring more attractive and increase their employment perspectives. All subsidies which encourage early retirement should be eliminated while benefits and social transfers – which amount to 20% of GDP - should be better targeted, according to the survey.

 

 

 
Download the underlying data in Excel

The survey argues that the government’s recent measures to strengthen public finances may not be enough to prepare properly for future challenges such as the increasing costs of supporting an ageing population. It recommends toughening  the fiscal rule discipline so that consolidation efforts are not weakened by the recovery of revenues when the economy is booming. The Domestic Stability Pact should be extended towards debt and expenditure targets while the medium-term spending framework should be applied to all levels of government.

The Austrians generally hold their health care system in high regard. However, compared with many other countries it is expensive, fragmented and is too dependent on in-patient hospital services, says the OECD. The survey recommends a number of reforms including more clearly assigning performance, financing and spending responsibilities.  In Austria’s federal structure a first step could be achieved by consolidating resources in “fund pools” pursuing policy objectives shared by different stakeholders.

Other recommendations include  fully enforcing the national capacity plan for inpatient and outpatient care; introducing performance-based payment mechanisms; increasing competition in pharmaceuticals; emphasizing healthier lifestyles;  and monitoring progress against national health goals such as targets for obesity and overweight rates. The survey also underlines the need to promote disease management programmes in all chronic care areas.

Journalists can obtain a copy of the full survey from the password-protected website or the OECD Media Division (tel. + 33 1 45 24 97 00).

 

 

 

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