Performance of fiscal policy, while good in international comparison, is not sufficient to prepare for future
ageing-related spending increases. Subject to macroeconomic developments, the pace of consolidation could be
more ambitious than currently planned, with a view to reducing the debt burden below 60% of GDP by 2020.
Austrian fiscal policies have tended to be pro-cyclical in upturns, mainly because spending was not adequately
kept in check. Stronger fiscal rules and a reform of inter-governmental fiscal relations could help contain
expenditure dynamics. Efficiency-raising reforms in key spending areas such as pensions and other social
expenditures, health, and education are also highly needed to reduce spending and ensure the provision of
high-quality public services at lower cost. In this regard, Austria should make full use of the performance
budgeting framework it plans to introduce from 2013. Higher potential growth could also take off some of the
pressure on public finances. There remains significant room to rebalance the tax structure towards less distortive
sources of revenue, thus supporting employment and growth.
