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Austria: Embrace digitalisation to boost growth and inclusiveness

 

17/07/2017 - The Austrian economy is strengthening, supported by recent tax reform and a pick-up in international trade.  With business and household confidence rising and the short-term outlook favourable, policymakers should enact deeper structural reforms that will improve both fiscal sustainability and social cohesion, according to a new report from the OECD.

 

The latest OECD Economic Survey of Austria discusses ways to build on the cyclical upturn underway and boost potential growth as well as how public policies can foster a speedier transition to digitalisation while ensuring more inclusive labour markets in the digital era.

 

The Survey, presented in Vienna by OECD Deputy Secretary-General Mari Kiviniemi, Austrian Federal Minister for Transport, Innovation and Technology Jörg Leichtfried and State Secretary for Diversity, Public Services and Digitalisation Muna Duzdar, notes that GDP growth has been regaining momentum since 2016. It identifies priorities for strengthening economic fundamentals, boosting business dynamism and a comprehensive approach to ensure equal opportunity in the face of technological change.

 

“Austria is in the midst of a remarkable economic upturn, stimulated by a well-timed tax reform and featuring extremely high levels of well-being and strong social and regional cohesion,” Ms Kiviniemi said. “The positive direction the economy is taking offers a unique opportunity to confront the important challenges that remain. More needs to be done to keep the economy on a strong and inclusive path, boosting job creation, preserving living standards and ensuring that all Austrians can seize the opportunities of the digital revolution.”

 

With population ageing expected to put increasing pressure on public finances, the Survey recommends Austria take measures to maintain long-term sustainability and improve growth, to ensure that public debt remains on a sustainable path.

 

It recommends continued efforts to increase the effective retirement age of both men and women; improving the effectiveness of public spending on education, health care and public administration, coupled with alignment of taxing and spending responsibilities across government layers; and reducing the tax distortions that penalise full-time work and hold back demand for low-skilled labour.

 

To boost potential growth, the Survey recommends Austria take steps to increase working hours, particularly for women, and boost productivity. It also calls for greater efforts to diversify financing of start-ups and small firms, particularly through venture capital investment and reductions to the tax- and other disincentives for equity investments. The insolvency framework should be reviewed and benchmarked against international best practice. Streamlining the licence system for retailers and reducing the number of exclusive rights in professional services would reduce currently high barriers to entry in these sectors.

 

The Survey looks closely at Austria’s adaptation to the global digital revolution, which has been slower than that seen in best-performing countries, and recommends a range of actions to speed the transition to digitalisation. These include:

 

  • establishment of a transparent monitoring system for the implementation of Austria’s Digital Roadmap, with timelines and quantitative targets;
  • integration of a Digital Skills Plan in the Roadmap, directed also at small business owners and managers, that establishes targets for various Information and Communication Technology skills;
  • facilitate new entries and stimulate competition in broadband services in the context of the Broadband Plan 2020;
  • ensure that competition policy responds to changing threats to competition in digital markets, including through international co-operation; and
  • promote more effective data protection, cyber security and consumer protection, while improving  public awareness that responsibility for risk management remains partly with firms and consumers themselves.

 

The Survey points out that the digital revolution will increase existing challenges to labour market participation and social inclusion. It recommends policymakers focus on improving equality of opportunity. Learning tracks, including life-long learning, should better fit changing labour market requirements for all groups in society, notably the least well-endowed with digital competences such as the elderly and the immigrant workers. 

 

To ensure that the benefits of the digital revolution are fairly distributed within firms, and between successful firms and the broader society, the wage settlement and the tax-and-benefit systems, as well as competition and open access regulations, should be adapted to serve this objective. Austria’s strong social partnership institutions should continue working with government to address these challenges, the Survey said.

 

An Overview of the Economic Survey, with the main conclusions, is accessible at: http://www.oecd.org/eco/surveys/economic-survey-austria.htm.   

For further information, journalists can contact the OECD Berlin Centre (+49 30 28 88 35 49), or Heino von Meyer, (+49 175 434 0424), head of the OECD Berlin Centre.

 

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