OECD Economic Surveys Austria

1 OECD Economic SurveysAustriaJuly 2017 This overview is extracted from the 2017 Economic survey of Austria . The survey is published on the responsibility of the Economic and Development Review Committee (EDRC) of the OECD, which is charged with the examination of the Economic situation of member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area OECD Economic Surveys .

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3 Austria OECD 20171 Executive summary Growth has picked up but fundamentals should be strengthened Austria s transition towards digitalisation has been lagging Changing demand for skills affects equality of opportunityEXECUTIVE SUMMARYOECD Economic Surveys : Austria OECD 20172 Growth has picked up but fundamentals should be strengthenedAustria is a stable and wealthy economy and growthhas picked up following the 2016 tax reform and therecovery of export demand. However, like in most OECD countries, trend output growth has declined since the1990s. Labour supply has expanded, driven by risingparticipation of women and elderly and an increase inimmigration, but hours worked per worker havedeclined.

4 Productivity has slowed and Austria has lostmarket shares within regional value chains. Investmenthas recently accelerated, yet enterprise churn, start-uprates and the renewal of business models are weakerthan in comparable countries. Reinvigorating businessdynamism would improve competitiveness and labourdemand, and spur both growth and social s transition towards digitalisation has been laggingThe business sector is adapting to the global digitalrevolution, albeit at a slower pace than in the mostadvanced countries, especially among smaller adoption of information and communicationtechnology (ICT) applications by households is alsouneven.

5 While the young and highly educated alignswiftly with global trends, older generations and thosewith lower educational level and immigrants seem tolag behind. Fostering broad-based diffusion of state-of-the-art technologies and digital innovations wouldhelp renew business models, work practices andlifestyles throughout Austria , and foster productivitygrowth, welfare and social demand for skills affects equality of opportunityThe digital transformation is redesigning productionprocesses and altering the relationships between workand leisure, capital and labour, skilled and unskilled,wealthy and less-wealthy.

6 To preserve social cohesion,a comprehensive policy approach is needed forensuring equality of opportunity in the face oftechnological change and appropriate redistribution ofthe gains stemming from digitalisation. Schools needto provide digital skills in addition to the traditionalones. Workers having left school will need to catch upvia life-long learning solutions. Co-ordination acrossthe many stakeholders of the education system needsto improve so that learning tracks better fit changinglabour market is regaining momentumSource:OECD Economic Outlook 101 2 Q1 = 100 AustriaOECDS hare of firms using cloud computing, 2016 Source:Eurostat andOECD Digital Economy Outlook 2017(forthcoming).

7 1 2 OECD NLDDNKSWEFIN% Adults with advanced digital proficiencySource: survey of Adult Skills (PIAAC) (2012, 2015).1 2 average020406080%Low-educated020 40 60 80%High-educatedEXECUTIVE SUMMARYOECD Economic Surveys : Austria OECD 20173 MAIN FINDINGSKEY RECOMMENDATIONSB uilding on the cyclical upturnFiscal balances and the public debt ratio have improved but theforeseeable costs of ageing remain very measures to ensure that the debt ratio declines as particular rapidly increase effective retirement are inefficiencies in education, health, care and publicadministration.

8 Funding and management responsibilities aretoo fragmented across government an in-depth spending review in education, health,care and public administration; align taxing and spendingresponsibilities across government balance sheet cleaning has made headway but operatingcosts remain high and bank profitability and capital digitalisation, restructuring and cost reduction in thebanking sector. Rigorously supervise large as well as potential growthThe external financing of start-ups and small firms is overlyreliant on bank to support venture capital investment and reduce taxand other disincentives for equity insolvency framework may discourage risk-taking and the insolvency framework benchmarking it againstinternational best and professional services are over-regulated and entrybarriers are the licence system for retailers and reduce thenumber of exclusive rights in professional utilisation remains low.

9 The employment rate hasimproved mainly through increases in part-time work and hoursworked per employee the tax distortions that penalise transition from part-time to full-time work, subsidise overtime and hold backdemand for low-skilled and child-caring remain hard to legal entitlements for full-day schooling andchildcare; further increase capacity for such facilities in thewhole a faster transition to digitalisationA 2017 Digital Roadmap mainstreams efforts to fosterdigitalisation and tackle adjustment up a transparent monitoring system for the implementationof the Digital Roadmap, with timelines and quantitative firms, especially SMEs, are relatively slow in adoptingICT innovations.

10 Gaps relative to the global frontier a Digital Skills Plan in the Roadmap, including forsmall firm owners and managers. Establish targets for ICT-generic, ICT-specialist and ICT-complementary and households use fast broadband less than incomparable new entries and stimulate competition in broadbandservices in the context of the Broadband Plan creates risks of closure, collusion andmonopolisation in several market that competition policy responds to changing threats tocompetition in digital markets, including through trust in digital applications is crucial to reducetransaction costs and facilitate the adoption of digital innovations,requiring addressing key data privacy.