Economic Policy Reforms 2023

Austria

See more data for Austria on the related dashboard.

Product and labour markets functioning

Performance gaps

• Many professional service sectors have long been sheltered from full competition by regulations, self-regulations and trade and investment protections.

• The share of R&D business in the high-tech sector is low and lags innovation leaders. Public support to R&D is provided mainly through tax incentives.

Recommendations

• Reduce regulatory barriers in entering market services without undermining their quality standards.

• Consider using direct R&D grants to support longer term, higher-risk research.

Digital transition

Performance gaps

• Austria lags in digitalisation with respect to the top-performing European countries. Fixed broadband coverage, notably at higher speed tiers, is lower than in most other European countries.

• The relative low dynamism of the business sector, and in particular the limited supply of private risk capital, constrains the diffusion of digital technologies.

Recommendations

• Increase access to high-quality internet throughout the entire country and achieve the national and EU goal of gigabit connectivity for all households by 2030.

• Improve the effectiveness of start-up and growth financing instruments by avoiding complexity and improving conditions for institutional investors to invest in venture capital, for example by further improving the depth of Austrian capital markets.

Inclusiveness, social protection, and ageing

Performance gaps

• Ageing will reduce the labour force by 5% by 2040 and risks exacerbating the already acute labour shortages. Ageing will also put pressure on the financing of pensions, healthcare and long-term care.

• At the same time, female labour force participation is low, partly reflecting the lack of quality childcare services.

Recommendations

• Ensure the long-term sustainability of the pensions system e.g., by linking the retirement age to life expectancy.

• Reduce early retirement pathways by further reforming the access to disability pensions, improving prevention and rehabilitation measures, and enhancing incentives to continue working at an older age while ensuring good working conditions.

• Bolster the availability and quality of early childcare services throughout the entire territory, in particular in rural areas.

Climate transition

Performance gaps

• The carbon intensity of the economy is declining too slowly against the ambitious 2040 climate neutrality goal. The eco-social tax reform 2022 is highly welcome but additional measures will be indispensable, as carbon prices and energy-related taxes will likely remain lower and more uneven than in peer countries, at least for a while.

Recommendations

• Design and implement complementary regulatory and emission saving investment schemes to align the trajectory of emissions with targets.

• Increase and harmonise further carbon prices after 2025 by integrating the largest possible share of emissions in the national and EU emission trading system.

• Eliminate the diesel/gasoline tax gap.

Overall performance