COMMISSION STAFF WORKING DOCUMENT Country Report Austria 2017 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2017 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2017) 90 final} {SWD(2017) 67 final to SWD(2017) 93 final}
Date: 2017-02-22
Institutions: European Commission, Secretariat-General
Subjects: Austria, EU employment policy, EU investment, economic development, economic recovery, euro area, fiscal policy, macroeconomics, multilateral surveillance, structural adjustment

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 22.2.2017  SWD(2017) 85 final   COMMISSION STAFF WORKING DOCUMENT  Country Report Austria 2017 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2017 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011  {COM(2017) 90 final} {SWD(2017) 67 final to SWD(2017) 93 final}   
 
 
CONTENTS 

Executive summary 

1. 

Economic situation and outlook 

2. 

Progress with country-specific recommendations 

3. 

Reform priorities 

3.1.  Public finances and taxation 

3.2. 

Financial sector 

3.3. 

Labour market, education and social policies 

3.4. 

Investment 

3.5. 

Sectoral policies 

A.  Overview table 

B.  MIP Scoreboard 

C. 

Standard tables 

References 

LIST OF TABLES 

1.1. 

2.1. 

B.1. 

Key economic, financial and social indicators – Austria 

Summary table on 2016 CSR assessment 

The MIP Scoreboard for Austria 

C.1. 

Financial market indicators 

C.2. 

Labour market and social indicators 

C.3. 

Labour market and social indictors (continued) 

C.4. 

Product market performance and policy indicators 

C.5.  Green growth 

LIST OF GRAPHS 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

Real GDP growth and contributions, output gap 

Corporate financing positions 

Headline and core HICP (harmonised index of consumer prices) 

Labour force and unemployment rate (15-64 years) 

Labour productivity 

1 

4 

11 

14 

14 

20 

23 

29 

34 

37 

43 

44 

49 

10 

12 

43 

44 

45 

46 

47 

48 

4 

4 

5 

5 

6 

 
 
 
 
1.6. 

1.7. 

1.8. 

1.9. 

Trade balance and export market share 

House prices and rental costs 

House price to income and rent ratio 

General government debt and deficit 

1.10. 

Tax wedge (% of labour costs, 2015) 

1.11.  Hospital discharges and hospital beds 2014 

3.1.1. 

The effect of the fiscal drag in Austria 

3.1.2.  Revenues from recurrent property taxes (2014) 

3.1.3.  Share of homeowners by deciles of equivalised disposable income 

3.1.4.  Public expenditure for healthcare (2014) 

3.2.1. 

Intra-group liquidity to CESEE subsidiaries 

3.2.2.  Net profits of Austrian subsidiaries in CESEE 

3.3.1. 

Labour market — key indicators 

3.3.2.  Unemployment rate by country of birth 

3.3.3.  Unemployment rate by educational attainment 

3.3.4.  Regional dispersion of unemployment 

3.3.5.  Employment rate by qualifications and country of birth (2015) 

3.3.6.  PISA performance 2012 -2015 in science - share of top and low performers 

3.4.1.  Regulatory restrictiveness indicator 2016 Austria and the EU 

3.4.2.  High-growth enterprises as % of all active enterprises with at least 10 employees 

3.4.3.  Venture capital as % of GDP 

3.5.1.  Evolution of business and public R&D intensity 

3.5.2.  Europe 2020 emission reduction targets 

LIST OF BOXES 

2.1. 

Contribution of the EU budget to structural change in Austria 

3.3.1. 

Integration of refugees 

3.4.1. 

Investment challenges and reforms in Austria 

3.5.1.  Selected highlights 

7 

7 

7 

8 

8 

9 

15 

15 

16 

18 

21 

21 

23 

23 

24 

24 

25 

26 

29 

31 

32 

34 

35 

13 

28 

33 

36 

 
 
 
 
EXECUTIVE SUMMARY 

This report assesses Austria’s economy in the light 
of  the  European  Commission’s  Annual  Growth 
Survey  published  on  16 November 2016.  In  the 
survey  the  Commission  calls  on  EU  Member 
States  to  redouble  their  efforts  on  the  three 
elements  of  the  virtuous  triangle  of  economic 
policy — boosting investment, pursuing structural 
reforms and ensuring responsible fiscal policies. In 
so  doing,  Member  States  should 
focus  on 
enhancing  social  fairness  in  order  to  deliver  more 
inclusive growth. 

in  Austria 

is  gaining 
Economic  growth 
momentum with the support of stronger private 
consumption  and  investment.  In  2016  growth 
accelerated to 1.5 % after 4 years of rather modest 
expansion,  and  is  expected  at  1.6 %  in  2017  and 
2018.  The  2016  tax  reform  stimulated  private 
consumption  as  households  used  their  higher 
disposable  incomes  to  spend  more.  Improved 
domestic  demand  conditions  have  also  spurred 
higher  investment  by  corporations,  particularly  in 
machinery  and  equipment,  and  non-residential 
construction. The need for replacements after years 
of  subdued  investment,  together  with  favourable 
financing conditions, has further contributed to the 
upturn  in  2016.  Following  this  more  dynamic 
phase,  investment  dynamics  are  expected  to  slow 
over the coming 2 years. 

Austriaʼs unemployment rate has increased but 
remains low compared with the rest of the EU. 
Austria  remains  an  attractive  destination  for 
foreign workers and is seeing a continuous inflow 
from  EU  and  non-EU  countries  alike.  This, 
together  with  the  longer  working  lives  of  elder 
workers  (due  to  restrictions  on  early  retirement) 
and increasing female labour market participation, 
is  helping  to  increase  the  labour  supply  and 
potential  growth.  Employment  has  also  been 
increasing,  but  somewhat  more  slowly  than  the 
labour  supply.  This  has  led  to  an  increase  in  the 
unemployment  rate,  which  reached  6.1 %  in  the 
second and third quarter of 2016, slightly above its 
previous  peak 
in 
employment  since  the  crisis  has  mainly  been 
driven by part-time jobs rather than full-time work. 
Work  is  thus  distributed  among  more  employees. 
This is limiting unemployment to some extent but 
also resulting in stagnating labour productivity per 
employee (while productivity per hour worked has 
been increasing). 

in  2004.  The 

increase 

and 

wages 

undermining 

Inflation above the euro area average is pushing 
up 
price 
competitiveness.  Since  the  crisis,  inflation  in 
Austria  has  been  driven  by  robust  demand  for 
tourism  and  business  services.  At  the  same  time, 
however, rising wages in combination with slower 
productivity  growth  are 
the  price 
reducing 
competitiveness of Austrian exporters. 

Public finances are expected to recover as bank 
support  measures  fade  out.  Following 
the 
financial 
crisis  Austria's  government  debt 
increased significantly, peaking at 85.5 % of GDP 
in 2015, due to the impact of support measures for 
the  banking  sector.  Following  the  agreement 
reached  in  the  HETA  case  (the  ‘bad  bank’  of  the 
former  Hypo  Alpe  Adria  bank),  the  restructuring 
of  the  banking  sector  is  expected  to  proceed 
smoothly 
risks. 
Government debt is projected to gradually decline 
to below 80 % of GDP by 2018. 

and  without 

significant 

the 

2016 

Overall,  Austria  has  made  some  progress  in 
addressing 
country-specific 
recommendations.  In  view  of  ensuring  fiscal 
sustainability,  some  progress  was  made  with 
respect  to  the  healthcare  system  and  limited 
progress  with  respect  to  the  pension  system. 
However,  no  progress  was  made  in  linking  the 
statutory  retirement  age  to  life  expectancy.  Some 
progress  was  made  towards  reforming  the  fiscal 
relations 
of 
the 
government.  On  balance,  in  these  fields  Austria 
made some progress.  

between 

various 

layers 

Austria  made  some  progress  in  improving  the 
labour  market  participation  of  women  as  well  as 
the  educational  achievements  of  disadvantaged 
young  people.  On  balance,  Austria  achieved  in 
these areas some progress. 

There  has  been  some  progress  on  improving  the 
sustainability  of 
the  healthcare  and  pension 
systems and streamlining fiscal relations across the 
various  levels  of  government.  Austria  has  also 
made  some  progress  in  improving  the  labour 
market  participation  of  women  —  as  childcare 
infrastructure  and  services  have  expanded  —  and 
in  taking  some  measures  aimed  at  improving  the 
educational  achievements  of  disadvantaged  young 
people.  On  reducing  investment  barriers  in  the 
services  sector  it  has  made  only  limited  progress: 
only a narrow draft revision of the trade licence act 

1 

 
 
(Gewerbeordnung)  was  put  forward,  and  some 
measures of administrative simplification.  

Regarding progress in reaching the national targets 
under  the  Europe  2020  strategy,  Austria  has 
already  reached  its  targets  on  tertiary  education 
attainment  and  limiting  early  school  leaving.  It  is 
on  track  to  meet  the  renewable  energy  and  the 
energy efficiency targets. However, more effort is 
needed  to  raise  the  employment  rate,  increase 
research  and  development  expenditure,  cut 
greenhouse gas  emissions  and  reduce poverty  and 
social exclusion. 

The  main  findings  of  the  analysis  in  this  report, 
and the related policy challenges, are as follows: 

  The  new  financial  agreement  between  the 
different  levels  of  government  is  a  step 
forward,  but  the  fiscal  framework  remains 
incentives  for  cost 
complex  with  weak 
efficiency. The 2017 financial equalisation law 
slightly  simplifies  the  system  of  transfers 
between  the  various  layers  of  government.  It 
also creates the legal basis for benchmarks and 
spending  reviews  and  ratifies  the  commitment 
to 
the 
sub-national  governments.  Their  spending 
responsibilities are nevertheless still far greater 
than  their  revenue-raising  powers,  while  the 
overall  organisational  set-up  remains  overly 
fragmented (see also Section 3.1). 

responsibilities 

reform 

the 

of 

  Despite the 2016 tax reform, the tax wedge –
i.e.  the  burden  on  labour  in  form  of  taxes 
and  social  security  contributions  – 
is 
relatively  high,  while  more  growth-friendly 
sources of revenue are underutilised. Like in 
the  past  the  recent  tax  reform  has  mainly 
countered  the  effect  of  inflation,  while  the  tax 
wedge  on  labour  has  remained  significantly 
above  the  EU  average.  By  contrast,  revenues 
from  recurrent  property  taxes  are  remarkably 
low, mainly because the tax base is outdated. 

  Pension  and  healthcare  spending  poses  a 
medium  risk  to  fiscal  sustainability  in  the 
medium  and  long  term,  due  to  a  rapidly 
ageing  population.  This 
the  case  for 
pensions partly because the effective retirement 
age  remains  relatively  low  despite  the  recent 
pension  reforms.  Furthermore,  the  statutory 

is 

Executive summary 

about 

raises 

concerns 

retirement  age  for  women  is  particularly  low 
and will not be aligned with that of men before 
2024.  This 
the 
sustainability  and  adequacy  of  pensions. 
Linking  the  statutory  retirement  age  to  life 
expectancy would help curb public spending on 
pensions.  For  healthcare,  the  more  stringent 
caps  on  expenditure  growth  set  by  the  2017 
financial equalisation law are expected to help, 
but 
to  ensure 
sustainability (see also Section 3.1). 

they  are  not 

sufficient 

and 

organisational 

  The  efficiency  of  the  healthcare  sector  is 
suboptimal, with a very large hospital sector 
and  underutilised  outpatient  care.  The 
fragmented 
financial 
structure  of  the  healthcare  sector  does  not 
encourage cost efficiency. It is characterised by 
a  disproportionately  large  hospital  sector  with 
unexploited  savings  potential,  for  instance 
through  better  use  of  ambulatory  care  and 
improved  public  procurement.  The  2017 
financial equalisation law includes measures to 
strengthen  outpatient  care  outside  hospitals, 
which  could  improve  cost  efficiency  in  the 
medium term. Nevertheless, the success of this 
initiative  also  depends  on  reforming 
the 
financial  arrangements  between  healthcare 
providers  and  social  security  funds  (see  also 
Section 3.1). 

require 

close  monitoring. 

  Banking  sector  developments  point  to  a 
steady  but  slow  improvement,  but  continue 
to 
The 
capitalisation of Austrian banks remains below 
that  of  its  EU  peers’  and  their  ability  to 
generate  profits  in  the  domestic  market  has 
been  under  pressure.  In  their  Central  Eastern 
and  South-Eastern  European  operations,  asset 
quality and profitability have improved further 
in several markets but still face some risks. At 
the same time, the increase in real estate prices 
and  housing  loans  underscore  the  importance 
of macro-prudential measures (see also Section 
3.2). 

  The  labour  market  is  performing  better  in 
Austria  than  in  most  EU  countries,  but 
challenges  remain.  Despite  the  comparatively 
labour  market  participation, 
high 
several  indicators  still  point  to  unexploited 
significant  gender 
and 
labour  potential 

female 

2 

 
 
Executive summary 

limiting 

and  restrictive  rules  on  the  exercise  of  key 
trades  and  professions  —  such  as  specific 
shareholding  requirements,  extensive  reserved 
activities  and  interdisciplinary  restrictions  — 
and 
are 
investment. 
business 
environment  for  services  is  not  conducive  to 
investment  and  job  creation  in  the  sector.  It 
also  affects  other  parts  of  the  economy  for 
which services are an important input (see also 
Section 3.4). 

dynamism 

restrictive 

business 

The 

creating 

  Regulatory  and  administrative  barriers  are 
holding  back  company  growth  and  the 
creation  of  start-ups.  Low  interest  rates, 
improved  consumer  demand  and  the  need  to 
renew  equipment  have  led  to  an  increase  in 
investment.  However,  structural  barriers  are 
still significant and are constraining investment 
in 
businesses. 
Insufficient investment in business creation and 
expansion hampers job creation and adaptation 
to  new  opportunities  of  digital  technology. 
Small  and  medium-sized  enterprises  and 
start-ups  in  Austria  lack  diversified  financing 
options,  notably  as  regards  equity  financing. 
The  current  fiscal  rules  do  not  contribute 
sufficiently to the investment climate (see also 
Section 3.4). 

expanding 

and 

inequalities.  These  indicators  include  the  rates 
of  part-time  work  and  the  gender  gap  in  pay 
and pensions. While the expanded and targeted 
policies  to get  people  into  work  are delivering 
good  results,  finding  employment  remains  a 
challenge  for  older  workers,  low  skilled  and 
people  with  a  migrant  background  (especially 
women  born  outside  the  EU).  The  recent 
inflow  of  migrants 
the 
increasing  number  of  recognised  refugees 
makes  it  all  the  more  important  to  integrate 
them  into  the  labour  market  and  in  education 
successfully (see also Section 3.3). 

into  Austria  and 

in  meeting 

faces  challenges 

  Education  results  in  Austria  are  still  in  the 
middle  of  the  range  compared  to  other 
countries.  Basic  skills  in  reading,  writing  and 
mathematics continue to deteriorate, hampering 
Austria’s overall skills base and its ambition to 
become  one  of  Europe’s  innovation  leaders. 
the 
Austria 
increasing demand for computer specialists and 
digitally 
Parents’ 
socioeconomic 
their  eventual 
status  and 
migrant  background  continue  to  have  a  major 
influence  on  their  children’s  education  results. 
In 2015, first generation immigrant students are 
3 times more likely than native born students to 
be  low  achievers  in  science  and  3  times  more 
likely  to  leave  school  early  before  completing 
upper  secondary  education  (see  also  Section 
3.3). 

employees. 

skilled 

  Social  welfare  standards  are  still  high 
overall, but some groups are at greater risk 
of poverty and inequality is on the rise. The 
proportion of  the  population at  risk  of poverty 
or social exclusion is one of the lowest among 
EU Member States. However, inequality on the 
labour  market  —  reflected  in  the  large  gender 
gap in pay and pensions — means that women 
aged  65  and  over  are  at  much  higher  risk  of 
poverty  than  men  of  the  same  age,  adding  to 
overall income inequality. Furthermore, the ‘at 
risk  of  poverty’  rate  is  higher  for  specific 
groups,  such  as  children  of  foreign-born 
parents  and  the  long-term  unemployed  (see 
also Section 3.3). 

  Rigidities  in  service  markets  and  regulated 
professions  are  hampering  competition  and 
discouraging investment. High access barriers 

3 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

GDP growth 

Austria’s economy is leaving behind the 4 years 
of slow growth seen since 2012. In the aftermath 
of  the  financial  crisis  Austria  entered  a  phase  of 
subdued  growth,  with  GDP  growth  fluctuating 
between 0 % and 1 % and only reaching the upper 
limit in 2015. For 2016 and the coming years, the 
Commission  2017  winter  forecast  expects  growth 
to  stabilise  at  around  1.5 %  (see  Graph 1.1).  The 
main  reasons  for  this  pick-up  can  be  found  in 
benefiting 
increased 
noticeably  from  the  income  tax  reform  that  took 
effect at the start of 2016 and turning positive for 
the first time since 2012. This has also stimulated 
investment activity, which recovered since the last 
quarter of 2015 and gained momentum throughout 
2016. 

consumption, 

private 

favourable  and  demand 
is  strong,  housing 
investment  remains  subdued,  pushing  up  house 
prices.  Corporations  have  increased  their  net 
lending position since the crisis and the bank loans 
to  corporations  as  a  percentage  of  GDP 
continuously  declined  (see  Graph 1.2).  However, 
especially  in  recent  years  this  happened  through 
passive  deleveraging,  i.e.  the  growth  in  loans  to 
corporations  was  outpaced  by  GDP  growth  and 
inflation.  Dividend  payments,  although  they  have 
declined,  remain  high.  It  is  thus  not  a  lack  of 
financing  resources  that  is  hampering  investment 
activity  but  rather  a  lack  of  opportunities  in  an 
environment of economic and political uncertainty 
and subdued domestic demand dynamics (see also 
Section 3.4). 

Graph 1.2:  Corporate financing positions 

Graph 1.1: 

Real GDP growth and contributions, output 
gap 

Source: European Commission 

Investment 

Investment increased in 2016 after several years 
of  relative  stagnation.  Overall  investment  in 
Austria remained relatively stable during the crisis, 
fluctuating  around  22 %  of  GDP,  which  is  only  1 
percentage  point  (pp.)  less  than  before  the  crisis. 
After improving in 2015, investment is forecast to 
continue  growing,  though  at  a  declining  rate  (by 
3.6 %  in  2016,  by  2.4 %  in  2017  and  2.0 %  in 
2018) The recovery in investment activity is being 
driven by greater spending on equipment and non-
residential  construction,  which  is  reducing  the 
backlog  of  replacement  investment  that  had  been 
postponed.  Although  financing  conditions  are 

Source: European Commission 

Inflation 

Austria continues to experience higher inflation 
than the other euro area countries, widening the 
price  gap.  Headline  inflation  has  increased  much 
more  rapidly  than  in  the  euro  area  since  2012, 
while  core  inflation  is  growing  faster  since  2010 
(see  Graph 1.3).  Due  to  Austria's  important  and 
thriving  tourism  sector,  prices  in  accommodation 
and  hospitality  services  continuously  increase. 
This  helped  to  counterbalance  the  dampening 
effect  of  low  oil  prices  in  recent  years,  keeping 
inflation  positive  at  all  times.  HICP  inflation  in 
2015  reached  a  low  at  0.8 %  and  is  expected  to 
creep  up  to  1.0 %  in  2016  before  more  than 
doubling to 1.8 % in 2017 with rising oil prices. 

4 

-6-5-4-3-2-1012345-6-5-4-3-2-10123450506070809101112131415161718% of pot. GDPppsOutput gapPrivate consumptionPublic consumptionInvestmentInventoriesNet exportsReal GDP (% change)Forecast58606264666870-4-202468101214160506070809101112131415% of GDP% of GDPNet lending / net borrowing corporationsNFC Distributed income (National accounts)NFC Loans (national accounts) (rhs) 
 
 
 
1. Economic situation and outlook 

Graph 1.3:  Headline and core HICP (harmonised index of 

Graph 1.4: 

consumer prices) 

Labour force and unemployment rate (15-64 
years) 

Source: European Commission 

Labour market 

is  expected 

Although  employment  is  continuously  rising, 
the  unemployment  rate  is  also  increasing.  The 
economy  cannot  fully  absorb  the  growth  in  the 
labour  force  (see  Graph 1.4)  also  resulting  from 
the  continued  inflow  of  foreign  workers.  In 
general,  migration 
to  positively 
contribute  to  the  demographic  trend  and  potential 
growth.  Other  factors  behind  the  increase  in  the 
labour  force  include  longer  working  lives  (a 
consequence  of 
to  early 
retirement  and  invalidity pensions)  and  increasing 
female  labour  market  participation.  While  a  large 
proportion of the increasing labour supply can still 
be  absorbed  by 
in 
employment,  unemployment  has  also  increased, 
especially  for  the  low-skilled.  The  impact  of 
refugees and asylum seekers on the labour force is 
expected  to  be  limited  in  comparison  (see  also 
Section 3.3). 

the  continuous  growth 

restricted  access 

Source: European Commission 

Social developments 

Inequality of income  is low,  while  inequality  of 
wealth is high. For 2015 data, disposable income 
inequality in Austria with a Gini coefficient at 0.27 
was among the lowest in the EU (1). The income of 
the  richest  20 %  of  households  was  4.0  times 
greater than that of the poorest 20 % of households 
(S80 / S20), well below the EU average of 5.2 (2). 
By  contrast,  Austria  is  among  the  countries  with 
highest  net  wealth  (3)  inequality  in  the  EU  (ECB 
2016).  Wealth  inequality  is  thus  much  more 
pronounced and decisive than income inequality as 
the  tax  and  social  benefit  systems  are  effective  in 
reducing  market  income  inequality.  In  Austria, 
market  income  inequality  before  taxes  and  social 
transfers  (0.50)  is  only  marginally  reduced  by  the 
tax  system  (0.48)  and  relies  largely  on  social 
redistribution 
(0.27).  These  different  Gini 
coefficients  were  rather  stable  in  the  period  2010 
to 2015. Comparing layers of society, over 2007 to 
2015  real  median  income  increased  in  total  by 
9.6 %  despite  the  financial  and  economic  crisis. 
However,  the  lowest  10 %  of  income  earners  saw 
their  real  incomes  hardly  grow,  by  just  0.5 %.  In 
general,  over  this  period  households’  real  income 

(1)  The Gini coefficient takes values between 0 and 1 and is a 
measure  of  equal  or  unequal  distribution,  with  higher 
values indicating a higher degree of inequality. 

(2)  The  income  quintile  share  ratio  (S80 /S20 )  is  the  ratio  of 
total  income  received  by  the  20 %  of  the  population  with 
the  highest  income  to  that  received  by  the  20 %  with  the 
lowest. 

(3)  Difference between total assets and total liabilities. 

5 

10010511011512012513013514090951001051101151201251300506070809101112131415161718Index, 2005=100Index, 2005=100HICP inflation, AustriaHICP inflation, euro areaCore inflation, Austria (rhs)Core inflation, euro area (rhs)Forecast012345673500360037003800390040004100420043004400450008Q108Q309Q109Q310Q110Q311Q111Q312Q112Q313Q113Q314Q114Q315Q115Q316Q116Q3% of active pop.1000 personsUnemployment rate(rhs)Labour supplyEmployment 
 
 
 
                                                           
1. Economic situation and outlook 

growth in total factor productivity is also visible in 
Austria’s weak GDP growth since 2011.  

Graph 1.5: 

Labour productivity 

Source: European Commission 

External position 

Austria’s current account and net international 
investment position remain in the black. Austria 
has had current account surpluses for many years, 
thanks  to  its  important  tourism  industry  and  the 
continuously  growing  export  of  business  services. 
Despite the important role of the export industry in 
the  Austrian  economy,  the  trade  balance  in  goods 
contributes only marginally to the current account 
surplus  and  recovered  only  recently  from  its 
negative  contribution  in  the  aftermath  of  the 
financial crisis. Austria has seen its export market 
share constantly decline since 2007, both overall as 
well  as  relative  to  other  advanced  economies  (see 
Graph 1.6), although the decline was more limited 
in volume terms. Austria’s non-EU trade however 
continues  to  rely  heavily  on  markets  in  Central, 
Eastern  and  South-Eastern  Europe, 
including 
Russia.  More  recently  it  has  also  come  to  rely  on 
the US  market,  but is  less present  in  fast-growing 
markets  in  Asia  and  South  America.  On  the  level 
of 
non-financial 
corporations  have  a  positive  net  lending  position 
which more than compensates for the negative net 
lending  position  of  financial  corporations  and  the 
government.  Overall, 
international 
investment position, which turned positive in 2013, 
continues to improve (see Graph 1.6). 

households 

the  net 

sectors, 

and 

In 

per  capita  fell  while  real  GDP  growth  per  capita 
stagnated.(4) 
creation  of 
addition, 
predominantly  low-paid  and  part-time  jobs  over 
recent  years  has  aggravated  the  segmentation  of 
the labour market and income inequalities.  

the 

The  social  situation  remains  good  overall, 
although  some  groups  are  at  higher  poverty 
risk.  The  proportion  of  the  population  at  risk  of 
poverty or social exclusion, at 18.3 %, is one of the 
lowest  in  the  EU  and  below  the  EU  average  of 
23.7 %.  However,  15.1  %  of  women  aged  65  and 
over  are  at  risk  of  poverty,  much  higher  than  the 
10.7 %  rate  for  men  of  the  same  age.  This  is 
because  of  the  large  gender  gap  in  pay  and 
pensions  and  a  pension  system  which  reflects  the 
inequality  in  the  labour  market.  Possible  further 
reforms may also consider the situation of specific 
groups,  in  particular  the  children  of  foreign-born 
parents,  who  face  at-risk-of-poverty  rates  of 
34.6 %, above the EU average of 33.2 % (see also 
Section 3.3). 

Productivity 

Productivity  in  Austria  remains  high  but  is 
shared  among  a  rising  number  of  employees. 
Productivity  per  employee  grew  until  2007  (see 
Graph 1.5) but dropped sharply during the crisis. It 
has remained flat at a lower level since then while 
the  EU  average  has  risen  continuously.  However, 
Austria’s productivity per hour worked has grown 
constantly since 2000 and, unlike the EU average, 
did  not  drop  even  during  the  crisis  years.  The 
explanation  is  that  the  increase  in  employment 
since the crisis has created more part-time jobs and 
fewer 
ones.  Overall,  Austria’s 
productivity  is  doing  well  and  growing  above  the 
EU  average.  However,  as  wage  growth 
is 
increasing faster than productivity per hour worked 
since  2008,  Austria  is  losing  slightly  in  price 
competitiveness  and  rebalancing  within  the  euro 
area.  Total 
incorporating 
factor  productivity 
technological progress and innovative capacity has 
been  on  a  constant  decline  in  Austria  since  2011, 
staying below pre-crisis levels, while the euro area 
average  has  been  rising  again  since  2013.  Weak 

full-time 

(4)  While  real  GDP  per  capita  grew  annually  by  0.28 % 
between  2007  and  2012  and  shrank  by  -0.18 %  between 
2012  and  2015,  real  income  of  households  per  capita 
shrank  annually  by  -0.28 %  between  2007  and  2012  and 
by -0.52 % between 2012 and 2015. 

6 

909510010511011512012513013514000010203040506070809101112131415Index, 2000=100Nominal compensation per employeeTotal factor productivity - ATTotal factor productivity - EAReal labour productivity per personReal labour productivity per hour worked 
                                                           
 
1. Economic situation and outlook 

Graph 1.6: 

Trade balance and export market share 

Graph 1.7:  House prices and rental costs 

Source: European Commission 

Source: ECB, Statistics Austria, OeNB 

Housing market 

The  strong  growth  in  house  prices  over  recent 
years has accelerated since mid-2015. Austria is 
one of the European countries where house prices 
have  been  constantly  rising  since  the  financial 
crisis unlike in many other European countries (see 
Graph 1.7). The quarterly house price index shows 
accelerated growth since Q3-2015, when the year-
on-year increase was 9.3 % before reaching 13.4 % 
in  Q1-2016,  8.9%  in  Q2-2016  and  5.2%  in 
Q3-2016.  Unlike  in  2012,  when  the  rise  in  house 
prices  could  be  attributed  largely  to  Vienna,  the 
capital, the bigger cities throughout the country are 
now also contributing to the acceleration in prices. 
Since  2011  house  prices  are  growing  faster  than 
rental  costs  and  income,  leading  to  increasingly 
high price-to-rent and price-to-income ratios which 
point  to  considerable  overvaluation.  The  increase 
in  Austria’s  price-to-income  ratio  since  the  crisis 
has  been  among  the  strongest in  the  EU, with  the 
majority  of  Member  States  seeing  their  ratio  drop 
(see  Graph 1.8).  As  this  trend  accelerated  in  the 
first  months  of  2016,  Austria  was  flagged  in 
December  by  the  European  Systemic  Risk  Board 
(see also Section 3.2). 

In  Austria,  both  rental  costs  and  house  prices  are 
rising  much  more  steeply  than  overall  inflation. 
This  could  pose  a  risk  for  private  consumption  if 
the  increasing  living  costs  were  to  limit  spending 
on  consumption  goods.  Growth 
in  housing 
mortgages  is  also  accelerating,  but  the  overall 
mortgage-to-GDP ratio is still relatively low.  

Graph 1.8:  House price to income and rent ratio 

Source: European Commission, ECB 

The  concentration  of  homeowners  in  the  higher 
income  deciles  helps  to  mitigate  risks  (Graph 
3.1.3)  as  higher-income  households  have  the 
financial  resources  to  react  to  changing  market 
conditions.  The  development  of  building  supply 
and  construction  investment  appears  moderate 
compared  to  changes  in  house  prices.  In  order  to 

7 

-25-20-15-10-50510150.00.20.40.60.81.01.21.41.61.82.000010203040506070809101112131415% of GDPTrade balance goods (rhs)Trade balance services (rhs)Export market share AT, valuesExport performance AT vs. advanced economies, valuesNet international investment position (rhs)%901001101201301401501601709010011012013014015016017008Q108Q309Q109Q310Q110Q311Q111Q312Q112Q313Q113Q314Q114Q315Q115Q316Q116Q3Index, Jan08=100Index, 2008Q1=100House price indexHousing mortgagesGross disposable income (4qma)Rent inflation (rhs)HICP (rhs)-110-100-90-80-70-60-50-40-30-20-100102030405060708090100110-60-50-40-30-20-100102030405060ROESPLMTHUSIHRNLITIEBGELSKLTEA19PTFIFRLVCZDKUKBEDECYEESELUAT% of GDP% changePrice to income change (2010-2015)Price to rent change (2010-2015) Lending for house purchase (2015) (rhs) 
 
 
 
1. Economic situation and outlook 

Austria had one of the highest tax wedges (5) in the 
EU  at  49.5 %  (for  a  single  earner  at  100 %  of 
average  wage  without  children).  With  the  reform, 
this  has  fallen  to  46.7 %  and  Austria  improved 
some  places  in  EU  comparison  (see  Graph  1.10). 
The  government  announced  in  January  2017  the 
introduction  of  an  automatic  indexation  of  tax 
brackets  according  to  inflation  for  countering  the 
effect of the fiscal drag. Together with measures to 
reduce  non-wage 
labour  costs  for  employers 
annually by around EUR 1 billion this will support 
efforts  for  further  lowering  the  tax  wedge  on 
labour.  The  analysis  in  Section  3.1  shows  that,  in 
the past, tax reforms have been implemented every 
couple of years to counter the effect of a rising tax 
wedge due to fiscal drag. 

Graph 1.10:  Tax wedge (% of labour costs, 2015) 

increase  housing  supply  the  government  plans 
several  measures,  such  as  easing  investment  and 
land provision for social housing.   

Public finances 

Public  finances  are  expected  to  improve  in  the 
coming  years  as  the  impact  of  bank  support 
measures  fades  out.  Government  debt  strongly 
increased in 2009 due to the nationalisation of the 
Austrian  bank  Kommunalkredit  and  was  further 
swollen  in  2014  and  2015  by  the  creation  of  the 
defeasance  vehicle  HETA  for  the  former  bank 
Hypo  Alpe  Adria  (see  Graph 1.9).  In  2016,  an 
agreement was reached with HETA’s creditors on 
the  guarantee  provided  by  Carinthia,  significantly 
reducing  the  risk  of  additional  costs  for  bank 
support  measures.  Government  debt  peaked  at 
85.5 % in 2015 but is expected to decline markedly 
in  the  coming  years  if,  as  planned,  the  assets  of 
in  government 
nationalised  banks 
accounts  are  gradually  sold  off.  Even  without 
considering  these  assets  government  debt  would 
have  stood  at  around  75 %  of  GDP  in  2016,  i.e. 
threshold. 
significantly 
Exceptional  spending  for  refugee-related  costs  in 
2015 and 2016 added to the government deficit but 
is  modest  compared  with 
the  bank  support 
measures. 

included 

above 

60 % 

the 

Graph 1.9:  General government debt and deficit 

Source: European Commission 

Despite  the  income  tax  reform  in  2016  the  tax 
burden  on  labour  remains  high  compared  to 
other European countries. Before the tax reform 

8 

Source: OECD 

Healthcare 

Austria’s healthcare system is characterised by 
large  and  costly  hospital  sector  which, 
a 
the 
together  with  projected  ageing  of 
population, 
long-term 
threatens 
sustainability.  In  general  the  accessibility  and 
quality  of  healthcare  provided  are  good  but 
compared  to  other  European  countries  Austria 
spends  a  relatively  high  percentage  of  GDP  on 
healthcare.  Equally,  the  proportion  of  hospital 
expenditure in overall healthcare costs is one of the 

its 

(5)  The tax wedge on labour represents the difference between 
the  total  labour  cost  of  employing  a  worker  and  the 
worker’s net earnings. It is defined as personal income tax 
and employer and employee social security contributions. 

0102030405060708090100-25-15-5515253507080910111213141516Impact of bank support measures on debtBank support measuresExpenditure for refugeesGovernment deficitGovernment debt (rhs)Government debt w/o liabilities from nationalised banks% of GDP% of GDPForecast0102030405060BEAT 15DEHUFRITAT 16FICZSESIPTSKESELEELUDKNLOECDPLUKIEIncome taxEmployee social security contributionsEmployer social security contributions% %  
 
 
 
                                                           
1. Economic situation and outlook 

strategy for the digital future till 2025. Also in the 
government  programme  2017-18  digitalisation  is 
addressed  as  one  of  the  key  priorities.  Austrian 
businesses  are  doing  well  on  many  digitalisation 
aspects  and  public  authorities  are  offering  a  wide 
range  of 
solutions.  Austria, 
however,  ranks  below  or  merely  in  line  with  the 
EU  average  on  aspects  such  as  investment  in 
digital  skills,  e-commerce,  e-procurement  and  the 
deployment of high-speed broadband in rural areas 
(see also Sections 3.4 and 3.5). 

e-government 

than 

is  significantly  higher 

highest  in  the  EU.  The  number  of  hospital 
discharges  and  the  number  of  hospital  beds  per 
capita 
in  other 
European countries with the exception of Germany 
(see  Graph 1.11).  As  an  ageing  society,  Austria 
faces 
as 
healthcare,  long-term  care  and  pension  costs  are 
expected  to  increase  markedly  in  future  (see  also 
Section 3.1). 

considerable 

challenges 

financial 

Graph 1.11:  Hospital discharges and hospital beds 2014 

Source: OECD 

Education 

Austria reaches its national EU 2020 targets on 
tertiary  education  and  early  school  leaving, 
which is markedly better than the EU average, 
however  national  and  international  tests  show 
deficiencies  in  basic  skills.  Weaknesses  in  some 
basic  skills  (reading  and  science)  were  confirmed 
by  their  deterioration  in  the  last  2015  OECD 
Programme  for  International  Student  Assessment 
(PISA)  test.  For  instance,  the  proportion  of  low 
achievers  in  science  amounts  to  20.8 %  in  2015, 
while  the  proportion  of  high  achievers  ranks  only 
in the mid-field. These results do not help Austria 
realise  its  ambition  of  becoming  an  innovation 
leader (see also Section 3.3). 

Digitalisation 

Austria  aspires  to  become  one  of  the  innovation 
leaders  in  Europe  but  remains  around  the  EU 
average  in  key  aspects  of  the  digitalisation  of  its 
economy and society. In January 2017, Austria has 
adopted  the  Digital  Roadmap  Austria,  its  national 

9 

02004006008001000120014000510152025ATDECZHUSKELLVFRSIEEPLFIBEDKLUSEIEUKNLITESPOper 100 populationInpatient care dischargesTotal hospital beds (rhs)per 100 000 population 
 
1. Economic situation and outlook 

Table 1.1: 

Key economic, financial and social indicators – Austria 

(1) Sum of portfolio debt instruments, other investment and reserve assets. 
(2,3) Domestic banking groups and stand-alone banks. 
(4) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
(*) Indicates BPM 5 and/or ESA 95 
Source: European Commission, ECB 

10 

2004-20082009201020112012201320142015201620172018Real GDP (y-o-y)2.7-3.81.92.80.70.10.61.01.51.61.6Private consumption (y-o-y)2.20.61.01.30.5-0.1-0.30.01.31.21.1Public consumption (y-o-y)2.42.50.10.00.20.70.82.11.81.00.8Gross fixed capital formation (y-o-y)1.7-7.3-2.16.71.42.2-0.90.73.62.42.0Exports of goods and services (y-o-y)6.5-15.013.86.01.70.52.33.62.72.93.1Imports of goods and services (y-o-y) 5.2-12.012.06.21.10.71.33.43.72.82.5Output gap0.7-2.5-1.50.30.1-0.7-0.9-0.9-0.7-0.4-0.2Potential growth (y-o-y)2.00.70.90.90.90.90.91.01.31.31.4Contribution to GDP growth:Domestic demand (y-o-y)1.8-0.90.12.20.60.6-0.20.61.91.41.2Inventories (y-o-y)0.2-0.80.50.6-0.4-0.50.30.00.00.00.0Net exports (y-o-y)0.8-2.11.20.10.30.00.50.2-0.40.20.4Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.2-0.30.00.00.10.10.00.10.30.20.3Capital accumulation (y-o-y)0.70.50.40.50.50.50.50.50.50.50.5Total factor productivity (y-o-y)1.10.60.50.40.30.30.40.40.50.60.6Current account balance (% of GDP), balance of payments3.22.62.91.61.52.02.41.8...Trade balance (% of GDP), balance of payments4.03.63.02.32.42.93.23.4...Terms of trade of goods and services (y-o-y)-0.82.2-1.8-1.7-0.40.10.51.31.1-0.6-0.1Capital account balance (% of GDP)-0.10.00.1-0.1-0.1-0.2-0.1-0.5...Net international investment position (% of GDP)-12.3-5.1-5.2-1.9-3.21.32.22.9...Net marketable external debt (% of GDP) (1)-15.1-10.8-18.0-20.8-23.7-20.1-21.1-21.8...Gross marketable external debt (% of GDP) (1)173.0184.7185.3186.2183.7172.7171.1161.6...Export performance vs. advanced countries (% change over 5 years)13.01.9-5.5-4.5-12.3-10.6-10.0-7.69...Export market share, goods and services (y-o-y)-0.9-1.7-10.4-2.4-6.01.70.2-3.3...Net FDI flows (% of GDP)2.20.32.03.63.22.4-0.61.9...Savings rate of households (net saving as percentage of net disposable income)11.111.39.37.98.77.07.07.3...Private credit flow, consolidated (% of GDP)5.81.30.33.01.30.60.92.1...Private sector debt, consolidated (% of GDP)124.5132.8132.8130.1129.2128.0126.2126.4...of which household debt, consolidated (% of GDP)51.453.954.853.552.451.651.652.3...of which non-financial corporate debt, consolidated (% of GDP)73.178.978.076.676.876.474.674.1...Corporations, net lending (+) or net borrowing (-) (% of GDP)-0.22.03.82.00.70.82.50.60.91.31.8Corporations, gross operating surplus (% of GDP)26.824.724.925.124.223.623.523.423.824.324.8Households, net lending (+) or net borrowing (-) (% of GDP)5.35.23.92.43.02.02.62.53.32.72.2Deflated house price index (y-o-y)0.43.54.43.04.82.91.43.5...Residential investment (% of GDP)4.24.44.44.44.34.44.34.3...GDP deflator (y-o-y)2.11.91.01.92.01.61.81.91.71.41.6Harmonised index of consumer prices (HICP, y-o-y)2.20.41.73.62.62.11.50.81.01.91.6Nominal compensation per employee (y-o-y)2.71.61.12.02.72.11.91.91.41.61.7Labour productivity (real, person employed, y-o-y)1.2-3.41.21.2-0.3-0.2-0.30.3...Unit labour costs (ULC, whole economy, y-o-y)1.55.2-0.10.83.02.32.11.50.80.80.8Real unit labour costs (y-o-y)-0.63.2-1.1-1.11.00.80.4-0.3-0.9-0.5-0.8Real effective exchange rate (ULC, y-o-y)0.22.1-2.2-0.1-0.63.21.7-1.70.1-0.4-1.0Real effective exchange rate (HICP, y-o-y)-0.21.1-3.40.5-1.82.11.7-1.91.6-1.0.Tax rate for a single person earning the average wage (%)33.332.632.733.433.934.434.734.9...Tax rate for a single person earning 50% of the average wage (%)21.6*21.021.220.921.723.122.823.1...Total Financial sector liabilities, non-consolidated (y-o-y)11.6-0.40.81.52.0-1.51.10.9...Tier 1 ratio (%) (2).9.610.010.311.311.912.313.2...Return on equity (%) (3).1.26.61.24.51.0-1.96.3...Gross non-performing debt (% of total debt instruments and total loans and advances) (4).2.73.94.04.34.26.25.5...Unemployment rate5.15.34.84.64.95.45.65.76.06.16.2Long-term unemployment rate (% of active population)1.31.21.21.21.21.31.51.7...Youth unemployment rate (% of active population in the same age group)9.810.79.58.99.49.710.310.611.3..Activity rate (15-64 year-olds)72.174.374.474.675.175.575.475.5...People at risk of poverty or social exclusion (% total population)18.119.118.919.218.518.819.218.3...Persons living in households with very low work intensity (% of total population aged below 60)7.67.17.88.67.77.89.18.2...General government balance (% of GDP)-2.6-5.4-4.5-2.6-2.2-1.4-2.7-1.0-1.4-1.2-0.9Tax-to-GDP ratio (%)42.342.142.042.142.743.543.744.343.243.143.1Structural budget balance (% of GDP)..-3.3-2.6-1.9-1.2-0.70.0-0.9-0.8-0.7General government gross debt (% of GDP)66.779.782.482.282.081.384.485.583.581.379.3forecast 
 
 
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

the 

implementation  of 
to  Austria 

the 
Progress  with 
recommendations  addressed 
in 
2016(6)  has  to  be  seen  in  a  longer  term 
the 
perspective  since 
European  Semester 
in  2011.  Austria  has 
undertaken several reforms since then. 

introduction  of 

the 

financial 

increasing 

surveillance  and 
By 
implementing 
targeted  measures,  Austria 
managed to restructure most of its nationalised and 
partly  nationalised  banks  by  2016  so 
that 
remaining risks are contained and relate to legacy 
issues.  By  activating  several  macro-prudential 
measures,  it  also  reduced  risks  related  to  the 
quality of foreign assets. 

The  2017  financial  equalisation  law  helped 
simplify  the  financial  relations  between  the 
different  layers  of  government.  The  agreement 
also  introduced  several  new  elements  which  have 
the  efficiency  and 
the  potential 
increase 
framework. 
adaptability  of  Austria's 
fiscal 
Nevertheless, 
remains  overly 
framework 
complex  and  still  suffers  from  a  misalignment 
between 
revenue-raising  powers  and 
broader spending responsibilities. 

limited 

the 

to 

Several measures were taken to reduce taxation 
on  labour,  such  as  the  2016  income  tax  reform 
and  the  reduction  of  non-wage  labour  costs  for 
employers. Austria nonetheless still has one of the 
highest tax wedges in Europe. 

limiting  access 

Austria  has  managed  to  increase  the  effective 
retirement  age  by 
to  early 
retirement and invalidity pension schemes as from 
2014.  Earlier harmonisation of  the  pension age  of 
men  and  women  as  well  as  a  linking  of  the 
statutory pension age to life expectancy have been 
recommended  several  times  but  have  not  been 
implemented. 

The  2013  healthcare  reform  comprised  several 
measures  to  improve  the  efficiency  of  the 
healthcare  sector,  including  a  cost-containment 
path  up  to  2016.  The  2017  financial  equalisation 
law established more stringent expenditure ceilings 
up to 2021 and also took some steps to strengthen 
the  provision  of  outpatient  care  outside  hospitals. 

(6)  For  the  assessment  of  other  reforms  implemented  in  the 

past, see in particular Section 3. 

Nevertheless,  the  organisational  and  financing 
structure  of  the  healthcare  sector  remains  overly 
complex  and  ensuring  its  sustainability  in  the 
medium and long term remains a challenge. 

The labour market participation of women has 
increased in recent years but this is mainly due to 
part-time  employment.  Women  would  gain  more 
from  the  labour  market  if  the  gender  gap  in  pay 
and  pensions  were  narrowed  and  childcare  and 
long-term care facilities expanded. 

Measures  have  been  taken  to  improve  the 
educational  achievements  of  disadvantaged 
young  people  —  including  those  from  a  migrant 
background — but education outcomes have so far 
not improved, rather deteriorated. 

as 

(such 

simplification 

the  underlying 

Austria  has  made  some  efforts  to  improve 
competition  and  investment  in  the  services 
sector  by  reducing  regulatory  and  administrative 
barriers.  These  efforts  have  focused  notably  on 
administrative 
the 
introduction  of  an  electronic  trade  register).  This 
reduces  compliance  costs  and  mitigates  some  of 
regulation  without, 
the  negative  effects  of 
issue  of 
however, 
resolving 
restrictiveness.  Austria  also 
some 
regulatory  obstacles  in  reaction  to  national  court 
rulings  or  EU  infringement  procedures.  It  has 
recently tabled a proposal for a limited revision of 
the  trade  licence  act  (Gewerbeordnung).  Austria 
participated  actively  in  the  mutual  evaluation  of 
professional  regulation  at  EU  level  which  took 
place  between  2014  and  2016.  The  action  plan  it 
presented  as  part  of  this  exercise  was  however 
in  a 
unambitious  and  has  not  yet  resulted 
systematic  attempt  to  remove  administrative  and 
regulatory obstacles across professions and trades. 

removed 

the 

Overall,  Austria  has  made  some(7)  progress  in 
addressing 
country-specific 
2016 
recommendations  (CSRs).  Some  progress  was 
made  on  CSR1  in  addressing  the  sustainability  of 
the  pension  and  healthcare  system  together  with 
streamlining  the  fiscal  framework.  Some  progress 
was  made  on  CSR2  in  improving  the  labour 

(7)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
CSR is presented in the Overview Table in the Annex. This 
overall  assessment  does  not  include  an  assessment  of 
compliance with the Stability and Growth Pact. 

11 

 
 
                                                           
                                                           
2. Progress with country-specific recommendations 

market participation of women and the educational 
achievements  of  disadvantaged  young  people. 
Limited progress was made on CSR3 on reducing 
barriers to investment in the services sector. 

Table 2.1: 

Summary table on 2016 CSR assessment 

* This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact. 
Source: European Commission 

12 

  Austria Overall assessment of progress with 2016 CSRs:  Some progress CSR 1: Ensure that the deviation from the medium-term budgetary objective in 2016 and in 2017 is limited to the allowance linked to the budgetary impact of the exceptional inflow of refugees in 2015, and to that effect achieve an annual fiscal adjustment of 0,3 % of GDP in 2017 unless the medium-term budgetary objective is respected with a lower effort. Ensure the sustainability of the healthcare system, and of the pension system by linking the statutory pension age to life expectancy. Simplify, rationalise and streamline fiscal relations and responsibilities across the various layers of government.  Some progress*  Some progress in ensuring the financial sustainability of the healthcare system  Limited progress in ensuring the financial sustainability of the pension system  No progress in linking the statutory retirement age to life expectancy  Some progress in reforming fiscal relations between the various layers of government  CSR 2: Improve the labour market participation of women. Take steps to improve the educational achievements of disadvantaged young people, in particular those from a migrant background. Some progress  Some progress in improving the labour market participation of women  Some progress in improving the educational achievements of disadvantaged young people CSR 3: Reduce, in the area of services, administrative and regulatory barriers for investments, such as restrictive authorisation requirements and restrictions on legal form and shareholding, and impediments to setting up interdisciplinary companies. Limited progress  Limited progress in reducing administrative and regulatory barriers to investment in services  No progress in reducing impediments to setting up interdisciplinary services companies   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2. Progress with country-specific recommendations 

13 

Box 2.1: Contribution of the EU budget to structural change in AustriaAustria receives up to EUR 4.9 billion from the European Structural and Investment Funds (ESIF) for the period 2014-2020. This is equivalent to around 0.2 % of GDP annually (over 2014-2017) and 5 % of national public investment (1). By 31 December 2016, an estimated EUR 1.4 billion, which represents about 28 % of the total allocation for ESI Funds, have already been allocated to concrete projects.  Financing under the European Fund for Strategic Investments, Horizon 2020, the Connecting Europe Facility and other directly managed EU funds is additional to the ESI Funds. By end 2016, Austria has signed agreements for EUR 738 million for projects under the Connecting Europe Facility. The EIB Group approved financing under EFSI amounts to EUR 188 million, which is expected to trigger nearly EUR 492 million in total investments (as of end 2016).  All necessary reforms and strategies as required by the ex-ante conditionalities (2) have been met, thus ensuring a timely and efficient up-take of the funds. All relevant CSRs were taken into account when designing the 2014-2020 programmes. The European Regional Development Fund (ERDF) will contribute to stimulating private investments in research and development and to improve the cooperation between public and private investments actors. Furthermore, Austria already improved with the help of the ERDF the coordination between the regional and Federal levels through the national Smart Specialisation Strategy. A considerable part of the ESI Funds (EAFRD EUR 3.9 billion) addresses rural development, with the aim of improving competitiveness in the agricultural sector, preserving eco-systems with a view to ensuring biodiversity and supporting the socio-economic regeneration of rural areas. The ESI Funds also support various labour market policies, particularly skills upgrading and contribute to increasing the employability of the labour force. Austria also uses ESI Funds assistance for different social policies supporting social inclusion measures, especially for minorities and migrants. Specifically, the ESF supports the implementation of country specific recommendations, by assisting measures to improve the employability of women, older workers and workers with migrant background in particular.   https://cohesiondata.ec.europa.eu/countries/AT                                                            (1) National public investment is defined as gross capital formation + investment grants + national expenditure on agriculture and fisheries. (2) At the adoption of programmes, Member States are required to comply with a number of ex-ante conditionalities, which aim at improving framework and investment conditions for the majority of areas of public investments. For Members States that do not fulfil all the ex-ante conditionalities by the end 2016, the Commission has the possibility to propose the temporary suspension of all or part of interim payments.  
 
 
 
 
 
 
 
 
 
 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

3.1.1.  FISCAL FRAMEWORK 

the 

and 

states 

the  different 

The  2017  financial  equalisation law takes  some 
steps  to  reduce  the  complexity  of  the  fiscal 
framework. In 2016, representatives of the central 
the 
government, 
federal 
municipalities  agreed  on  a  new 
financial 
equalisation  law,  which  will  govern  financial 
relations  between 
layers  of 
government  from  January  2017  for  5  years. 
Several  inter-sector  transfers  have  been  abolished 
and  integrated  into  the  general  revenue-sharing 
system.  A  first  step  has  also  been  taken  to  make 
the  revenue-sharing  system 
task-
oriented:  starting  in  2018  the  funds  for  childcare 
will  be  allocated  to  municipalities  based  on  the 
services  provided  rather  than  the  number  of 
inhabitants. From 2019, the same system will also 
apply  to  compulsory  schooling.  The  law  also 
introduced  a  uniform  formula  for  calculating  the 
maximum amount of liabilities and guarantees for 
each  sub-sectoral  government,  at  the  same  time 
implementing  a  general  ban  on 
financial 
speculation.  Nevertheless,  the  responsibilities  of 
each  government  subsector  towards  other  sectors’ 
liabilities remain unclear. 

itself  more 

to 

improve 

The  new  agreement  also  introduces  several 
the  efficiency  and 
elements 
flexibility  of  the  fiscal  framework.  The  legal 
basis has been created for regular reviews of tasks 
and  expenditure  in  individual  areas  in  order  to 
consider  progress,  results  and  the  potential  for 
savings  or  redistribution  of  tasks.  By  the  end  of 
2018,  a  system  of  benchmarks  will  also  be 
developed  to  compare  federal  states’  performance 
in  several  areas  in  order  to  encourage  efficiency 
include 
and 
long-term  care  and 
administration,  hospitals, 
compulsory 
three  government 
subsectors  (central  government,  federal  states  and 
municipalities)  also  committed  to  reform  the 
distribution  of  their  respective  competencies,  for 
which an agreement will have to be reached by the 
end  of  2018.  The  reform  will  aim  at  unbundling 
competencies both in the legislative and executive 
field,  and  will  include  subsequent  changes  in  the 
for 
financial  arrangements.  The 

improve  monitoring.  These 

schools.  The 

legal  basis 

spending  reviews  and  benchmarks  improves  the 
adaptability  of  the  fiscal  framework,  while  the 
reform  of  competencies  could  make  it  possible  to 
tackle  the  complexity  of  the  system  at  its  roots. 
However, the effectiveness of these measures will 
depend on their thorough implementation. 

The 2017 financial equalisation law does little to 
correct  the  misalignment  of  revenue-raising 
powers and spending responsibilities across the 
different 
layers  of  government.  The  new 
agreement  slightly  increases  tax  autonomy  at  the 
sub-national level, leaving the federal states free to 
set  the  tariff  for  the  housing  subsidy  contribution 
from 2018. While this measure has the potential to 
increase federal states’ revenues from autonomous 
taxes  from  EUR  500  million  to  around  EUR  1.5 
billion,  this  would  be  still  low  compared  to  their 
overall budget of around EUR 30 billion in 2015. 
At  the  same  time,  the  law  increases  yearly 
transfers  to  federal  states  and  municipalities  by 
EUR  300  million,  which  will  raise  their  spending 
capacity,  thus  widening  the  misalignment  with 
their revenue-raising powers. 

for 

rules 

Regarding  the  implementation  of  the  national 
fiscal rules, the complexity of the 2012 Austrian 
Stability Pact  makes an  effective  monitoring at 
level  difficult.  The  2012 
the  sub-national 
several 
introduced 
Austrian  Stability  Pact 
numerical 
the  budgets  of  each 
government  subsector.  As  part  of  these  rules, 
federal states and municipalities were required not 
the  general 
to  exceed  a  specific  share  of 
government  structural  budget  deficit.  For  this 
purpose  they  should  keep  a  structural  balance 
from  2017  onwards  where 
control  account 
deviations 
recorded. 
targets  would  be 
from 
Similarly,  increases  in  expenditure  at  the  sub-
national level have been made subject to the same 
rules  as  set  at  EU  level  (Council Regulation  (EC) 
No 1175/2011). Both the structural budget control 
account and the implementation of the expenditure 
rule  are  very  difficult  and  resource-consuming  at 
the 
for 
level, 
municipalities.  This  is  particularly  relevant  given 
the  accounting 
the  current  heterogeneity  of 
standards  and  practices  across 
sub-national 
governments  (accounting  standards  will  be  fully 

sub-national 

especially 

14 

 
 
harmonised  only  from  2020  onwards)  as  well  as 
the  complexity  of  intergovernmental  transfers  and 
subsidies.  Similar  conclusions  are  shared  by  the 
Fiscal  Advisory  Council  (Fiskalrat,  2016),  which 
since  2013  has  the  mandate  to  analyse  the 
sustainability and the quality of budgetary policies. 

3.1.2.  TAXATION 

Despite  the  2016  tax  reform,  the  tax  wedge  on 
labour  in  Austria  remains  comparatively  high. 
The  tax  reform  implemented  from  January  2016 
has reduced the tax wedge on labour. Tax brackets 
for personal income tax have been adjusted, with a 
substantial  reduction  of  the  entry  rate.  The  tax 
wedge for a single person with average income has 
decreased by 2.8 percentage points, from 49.5 % to 
46.7 %. The reform also provided work incentives, 
with  a  significant  reduction  of  the  low-wage  trap 
for second earners (from 43.9 % to 37.7 %)(8).  

Graph 3.1.1:  The effect of the fiscal drag in Austria 

3.1. Public finances and taxation 

earners  remains  significantly  above 
average of 33.5 %. 

the  EU 

to 

adjust 

inflation, 

In the absence of an indexation of tax brackets, 
the  tax  burden  on  personal  income  tends  to 
increase over time as an effect of the fiscal drag. 
The  Austrian  tax  system  currently  does  not 
envisage  any  mechanism  to  automatically  adjust 
tax  brackets  to  inflation.  Consequently,  as  wages 
grow 
taxpayers 
for 
progressively  move  to  higher  tax  brackets  with  a 
corresponding  increase  in  their  tax  liability.  To 
some extent, the income tax reforms implemented 
in  recent  years  countered  the  effect  of  the  fiscal 
drag and did not reduce the tax wedge on labour in 
a  structural  way.  For  this  reason,  since  the  early 
2000s  the  tax  wedge  on  labour  in  Austria  has 
fluctuated  between  47 %  and  49 %,  always 
remaining far above the EU average (Graph 3.1.1). 
In  January  2017, 
to 
automatically  index  the  two  lowest  income  tax 
brackets  when  the  cumulative  inflation  reaches 
5%.  If  adopted,  this  measure  would  provide  for  a 
more stable reduction of the tax burden on labour 
from 2019 onwards. 

the  government  agreed 

Graph 3.1.2:  Revenues from recurrent property taxes (2014) 

(1) The dashed values are Commission forecast 
Source: OECD, European Commission 

Nevertheless, even after the reform the tax wedge 
on  labour  in  Austria  is  among  the  highest  in  the 
EU,  and  far  above  the  EU  average  of  40.6 %. 
Similarly, at 37.7 % the low-wage trap for second 

Source: OECD 

(8)  The low-wage trap shows the share of a family’s additional 
earnings  arising  from  an  increase  in  work  productivity 
which  are  wiped  out  by  increasing  taxes  and  benefit 
withdrawal.  The  family  considered  here  has  two-earners 
with  two  children,  where  the  principal  earner  earns  the 
average  wage  and  the  second  earner  increases  its  gross 
wage from 33 % of the average wage to 67 %. 

Austria  has  potential  scope  to  shift  the  tax 
burden  from  labour  to  recurrent  property 
taxes. Revenues from recurrent property taxes are 
significantly  lower  in  Austria  than  the  rest  of  the 
EU:  in  2014  they  amounted  to  0.2 %  of  GDP 
versus  an  EU  average  of  1.6 %  of  GDP  (Graph 
3.1.2). Empirical research shows that recurrent  

15 

3540455055606501020304050600001020304050607080910111213141516bn euroTaxes on production and imports, receivableCurrent taxes on income, wealth, etc., receivableAT - Tax wedge, single person, average income (rhs)EU average, GDP weighted - Tax wedge, single person, average income (rhs)% of earning2009 tax reform2016 tax reform2005 tax reform2001 tax reform01020304050607080901000.00.51.01.52.02.53.03.5FRUKELDKITBEESPLCYIENLPTSELVFIROHUSISKDEBGEELTCZATLUHRMT% of populationRecurrent property tax revenueAverage recurrent property tax revenueShare of houseowners (% of population)Average share of houseowners% of GDP 
 
                                                           
 
3.1. Public finances and taxation 

Commission,  2014)(9).  However,  the  tax  base  is 
extremely  low,  as  the  last  assessment  of  property 
values  for  tax  purposes  occurred  in  1973  and  the 
assessed  values  bear  little  correlation  with  today's 
market values. This misalignment affects revenues, 
limits the stabilising role that property taxation can 
play  in  the  housing  market,  and  may  produce  a 
regressive distributional effect as the market values 
of  properties  have  evolved  very  differently  across 
the  country.  The  2016  tax  reform  introduced 
several  measures  to  update  the  assessed  values  of 
immovable properties for tax purposes, in order to 
better reflect their market values. Nevertheless, the 
new  tax  base  applies  only  to  taxes  on  gratuitous 
transfers, not to recurrent taxes.  

3.1.3.  AGE RELATED SPENDING 

improvement 

Austria  faces  a  medium  risk  to  its  fiscal 
sustainability  in  the  medium-  and  long-term, 
mainly  due  to  the  effects  of  ageing.  Based  on  a 
debt  sustainability  analysis  by  Commission  staff 
(European  Commission  2017a) 
as  updated 
following the Commission 2017 winter forecast, in 
a  no-policy-change  scenario  Austria's  public  debt 
is  projected  to  decrease  by  about  18  pps  of  GDP 
between 2016 and 2027, reaching 65.5 % of GDP. 
the 
A  cumulative  gradual 
structural primary balance of 0.5 % of GDP over 5 
years  (starting  from  the  year  after  the  forecasts, 
currently 2019) would be required in order to reach 
the  60 %  debt-to-GDP  ratio  by  2031.  This  is 
mainly  due  to  the  unfavourable  current  level  of 
debt and, to a lesser extent, to an age-related effect 
over  the  medium  term.  In  the  long-term,  the 
projections point to a required fiscal adjustment of 
2.2 % of GDP to ensure the sustainability of public 
finances,  qualifying  Austria  as  facing  medium 
fiscal  sustainability.  This  is  mainly  due  to  the 
stronger  projected  impact  of  age-related  spending 
(2.5 % of GDP) over the longer term. 

in 

Graph 3.1.3:  Share of homeowners by deciles of 

equivalised disposable income 

(1) Homeowners are defined as outright owners and owners 
paying a mortgage. 
(2) EUROMOD simulates benefit entitlements and tax 
liabilities (including social security contributions) of individual 
and households. The simulations are based on 
representative survey data from the European Statistics on 
Income and Living Conditions (EU-SILC). 
Source: European Commission, Joint Research Centre 
based on the EUROMOD model 

the 

limited  by 

these  would  be 

taxes  on 
least 
immovable  property  are 
distortive  to  growth  (Arnold  et  al.,  2011),  and 
other  studies  indicate  that  shifting  the  tax  burden 
from  labour  to  consumption  or  property  would 
have  positive  effects  on  GDP  and  employment 
(European  Commission,  2013).  While  the  design 
of  such  a  shift  would  need  to  avoid  potential 
negative  distributional  impacts,  in  the  case  of 
Austria 
the 
comparatively  low  share  of  house-owners  in  the 
their 
overall  population 
concentration in the higher income deciles (Graph 
3.1.3).  As  recurrent  property  taxes  are  one  of  the 
few  sub-national  own  taxes  in  Austria,  increasing 
the corresponding revenues would also reduce the 
transfer  dependency  of  sub-national  governments. 
For this reason, the 2017 financial equalisation law 
established  a  working  group  with  the  specific 
mandate to propose a reform of the property tax by 
mid-2017.  Austria  is also one  of  the  few  Member 
States  without  an  inheritance  tax,  which  was 
suspended in 2008. 

(Graph  3.1.2)  and 

The  outdated  tax  base  for  recurrent  taxes  on 
immovable  property  leads  to  low  revenues  and 
distortive  distributional  effects.  In  Austria  the 
rates of recurrent property taxes are relatively high, 
ranging  up  to  1 %  depending  on  the  municipality 
(EU  average  of  0.36 %  in  2012)  (European 

3.1.4.  PENSIONS 

Austria's  public  expenditure  on  pensions  is 
relatively  high  compared  to  the  rest  of  Europe 
and is expected to increase significantly due to a 
rapidly  ageing  population.  According  to  the 

(9)  Data  refer to  2012  and  to  tax  rates  on  the  possession  of  a 

dwelling with a value of EUR 213 000. 

16 

01020304050607001020304050607080123456789101000 Euro%Income decilesMean annual equivalised disposable income of homeowners (rhs)Share of homeowners per decileDistribution of homeowners across deciles 
 
                                                           
3.1. Public finances and taxation 

lives  led  to  an  increase  in  the  effective  retirement 
age.  In  the  first  half  of  2015,  the  effective 
retirement  age  increased  by  13  months  compared 
to the same period in 2014 (10) and by additional 2 
months in the first half of 2016, reaching 60 years 
and 3 months (BMASK, 2016). (11) However, this 
figure  still  appears  low  compared  to  the  EU 
average, which  in  2014  stood  at  63  and 6 months 
for  men  and  62  years  and  6  months  for  women. 
For men, the gap from the statutory retirement age 
of  65  years  also  remains  significant.  For  women, 
the  current  statutory  retirement  age  of  60  years  is 
among the lowest in the EU, and it will start to be 
aligned  with  the  statutory  retirement  age  for  men 
only  in  2024.  In  its  programme  2017-18,  the 
government  is  planning  to  further  harmonise  the 
pension  system  of  civil  servants  with  the  general 
pension system (ASVG).   

The low labour market participation of women 
and  the  high  gender  pay  gap,  combined  with 
lower  pension  contributions, 
less 
adequate pensions for women. Austria continues 
to  face  a  challenge  in  terms  of  pension  adequacy 
for  women,  particularly  those  aged  65+.  The 
gender  pension  gap  increased  from  35 %  in  2008 
to 39 % in 2015.  

led 

to 

3.1.5.  HEALTHCARE 

Public  expenditure  on  healthcare  in  Austria 
poses a sustainability challenge, as it is expected 
to  rise  significantly  in  the  medium  and  long 
term from already high levels. At 7.9 % of GDP, 
the public expenditure for healthcare in Austria is 
among the highest in the EU (EU average of 7.2 % 
the 
of  GDP,  2014  data).  On 
2015 Ageing  Report,  healthcare  expenditure  is 
projected to increase by 1.3 pps of GDP from 2013 
to 2060, significantly above the average projected 
increase  for  the  EU  (0.9  pps  of  GDP).  Together 
with the projected rise in spending on pensions and 
long-term care, this projected increase represents a 
medium risk to fiscal sustainability in the medium 
and long term. 

the  basis  of 

(10)  Part of the increase in the effective retirement age recorded 
in 2015 is due to a change in the criteria for classification. 
(11)  This  figure  does  not  consider  civil  servants.  The  effective 
federal 

retirement  age  of  civil 
the 
administration was 61 years and 2 months in 2015. 

servants  of 

the  period  2013-2060, Austria 

(European  Commission, 
2015 Ageing  Report 
2015a),  for 
is 
expected to be among the EU Member States with 
the  largest  predicted  increase  in  pensions.  The 
report projects that by 2060 Austria's spending on 
pensions  will  increase by  0.5  pps of GDP  (vs  EU 
average of a 0.2 pps reduction). 

The  government's  budgetary  support 
for 
pensions  is  still  increasing.  In  its  Budget  Report 
2017  and  Strategy  Report  2017-2020  (BMF, 
2017), the Ministry of Finance projects an increase 
of  30.3 %  in  federal  contributions  to  the  pension 
insurance  (excluding  civil  servants)  over  2015-
2020 (from EUR 10.2 billion in 2015 to EUR 13.3 
billion in 2020). Similarly, pension expenditure for 
public  servants  (including  expenditure  for  long-
term  care)  is  expected  to  increase  in  the  same 
period  by  15.6 %  (from  EUR  9  billion  in  2015  to 
EUR 10.4 billion in 2020). 

Increasing life expectancy and the low effective 
retirement  age  are  the  main  drivers  of  higher 
pension  expenditure.  Significant  changes  in  the 
age  structure  of  the  Austrian  population  are 
expected  by  2040  due  to  the  persistently  low 
fertility rate and rising life expectancy. As a result, 
the population aged over 65 is expected to increase 
from 1.6 million in 2015 to 2.8 million in 2060. In 
contrast,  the  number  of  potential  workers  is 
expected  to  gradually  decrease  after  2025,  so  that 
in  2060  the  ratio  between  the  population  aged  65 
and  more  as  a  percentage  of  the  population  aged 
15-64  will  be  0.5  (old-age  dependency  ratio).  At 
the  same  time,  given  the  low  effective  retirement 
age, the number of pensioners as a share of the 65+ 
population  (coverage  ratio)  is  projected  to  remain 
far  above  the  EU  average  up  to  2060,  though  the 
gap  is  expected  to  decrease  (148 %  vs  133 %  in 
2013,  116 %  vs  105 %  in  2060).  The  gradual 
decline  in  the  working-age  population  from  2020 
and  the  simultaneous  increase  in  pensioners  will 
have a dampening effect on economic growth and 
change 
revenue  and  expenditure 
structure. 

the  public 

Although  pension  reform  measures  launched 
since  2014  led  to  an  increase,  the  effective 
retirement  age  is  still  relatively  low.  Reducing 
access  to  invalidity  pensions,  better  transparency 
created  by  the  individual  pension  accounts,  the 
higher penalties for entering retirement earlier and 
the  higher  benefits  resulting  from  longer  working 

17 

 
                                                           
3.1. Public finances and taxation 

The  main  driver  of  the  high  healthcare 
spending  is  the  large  hospital  sector,  while  the 
less  costly  outpatient  care  is  underutilised. 
Several  indicators  point  to  the  over-utilisation  of 
hospital  care  in  Austria.  The  number  of  available 
acute  care  beds  (535  per  100 000  inhabitants  in 
2013),  is 50 %  higher  than  the  EU  average  (356). 
At  the  same  time,  even  if  the  average  length  of 
curative care stays, at 6.5 days, is at about the EU 
average 
inpatient 
discharges(12)  per  100 000  inhabitants  (26.6)  is 
among the highest in the EU and more than 50 % 
above  the  EU  average  (16.5).  Consistently,  the 
number  of  day-case  discharges  is  lower  than 
average  (6 595  in  Austria  versus  7 031  in  the  EU 
in  2013).  Accordingly,  public  expenditure  for  the 
hospital  sector  is  among  the  highest  in  the  EU 
(Graph  3.1.4),  while  Austria  at  is  below  the  EU 
average 
terms  of  public  expenditure  for 
outpatient care (Austria 1.5 % of GDP, EU 2.2 %). 

the  number  of 

in  2013, 

in 

Graph 3.1.4:  Public expenditure for healthcare (2014) 

Source: European Commission 

is 

sector 

complex 

The  financial  and  organisational  structure  of 
the  healthcare 
and 
fragmented. The Austrian taxpayer contributes to 
the healthcare system directly through compulsory 
contributions to social security funds and indirectly 
through  taxes.  While  outpatient  care  is  mainly 
financed  by  social  security  funds,  which  have 
direct  agreements  with  healthcare  providers,  the 
financing of inpatient care is more complex. Public 

(12)  An  inpatient  discharge  is  the  discharge  of  a  patient  at  the 

end of an inpatient care service. 

the 

annual 

increase 

The financial targets set by the 2013 healthcare 
reform  and  the  2017  financial  equalisation  law 
are not sufficient to ensure the sustainability of 
the  healthcare  system.  With  the  2013  healthcare 
reform 
in  healthcare 
expenditure  has  been  limited  to  3.6 %  from  2013 
to 2016, a level which had been set to match future 
the 
nominal  GDP  growth  as  estimated  by 
government.  Although  it  is  being  met  (GÖG  and 
BMGF,  2016),  the  expenditure  ceiling  lacked 
ambition and did not imply  significant changes in 
the existing trend. For health insurance institutions, 
this  was  confirmed  by  the  joint  monitoring  report 
issued  on  July  2016  (Rechnungshof,  2016).  The 
2017  financial  equalisation  law  has  set  more 
stringent financial targets, as the cap on healthcare 
expenditure  growth  will  be  gradually  decreased 
from  3.6 %  in  2016  to  3.2 %  in  2021.  The  new 
targets  are  likely  to  play  a  positive  role  in 
spending  path  and 
containing 
the 
encouraging 
projections  of  the  2015 Ageing  Report  pointed  to 
medium risks for fiscal sustainability even though 
they  assumed  lower  growth  rates  for  healthcare 
the  same  years.  Therefore, 
expenditure  over 
Austria  will  still  face  a  sustainability  challenge 
even if the financial targets are met. 

efficiency.  Nevertheless, 

the  overall 

Despite  the  high  costs,  the  outcomes  of  the 
healthcare  system  are  around  the  EU  average, 
pointing  to  unexploited  efficiency  gains.  The 
Austrian healthcare system does not seem to suffer 
from  problems  of  accessibility:  according  to  the 
EU  statistics  on  income  and  living  conditions, 
Austria  consistently  scores  as  one  of  the  Member 
States  with  the  lowest  self-reported  unmet  needs 
for medical care due to costs, distance and waiting 
times. However, recent evidence at the local level 
suggests  some  inefficiencies  and  long  waiting 
times in specific sectors (Stadtrechnungshof Wien, 
2017a/b).  Life  expectancy 
the  EU 
average, both for  females  and  males  (84  and 79.1 
respectively,  versus  an  EU  average  of  83.6  and 
78.1).  Nevertheless,  the  number  of  healthy  life 
years  is  significantly  below  the  EU  average  (57.8 
for  females  and  57.6  for  males,  versus  an  EU 
average  of  61.8  and  61.4  respectively).  This 
indicates  that  although  the  Austrians  are  living 
longer than the EU average, they tend to live fewer 
years  in  sound  health  conditions.  Overall,  the 
outcomes  of  the  healthcare  system,  although  of 
good  level,  do  not appear  to fully reflect  the  high 
costs. 

is  above 

18 

012345678910DKFIFRNLBEATCZIEUKDEITSEHRSLPTESMTBGLTEEHULUELPLROLVCYSK% of GDPOther expenditureOutpatient servicesHospital servicesTotal expenditure - EU 28Hospital services expenditure - EU 28 
 
                                                           
3.1. Public finances and taxation 

forms 

different 

subsector, 

hospitals  are  financed  through  nine  healthcare 
funds  associated  with  the  federal  states,  which 
collect  contributions  from  the  three  government 
layers and the social security institutions. For each 
government 
of 
contributions  exist  which  depend  on  different 
legislation and relate to different funds. In general, 
the complexity of the system does not provide any 
stakeholder with full control over the financing or 
strong  incentives  to  reduce  costs.  In  addition, 
managing  and  financing  responsibilities  are  not 
fully  aligned,  with  federal  states  owning  and 
the  public  hospitals  but 
running  most  of 
contributing  to  less  than  half  of  the  hospital 
sector’s  financing.  This  set-up  provides  federal 
states  with  weak  incentives  to  pursue  efficiency 
within the hospital sector or at health system level 
by  shifting  services  to  the  less  costly  outpatient 
care. 

The  2017  financial  equalisation  law  takes  steps 
to  promote  efficiency,  by  reducing 
the 
incentives for hospitals to treat outpatient cases 
as  inpatient  ones.  The  system  of  reimbursement 
for hospitals based on the diagnosis-related groups 
introduced  in  1997  has  applied  so  far  only  to 
inpatient cases. As the ambulatory care department 
of hospitals were reimbursed under a different and 
less generous regime, hospitals had an incentive to 
treat  ambulatory  cases  as  inpatients.  From  2017, 
the diagnosis-related groups reimbursement system 
will  also  apply  to  the  ambulatory  departments. 
This is likely to promote a shift of excess capacity 
from  the  inpatient  to  the  outpatient  sector  and  a 
consequent reduction in acute care beds. 

The 2017 financial equalisation law strengthens 
the  provision  of  outpatient  care  outside 
hospitals.  To  provide  patients  with  an  effective 
alternative  to  hospital  services,  a  legal  framework 
for  planning  outpatient  multi-disciplinary  primary 
care centres has been created. The framework also 
provides  for  the  creation  of  networks  of  primary 
care  providers,  which  is  particularly  relevant  for 
the  more  scarcely  populated  areas.  Compared  to 
the  traditional  single-handed  practices,  the  new 
centres would offer a wider range of care services 
and more patient-friendly conditions. Although the 
establishment  of  the  care  centres  is  subject  to  the 
local  supply  of  outpatient  care  (which  includes 
single-handed  practices), 
to 
implement 75 care centres by 2021, and EUR 200 
million  have  been  earmarked.  So  far,  the  low 

it  was  agreed 

lump-sum  with 

development  of  outpatient  care  outside  hospitals 
was  also  due  to  the  contracts  agreed  between 
healthcare  providers  and  social  security  funds,(13) 
fee-for-service 
combining 
payments.  The  success  of  the  multi-disciplinary 
on 
primary 
the 
implementation  of  new  payments 
schemes 
ensuring the involvement of both practitioners and 
social security funds. 

depends 

centres 

care 

Austria’s  hospital sector  makes  insufficient  use 
of  effective  public  procurement  such  as  EU-
wide  tendering,  procurement  aggregation  and 
non-price  award  criteria.  Effective  public 
procurement has the highest benefits in healthcare 
systems, like Austria’s, which rely in particular on 
institutional players such as hospitals. Based on the 
EU’s TED database, however, Austria’s public and 
confessional  hospitals  make  little  use  of  EU-wide 
tendering.  The  value  of  health-related  tenders 
published EU-wide by the Austrian health sector is 
0.23 %  of  GDP,  compared  to  an  EU  average  of 
0.62 %;  the  total  amount  is  EUR  0.78 billion 
compared 
to  Sweden’s  EUR 
3.59 billion  for  a  population  of  similar  size.  A 
related  issue  is  that  in  a  significant  number  of 
tenders  only  one  bid  was  received  (41 %  in 
medical imaging equipment tenders in 2012-2015), 
indicating  a  lack  of  competition.  Furthermore, 
Austria’s  hospitals  forego  volume  savings  for 
commoditised inputs and the amortisation of costly 
expertise for complex products by not aggregating 
their  tenders.  In  addition,  Austrian  hospitals  used 
price as the sole award criterion in 54 % of tenders 
in  2012-2015,  which  points 
lack  of 
sophistication in tendering practices.  

for  example 

to  a 

3.1.6.  LONG-TERM CARE 

Austria  has  an  ageing  society  whose  long-term 
care costs are expected to increase significantly. 
Austria ranks in the middle of the EU on long-term 
care costs as a percentage of GDP. However, it is 
one  of  the  countries  with  the  highest  projected 
increase, with costs expected to double from 1.4 % 
of  GDP  in  2013  to  2.7 %  of  GDP  by  2060 
(projected  increase  of  1.3 pps  of  GDP  versus  1.1 
pps for the EU average).  

(13)  Contracts  for  physicians  are  negotiated  centrally  between 
the  Medical  Chamber  and  the  main  association  of  social 
security funds (Hauptverband).  

19 

 
                                                           
3.2.  FINANCIAL SECTOR 

Banking sector capitalisation improved in 2016, 
but pockets of vulnerability still remain. Capital 
adequacy  (including  the  capitalisation  of  CESEE 
subsidiaries)(14)  strengthened  further  and  reached 
16.5 %  in  June  2016  compared  with  16.3 %  in 
2015.  The  common  equity  Tier  1  (CET  1)  ratio 
rose to 13.2 % in June 2016, up by 0.4 percentage 
2015. 
compared  with  December 
points 
Notwithstanding  efforts  to  strengthen  their  capital 
buffers,  the  largest  Austrian  banking  groups  still 
have  lower  capital  ratios  than  European  peers,  as 
shown  also  by  the  results  of  the  2016  EU-wide 
stress  test  performed  by  the  European  Banking 
Authority. One of the two Austrian banks included 
in the stress test sample (i.e. Erste Bank Group and 
Raiffeisen) was among the banks with the weakest 
results.  The  two  banks  had  lower  starting  point 
capital  ratios  for  the  stress  test  and  experienced 
high  credit  losses,  in  particular  for  their  CESEE 
operations.  Meanwhile,  due  to  their  traditional 
business  model,  Austrian  banks  continue  to  have 
lower leverage ratios than their European peers. 

To 
increase  the  risk-bearing  capacity  and 
overall resilience of the banking sector, Austria 
activated several macro-prudential measures in 
2016.  Following  a  recommendation  from  the 
Austrian macro-prudential body (Financial Market 
Stability  Board),  the  Financial  Market  Authority 
'other  systemically 
identified  seven  banks  as 
important 
the 
applicable  O-SII  buffers  at  1 %  and  2 %, 
depending  on  the  banking  group.(15)  The  O-SII 
buffers will be gradually phased in between 1 June 
2016  and  1 January  2019.  Since  1 January  2016, 
the  Financial  Market  Authority  has 
also 
implemented  a  systemic  risk  buffer  (SRB) of 1 % 
and  2 %  for  12  banks,(16)  depending  on  the 

institutions'  ('O-SIIs')  and  set 

(14)  The  CESEE  (Central,  Eastern  and  South-eastern  Europe) 
region  includes  Turkey  and  the  following  sub-regions:  i) 
Central and Eastern Europe (CEE), consisting of the Czech 
Republic,  Hungary,  Poland,  the  Slovak  Republic  and 
Slovenia;  ii)  South-eastern  Europe  (SEE),  consisting  of 
Albania,  Bosnia  &  Herzegovina,  Bulgaria,  Croatia, 
Kosovo,  FYR  of  Macedonia,  Montenegro,  Romania  and 
Serbia;  iii)  the  Baltic  region,  consisting  of  Estonia, Latvia 
and  Lithuania;  Russia,  Ukraine  and  other  countries  in  the 
Commonwealth of Independent States. 

(15)  The  2 %  O-SII  buffer  applies  to:  Erste  Group  Bank, 
Raiffeisen  Zentralbank,  Raiffeisen  Bank  International, 
UniCredit  Bank  Austria;  the  1 %  O-SII  buffer  applies  to: 
Raiffeisenlandesbank Oberösterreich, Raiffeisenlandesbank 
Niederösterreich-Wien, BAWAG P.S.K. 

(16)  The  2 %  SRB  applies  to:  Erste  Group  Bank,  Raiffeisen 
Zentralbank,  Raiffeisen  Bank  International,  UniCredit 
Bank  Austria;  1 %  SRB  applies  to:  Raiffeisenlandesbank 

banking group. The SRB will be gradually phased 
in between 1 January 2016 and 1 January 2019 for 
the institutions directly supervised by the ECB. For 
those  not  directly  supervised  by  the  ECB,  the 
Authority set a SRB of 1 % from 1 January 2016, 
which  is  applied  without  a  phase-in  period.(17) 
Only  the  higher  of  the  O-SII  buffer  and  the  SRB 
applies. 

The  increase  in  real  estate  prices  coupled  with 
the  recent  trends  in  housing  loans  underscores 
the  importance  of  macro-prudential  measures. 
Against  the  background  of  growth  in  housing 
loans,  especially  over  the  last  year,  and  signs  of 
real estate price overvaluation in some parts of the 
country,  the  Financial  Market  Stability  Board 
called  for  the  introduction  of  additional  macro-
prudential  instruments.  In  June  2016,  the  Board 
recommended  to  the  Ministry  of  Finance  the 
development of a legal basis for introducing limits 
on the loan-to-value ratio, the debt-to-income ratio 
or  the  debt  service-to-income  ratio  for  new  real 
estate  lending.  The  Financial  Market  Stability 
Board issued in September 2016 a communication 
on  sustainable  lending  standards  in  real  estate 
lending,  which  is  crucial  for  maintaining  stability 
and  growth.  Furthermore,  the  European  Systemic 
Risk Board, which in 2016 conducted an EU-wide 
forward-looking  assessment  of  vulnerabilities 
relating to residential real estate, issued a warning 
to  Austria  on  vulnerabilities  in  this  sector  and 
made it public on 16 December 2016. 

Austrian banks continue to have liquid balance 
sheets. The increase in deposits that has exceeded 
loan growth has allowed banks to maintain a sound 
funding  profile.  Their  reliance  on  wholesale 
funding  has  been  moderate,  but  developments 
linked  to  HETA  Asset  Resolution,  the  ‘bad  bank’ 
of the former Hypo Alpe Adria, have hurt investor 
confidence  and  led  to  an  increase  in  the  cost  of 
funding for senior unsecured debt issued by banks. 
However,  the  cost  of  these  instruments  declined 
again after the acceptance by creditors of the buy-
back  program  offered  by  Carinthia.  The  cross-

Oberösterreich,  Raiffeisenlandesbank  Niederösterreich-
Wien,  BAWAG  P.S.K.,  Hypo  NOE  Gruppe  Bank, 
Vorarlberger  Landes−  und  Hypothekenbank,  Hypo  Tirol 
Bank, Oberösterreichische Landesbank, Sberbank. 

(17)  These  banks  are:  Hypo  NOE  Gruppe  Bank,  Vorarlberger 
Landes−  und  Hypothekenbank,  Hypo  Tirol  Bank, 
Oberösterreichische Landesbank. 

20 

 
 
                                                           
                                                                                   
3.2. Financial sector 

income.  The  reduction  of  the  bank  levy  in  2017 
will support profitability. 

in 

foreign 

steady  decline 

Although on a declining trend, foreign currency 
loans to households remain a matter of concern. 
The 
exchange-
denominated loans, in particular Swiss franc loans, 
to  Austrian  households  is  a  corollary  of  several 
supervisory  measures  to  curb  foreign  exchange 
lending  adopted by  the Austrian  supervisors  since 
2008. Swiss franc loans account for roughly 96 % 
of  foreign  currency-denominated  loans  granted  to 
the  private  sector.  At  the  end  of  2015,  the 
outstanding  stock  of  Austrian  banks'  foreign 
currency  loans  to  households  amounted  to  EUR 
24.4 billion, some EUR 14.7 billion lower than in 
2008.  About  two  thirds  of  these  loans  are  'bullet 
loans', most of them linked to repayment vehicles, 
which 
financial  market 
developments.  Roughly  80 %  of  the  outstanding 
foreign  currency  loans  to  households  are  set  to 
mature from 2021 onwards.  

sensitive 

are 

to 

Graph 3.2.2:  Net profits of Austrian subsidiaries in CESEE 

* Q3 data not comparable with yearly data 
Source: OeNB (central bank of Austria) 

The exposure of the Austrian banking sector to 
the  CESEE  region  increased  slightly  in  2015. 
Based  on  data  from  the  Bank  for  International 
Settlements,  the  total  exposure  of  Austrian  banks 
to the CESEE countries stood at EUR 187.6 billion 
in June 2016, up from EUR 184.8 billion in 2014 
but  roughly  EUR  12  billion  below  the  level 
registered 
in 
ownership of the CESEE subsidiaries of UniCredit 
Bank Austria to the UniCredit Group, the exposure 
of  Austrian  banks  to  the  CESEE  region  has 
declined  considerably  (however,  this  is  not  yet 

in  2008.  Due 

transfer 

the 

to 

border intra-group financing of the largest Austrian 
banks  with  international  operations  has  declined 
steadily  since  2011  (Graph  3.2.1),  as  the  funding 
profile of the CESEE subsidiaries has continued to 
improve.  Supported  by  the  increase  in funding on 
the  local  market  due  to  the  rise  in  customer 
deposits  but  also  by  an  orderly  deleveraging 
the  CESEE 
funding  gap  of 
process, 
subsidiaries  continued  to  decline.  Consequently, 
the  loan-to-deposit  ratio  of  these  subsidiaries  fell 
to 81.0 % in Q3 2016 from 96.7 % in 2014.  

the 

Graph 3.2.1:  Intra-group liquidity to CESEE subsidiaries 

Note: Liquidity transfers to credit institutions only  
Source: OeNB (central bank of Austria) 

Notwithstanding  recent  positive  developments, 
banks'  capacity  to  generate  profits  in  the 
domestic  market  remains  under  pressure.  The 
low interest rate environment continues to limit the 
generation  of  net  interest  income  by  Austrian 
banks  which,  like  German  banks,  rely  heavily  on 
interest  income.  Several  credit  institutions  have 
implemented cost-cutting measures in the domestic 
market,  but  overall  banks  continue  to  have  very 
dense  branch  networks.  The  cost-to-income  ratio 
of Austrian banks declined in 2015 to 66.2 % from 
69.7 %  in  2014.  However,  it  is  higher  than  the 
cost-to-income  ratio  for  the  CESEE  subsidiaries, 
which  fell  to  51 %  in  2015  from  53 %  in  2014. 
Return  on  average  equity  at  unconsolidated  level 
reached  4.9 %  in  June  2016,  some  0.9  pps  lower 
than  in  the  same  period  in  2015.  Profitability 
continues  to  be  supported  mainly  by  lower  loan-
loss  provisions  than  in  previous  years.  Overall, 
operating  income  decreased  in  the  first  half  of 
2016, compared with the same period in 2015, due 
to  the  reduction  in  net  interest  income,  lower  fee 
and  commission  income  as  well  as  lower  trading 

21 

05101520253035404550080910111213141516Q3*CZHRHURORUSISKRestEURbln-3.0-2.0-1.00.01.02.03.04.05.0080910111213141515Q3*16Q3*RUCZSKHRROHUUARest of CESEECESEE totalEURbln 
 
 
reflected  in  the  June  2016  data).  The  exposure  to 
the  region  accounts  for  roughly  64 %  of  the 
consolidated  foreign  claims  of  majority-owned 
Austrian  banks.  The  CESEE  exposure  has 
remained diversified and dominated by operations 
in  the  EU  Member  States.  Exposure  to  EU 
Member  States  in  the  CEE  region  has  been 
prominent, the highest being to the Czech Republic 
and  Slovakia.  In  recent  years,  operations  in 
Ukraine,  Russia 
been 
increasingly hit by adverse economic and political 
developments  as  well  as 
international 
commodities cycle.(18) 

and  Turkey 

have 

the 

(i.e. 

in  2015,  but 

Whereas  CESEE  operations  have  benefited 
from  improved  asset  quality  and  profitability, 
several  challenges  remain.  In  most  CESEE 
countries  non-performing  loans  either  remained 
unchanged  or  declined  significantly 
in 
Bulgaria, Romania, Slovenia) in 2015 on the back 
of  efforts  to  clean  up  balance  sheets.  Meanwhile, 
subsidiaries  operating  in  Ukraine  and  Russia 
experienced a further deterioration in asset quality 
in  2015.  The  profitability  of  CESEE  operations 
the 
improved 
considerably 
subsidiaries 
in  Ukraine  and  Croatia  reported 
losses,  whereas  the  Russian  subsidiaries  remained 
profitable (Graph 3.2.2). The aggregated net profit 
after tax of the CESEE subsidiaries (excluding the 
profits  of  UniCredit  Bank  Austria  subsidiaries  in 
CESEE)  stood  at  EUR  1.4  billion  in  June  2016 
compared  with  EUR  0.9  billion  a  year  earlier. 
Austrian  banks  operating  in  CESEE  have  been 
increasingly  impacted  by  legislative  initiatives  in 
several  host  countries  (e.g.  Hungary  and  Croatia) 
aimed  at  converting  foreign  currency  loans,  in 
particular Swiss franc loans, into local currency or 
another  foreign  currency.  Although  declining,  the 
outstanding  stock  of  foreign  currency 
loans 
granted abroad remains sizeable. The total foreign 
currency loans granted by the Austrian subsidiaries 
stood  at  roughly  EUR  32.7  billion  in  June  2016. 
This was down from EUR 69.3 billion in 2015 due 
to  the  transfer  of  ownership  of  the  CESEE 
subsidiaries  of  UniCredit  Bank  Austria  to  the 
UniCredit Group. 

(18)  Operations  in  Turkey  are  no  longer  part  of  Austria's 

exposure to CESEE since October 2016. 

3.2. Financial sector 

3.2.1.  NATIONALISED BANKS 

first  unsuccessful  offer, 

Following  a 
the 
creditors of HETA accepted a second settlement 
offer  by  the  state  of  Carinthia.  In  September 
2016,  Carinthia  made  a  second  offer  to  the 
creditors  of  HETA  to  acquire  certain  the  HETA 
debt instruments  for which  Carinthia  is statutorily 
liable  as  deficiency  guarantor  (for  the  State  aid 
decision,  see  Commission  2016b).  The  offer, 
which had to be accepted by a two-thirds majority 
of  HETA  creditors  in  order  to  be  implemented, 
was  accepted  by  creditors  representing  EUR  10.7 
billion  or  98.71 %  of  all  HETA  debt  instruments. 
The central government’s financial contribution is 
substantial, leaving Carinthia with a minor share of 
up to EUR 1.2 billion of the total cost, which will 
be  funded  by  a  loan  from  the  federal  government 
via  its  financing  agency  OeBFA.  As  all  HETA 
liabilities were already included in the government 
accounts,  honouring  the  offer  is  not  expected  to 
imply additional costs for the general government. 

vehicles 

The  remaining  assets  of  the  three  public 
are  being 
financial  defeasance 
progressively  divested,  with  different  time 
horizons and limited risks overall. The liabilities 
of  HETA,  KA  Finanz  and  Immigon  had  been 
recorded as part of government debt, increasing it 
significantly over 2009-2015 (see Graph 1.10, and 
Commission,  2016c).  The  impaired  assets  of  the 
three vehicles are being divested over time in order 
to  cover  the  respective  liabilities  and  allow  a 
corresponding  reduction  in  government  debt.  In 
the case of HETA, the impaired assets amounted to 
around  EUR  14.3  billion  at  the  end  of  2015.  The 
wind-down  of  HETA’s  assets  is  expected  to  be 
completed by 2020, but the bulk of assets is likely 
to  be  divested  already  by  2018.  The  assets  have 
undergone  different  valuations,  with 
last 
performed  by  the  Financial  Market  Authority  in 
April  2016.  As  this  valuation  took  a  rather 
conservative  approach,  risks  that  yields  will  be 
lower  than  the  expected  values  are  limited.  The 
impaired  assets  of  Immigon,  a  wind-down  entity 
split  of  Österreichische 
created 
Volksbanken,  amounted  to  around  EUR  3  billion 
at the end of 2015. Their resolution is expected to 
be  completed  by  2017.  In  the  case  of KA Finanz, 
the  winding-down  period  of  the  remaining  assets 
amounting  to  EUR  12.9  billion  is  much  longer. 
However, the overall risk is limited as the rating of 
the assets is relatively positive. 

from 

the 

the 

22 

 
                                                           
3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

construction.  Most  of  the  jobs  created  in  recent 
years  are  part-time  (full-time  employment  has 
picked up only recently) and a majority of the new 
positions are in the low-wage sector. 

Graph 3.3.1:  Labour market — key indicators 

3.3.1.  LABOUR MARKET 

the 

labour  market 

The 
in  Austria,  although 
affected  by  increased  unemployment,  remains 
one  of  the  best-performing  in  the  EU.  Because 
of  weaker  economic  performance 
labour 
market  has  recently  faced  some  difficulty  in 
absorbing  the  increased  labour  supply.  Although 
among  the  lowest  in  Europe,  the  unemployment 
rate of 6.1 % (in Q3 2016) was the highest Austria 
has  seen,  at  least  since  1968.  However,  this 
historical  peak  is  just  above  the  earlier  peak  of 
2004,  and  the  increase  in  unemployment  stopped 
by the summer of 2016 as GDP growth picked up. 
At the same time some groups of the working-age 
population  still  suffer  from  weaker  labour  market 
outcomes,  notably  older  workers,  low  skilled 
workers,  women  and  people  with  a  migrant 
background. 

The  increasing  labour  supply  has  improved 
growth  potential  and  demographic  trends,  but 
has  not  been  fully  absorbed  by  employment. 
Labour  immigration  and  an  increasing  activation 
of older workers and women have been expanding 
labour  supply.  Austria  had  one  of  the  highest  net 
migration rates in the EU between 2000 and 2015. 
Annually some 42 000 more people immigrated to 
Austria  than  emigrated.  Furthermore,  Austria  was 
one of the main destinations of posted workers and 
received, in net terms, about 60 000 such workers 
in  2014.  Since  2000,  immigration  has  more  than 
compensated  the  effect  of  demographic  ageing, 
and  the  working-age  population  has  expanded  by 
370 000  (6.9 %).  The  activity  rate  for  older 
workers  rose  from  47.2 %  in  2000  to  62.9 %  in 
2015.  For  women  it  increased  from  65.1 %  to 
74.0 %  in  the  same  period.  In  addition,  economic 
growth of less than 1 % in real terms between 2012 
and  2015  was  too  weak  to  absorb  the  increasing 
labour supply. 

Source: European Commission 

Graph 3.3.2:  Unemployment rate by country of birth 

Source: European Commission 

the 

though 

An  increasing  labour  supply  is  not  necessarily 
in  contradiction  with  lower  unemployment. 
Until 2011 unemployment fell from its 2004 peak 
labour  supply  was  already 
even 
expanding.  In  addition,  even  if  unemployment 
started 
long-term 
unemployment rate has remained relatively low, at 
1.7 %  compared  with  the  EU  average  of  4.5 %  in 
2015,  and  turnover  on  the  labour  market  has 
remained  high.  This  is  also  explained  by  the  high 
seasonality  of  economic  sectors  like  tourism  and 

in  2011, 

increase 

the 

to 

born 

non-EU 

increase 

in  unemployment 

The  current 
is 
concentrated  in  certain  groups.  It  affected  in 
people,  whose 
particular 
unemployment rate in 2015 was 12.6 % compared 
to 4.6 % for native-born people (see Graph 3.3.2). 
The  increase  also  particularly  hit  the  low-skilled, 
11.2 %  of  whom  were  unemployed  in  2015, 
compared to 5.7 % for all skill levels. By contrast, 
labour  market  situation  of  better-skilled 
the 
low 
remained  good.  People  with 
workers 

23 

707172737475767778798002468101214010203040506070809101112131415% of total pop.% of active pop.Activity rate 20-64 (rhs)Unemployment rate 15-64Long-term unemployment rate 15-64Young unemployment rate 15-24NEET0246810121406070809101112131415%Other EU-bornNon-EU bornAustrian born 
 
 
 
 
3.3. Labour market, education and social policies 

unemployment 

qualifications  also  face  the  highest  risk  of  long-
lasting 
(see  Graph 3.3.3). 
Projections  show  that  supply  and  demand  are 
going  to  diverge  even  further  for  low-qualified 
labour  (CEDEFOP,  2015).  The  labour  force  with 
the  lowest  skills  is  expected  to  shrink,  but  the 
number  of  such  jobs  is  expected  to  shrink  by  far 
more. 

Graph 3.3.3:  Unemployment rate by educational 

attainment 

policy in response to the rise in unemployment. It 
increased  the  staff  of  the  Public  Employment 
Service  Austria,  reintroduced  skilled  workers 
grants,  stepped  up  initial  and  job-related  training 
and introduced a training guarantee for persons up 
to  the  age  of  25.  Furthermore,  non-wage  labour 
costs are being reduced by nearly EUR 1 billion in 
several  steps  from  2016  to  2018  and  further 
reductions  in  form  of  an  employment  bonus  is 
announced in the government programme 2017-18. 

Graph 3.3.4:  Regional dispersion of unemployment 

Note: Unemployment rates ages 20-64 (% of labour force), 
non-seasonally adjusted 
Source: European Commission 

a 

stronger 

Labour  market  performance  also  varies  across 
regions.  Compared  to  the  unemployment  peak  of 
2004, the regional distribution of unemployment in 
Austria has increased (see Graph 3.3.4). A regional 
comparison of unemployment data shows an east-
west  gap,  with 
in 
unemployment over recent years in the eastern part 
of  the  country  (Vienna,  Lower  Austria,  Upper 
Austria, Burgenland). Vienna is especially affected 
in  unemployment 
by 
increase 
the 
its 
(particularly 
programme  2017-18  the  government  proposes 
several  measures  for  increasing  mobility  on  the 
Austrian labour market. 

long-term  unemployment).  In 

increase 

strong 

Expenditure  on  labour  market  policies  has 
increased  somewhat  as  unemployment  has 
risen.  The  budget  for  active  and  passive  labour 
market 
reach 
EUR 8.6 billion  in  2017,  up  from  EUR 6.1 billion 
in 2012. In September 2016 the government took a 
number  of  measures  to  strengthen  labour  market 

projected 

policies 

to 

is 

Note: Dispersion is measured as the coefficient (between 0 
and 1) of variation of unemployment rates across NUTS2 
regions 
Source: European Commission 

Getting  older  workers  into  work  remains  a 
challenge,  although  increasing  and  targeted 
activation measures are delivering good results. 
The  employment  rate  of  older  workers  has  been 
continuously  increasing  as  a  result  of  government 
measures  targeting  this  age  group,  but  still  only 
49.7 % of people aged 55-64 were employed in the 
third  quarter  of  2016,  below  the  EU  average  of 
55.6 %.  The  employment  rate  of  older  women 
(41.5 %  in  the  third  quarter  of  2016)  remained 
significantly  lower  than  that  of  men  (58.3 %). 
Those  over  50  face  a  comparatively  lower  risk  of 
becoming unemployed, but once they lose their job 
they  tend  to  remain  unemployed  for  a  relatively 
long  period. Over  the  last few  years,  the Austrian 
government  has  increased  efforts to  deliver active 
labour market policies targeting these groups, and 
employers  are  encouraged  to  provide  age-friendly 
working  conditions  and  employ  older  workers. 
These  measures  are  helping  to  increase  their 

24 

02468101214050607080910111213141516Q1-Q3High skilledMedium skilledLow skilled% labour force, 20-6400.10.20.30.40.50.60.7BEATFRRODEHUCZUKPLNLSE20152004 
 
 
3.3. Labour market, education and social policies 

share  of  working-age  women  providing  informal 
and/or unpaid care. 

less 

likely 

to  be 

they  are  much 

The  proportion  of  the  population  with  a 
migrant  background  is  increasing,  while  their 
labour  market  potential  is  underused.  Some 
9.3 % of the Austrian population was born outside 
the EU, and with an employment rate of 60.6 % in 
2015 
in 
employment  than  native-born  people,  whose  rate 
was 76.4 %. By contrast, people born in other EU 
countries  have  an  employment  rate  that  is  similar 
to  the  native-born  population.  Since  2011  the  gap 
has widened as the employment rate of native-born 
people has increased by 0.6 pps while that of non-
EU-born  people  has  declined  by  3.6 pps. 
Employment  rates  for  those  born  outside  the  EU 
lag  behind  those  for  native-born  people  at  all 
qualification  levels  (see  Graph 3.3.5)  but  some 
groups  appear  to  face  particular  challenges.  The 
female  employment  rate  differs  according  to  the 
country  of  origin.  Women  born  in  other  EU 
countries have similar employment rates to native-
born  women  (69.5 %  v  72.2 %  in  2015),  while 
women  born  outside  the  EU  have  significantly 
lower rates (47.6 %). 

Graph 3.3.5:  Employment rate by qualifications and country 

of birth (2015) 

Source: European Commission 

People  born  outside  the  EU  are  often  under-
employed  and  face  a  high  risk  of  being 
overqualified when employed. According to data 
of the ad hoc module of the Labour Force Survey 
2014 (Statistik Austria, 2015a), 23.5 % of foreign-

and 

them 
the 

longer 
in 
employability 
keep 
employment.  Furthermore, 
government 
programme  2017-18  announces  an  employment 
initiative of yearly up to 20 000 new jobs for long-
term  unemployed  above  the  age  of  50.  In  this 
programme,  the  government  also  announced  its 
intention  to  modify  the  current  provisions  in  the 
field  of  dismissal  protection  to  facilitate  hiring 
older workers. 

taking 

Women’s labour market potential is underused, 
as  reflected  in  the  high  share  of  part-time 
employment  and  the  high  gender  pay  gap. 
While the employment rate of women aged 20-64 
is above the EU average (70.8 % vs 65.3 % in the 
second  quarter  of  2016), 
full-time 
equivalents  into  account  brings  it  back  to  average 
levels  (55.1 %  v  the  EU  average  of  55.3 %  in 
2015).  The  gender  gap  in  pay  remains  wide 
(22.2 %  in  2014,  compared  to  the  EU  average  of 
16.1 %)  but  has  narrowed  slightly  (from  24 %  in 
2010).  The  high  and  above-average  proportion  of 
women working part-time is not decreasing and is 
largely  driven  by  care  responsibilities.  In  2015, 
52.2 %  of  young  Austrian  women  (aged  15-39) 
working part-time mentioned caring for children or 
the elderly as their main reason for part-time work. 
This is well above the EU average of 33.6 %. 

Childcare provision is improving but Austria is 
still  below  the  Barcelona  target  for  children 
under  3  years  of  age.  The  number  of  early 
childcare  places  for  children  under  3  has  been 
increased,  but  the  current  level  of  25.5 %  in 
2015/2016  is  still  below  the  Barcelona  target  for 
this group of 33 %. Moreover, there are still major 
regional  differences  in  the  level,  e.g.  Vienna 
45.1 %,  Upper  Austria  14.5 %,  Styria  13.4 %, 
Carinthia  20.6 % 
(Statistik  Austria  2016). 
Furthermore, the percentage of children staying in 
formal childcare for 30 hours or more is far below 
the  EU  average  for  all  age  groups  from  0  to  12 
years.  A  nationwide  needs  assessment  of 
additional care places is so far lacking. Women are 
still  interrupting  their  professional  career  for  a 
relatively long period after giving birth, supported 
by the relatively generous system of parental leave 
allowances.  The  share  of  dependents  cared  for  by 
family  members  in  their  own  or  their  family’s 
home  is  relatively  high.  The  vast  majority of  care 
givers  are  working-age  women.  No  high-quality, 
recent data exist on the share of informal provision 
in  the  total  provision  of  long-term  care,  or  on  the 

25 

49.566.568.24.69.617.601020304050607080901001.Low2.Medium3.High%Non-EU bornGap to Austrian bornAustrian born 
 
3.3. Labour market, education and social policies 

the 

test 

and 

influence 

achievements 
of 
socioeconomic  status  remains  important.  The 
performance  of  15-year-olds 
in  mathematics, 
reading and science worsened compared to 2012 as 
measured  by 
(OECD 
the  2015  PISA 
Programme  for  International  Student  Assessment) 
(see Graph 3.3.6). The proportion of low achievers 
reached  21 %  in  science  and  22 %  in  reading  and 
maths.  The  share  of  top  performers  in  science 
decreased  from  10 %  in  2006  to  8 %  in  2015. 
These developments may hinder future potential to 
innovate.  Education  outcomes  for  those  with  an 
remained  significantly 
immigrant  background 
the  population  without  an 
below 
those  of 
immigration  background.  The  share  of 
low 
achievers  in  science  for  both  first  generation 
immigrants  and  children  of  immigrants  in  Austria 
is  among 
the  most  pronounced  among  EU 
countries  even  when  adjusted  for  socioeconomic 
status.  Between  2012  and  2015,  in  Austria  the 
share of low performers in science increased by 5 
pps, more than in Finland and Germany, while for 
instance  Denmark  and  Sweden  registered  a 
decrease.  

Graph 3.3.6:  PISA performance 2012 -2015 in science - 

share of top and low performers 

Source: OECD (2016) PISA 2015, table 1.2.2a 

between 

The amount of science instruction available differs 
significantly 
and 
disadvantaged  schools;  in  addition  both  grade 
repetition and truancy have increased. Austria has 
halved the gender gap in reading but boys continue 
to outperform girls in both maths and science. 

advantaged 

to 

the 

people 

reported 

in  Austria 

born 
being 
overqualified for their current job against 8.8 % of 
the  native-born  population.  Especially  for  some 
groups  of  non-EU  nationals  this  combines  with 
insufficient  knowledge  of  German,  a  sometimes 
relatively  low  level  of  formal  education  and  the 
lack  of  recognition  of  formal  qualifications 
survey 
obtained  abroad.  According 
mentioned  above,  around  75 %  of  the  non-EU 
nationals  received 
their  qualifications  outside 
Austria but only around 25 % of them applied for 
them  to  be  recognised.  The  recently  adopted 
Recognition Act provides various tools to facilitate 
the  recognition  of  qualifications  of  non-EU 
nationals. The legal entitlement to recognition and 
to  an  assessment  procedure  should  lead  to  better 
labour market integration of non-EU nationals with 
qualifications  obtained  abroad  and  help  them  find 
jobs  corresponding  to  their  qualification  levels 
more quickly. 

3.3.2.  SOCIAL POLICIES 

the 

is  overall  good.  The 
The  social  situation 
proportion  of  the  population  at  risk  of  poverty  or 
social  exclusion  decreased  in  2015  and  is  one  of 
the  lowest  in  the  EU  (18.3 %  in  2015  against  the 
EU  average  of  23.7 %).  The  wide  gender  gaps  in 
pay,  working  hours  and  length  of  working  life 
persist, impacting pension adequacy and leading to 
a  substantial  difference  between  the  at-risk-of-
poverty rate for women aged 65 and over (15.1 %) 
and  that  of  men  of  the  same  age  (10.7 %). 
is 
Although 
continuously 
the 
retirement ages for men and women by increasing 
the statutory retirement age for women, combined 
with respective job creation policies, would reduce 
the gender gap in pay and pensions and reduce the 
risk  of  poverty  for  women  aged  65  and  over.  In 
addition, the situation of specific groups at risk of 
poverty in Austria remains a concern. This applies 
in  particular  to  the  children  of  foreign-born 
parents,  with  poverty  rates  of  34.6 %,  above  the 
long-term 
EU  average  of  33.2 %,  and 
unemployed. 

effective 
increasing, 

harmonising 

retirement 

age 

the 

3.3.3.  EDUCATION 

School  education  in  Austria  produces  only 
average  outcomes  in  terms  of  basic  skills 

26 

0510152025Top performersLow performersTop performersLow performersTop performersLow performersTop performersLow performersTop performersLow performersTop performersLow performersFINLDESEATDK% 
 
3.3. Labour market, education and social policies 

the 

Recent  measures  aim  at  improving  skill  levels. 
The  recently  adopted  Act  on  an  education  and 
training  obligation  until 
age  of  18 
(Ausbildungspflichtgesetz)  provides  a  framework 
for  upgrading  the  skills  of  disadvantaged  young 
people. In addition, planned standardised forms of 
partial  qualifications  aim  at 
the 
learners.  Though 
educational  achievement  of 
participation  in  lifelong  learning  in  Austria,  at 
14.4 %,  almost  reaches  the  EU  benchmark  of 
15 %,  the  ‘Educational  guidance  and  counselling 
Austria’  (Bildungsberatung  Österreich)  initiative 
further 
is 
development of cost-free educational guidance and 
counselling  for  adults  (CEDEFOP,  2016).  This  is 
intended to increase their employability. 

improving 

promoting 

extension 

and 

the 

The  government  is  starting  to  implement  the 
first  package  of  the  November  2015  education 
reform plan. It provides for a better transition by 
linking  the  last  compulsory  year  of  childhood 
education  and  the  first  2  years  of  primary  school. 
This  allows  for  a  more  intensive  exchange  of 
information  between  the  institutions  and  more 
tailor-made support to students, including language 
support, 
if  needed.  Education  outcomes  are 
recorded  in  the  ‘education  compass’  and  the 
system  of  grading  has  been  adapted  in  primary 
schools.  The  government  programme  2017-18 
proposes  increasing  autonomy  of  schools  and 
further  strengthening  early  childhood  education 
and  care 
through  a  pilot  project  exploring 
compulsory attendance from age 4 on. The number 
of  all-day  school  places  more  than  doubled 
between  2007  and  2016 
to 
approximately  160 000.  About  40 %  of  school 
locations  now  offer  all-day  schooling,  but  only 
5 %  of  schools  have  a  curriculum  with  classes 
during  the  whole  day  (OECD,  2016a).  Austria 
already  has  a  EUR 375 million 
investment 
programme  to  increase  the  number  of  all-day 
schools  between  2015  and  2019.  A  further 
EUR 750 million  from  federal  funding  has  been 
made  available  for  the  coming  8  years,  with  a 
particular  focus  in  the  first  2  years  on  increasing 
integrated 
the  number  of  schools  with  an 
curriculum. Simplifying the administration of these 
funds  will  help  regions  to  use  them  fully,  which 
has not always been the case in the past. 

from  77 000 

Austrian teachers do not make sufficient use of 
digital  teaching  tools  yet.  According  to  the 
Austrian Education Report 2015 nearly all teachers 

—  90 %,  irrespective  of  their  age  —  use  digital 
means  and  the  internet  for  preparing  lessons  but 
much less often during the lessons themselves. The 
report  finds  that  teachers  do  not  know  enough 
about  relevant  digital  teaching  methods.  A  new 
digitalisation 
government 
programme  2017-18  envisages  equipping  all 
schools  with  broad  band  and  wireless  internet 
access  by  2020/21  and  introducing  teaching  basic 
digital skills into the regular curriculum of primary 
and lower secondary schools. 

strategy 

the 

in 

Austria faces challenges in meeting the growing 
demand  of  ICT  specialists,  digital  skills  among 
the general workforce and e-entrepreneurs. The 
share of ICT specialists in the Austrian workforce 
of  around  4 %  is  only  around  the  EU  average. 
Students'  motivation  to  engage  in  science  has 
further  deteriorated  since  2006  and  is  now  at  one 
of  the  lowest  levels  in  the  EU.  Even  if  interest  in 
science topics has risen back to the OECD average 
again  (Bifie,  2016),  this  comparative  lack  of 
motivation  does  not  help  achieve  the  increase  in 
human  resources  devoted  to  science,  technology, 
engineering  and  mathematics  that  is  needed  for 
Austria to become an innovation leader. Education 
and digital skills is one of the 12 focus areas of the 
Digital Roadmap Austria. 

in 

issue 

science, 

(OECD  2016b). 

Funding  remains  an 
in  the  higher 
education  system  and  is  preventing  Austria 
from  improving  education  outcomes.  Austria’s 
tertiary  attainment  rate  was  38.7 %  in  2015,  the 
same  as  the  EU  average.  Austria  reached  its 
Europe 2020 national target of 38 %. Austria has a 
comparatively larger share of studies on ISCED 5 
level 
In  2014,  per  1 000 
population  in  the  age  group  20-29  Austria  had 
22.5 graduates 
mathematics, 
engineering,  manufacturing  & 
computing, 
construction, 
of 
above 
18.7 graduates. However, it has a lower proportion 
of  graduates  at  higher  qualification  levels  (i.e. 
master’s degrees and PhDs) than those countries it 
aims  to  join  in  its  ambition  to  become  an 
innovation  leader.  The  big  increases  in  student 
numbers over recent years have not been matched 
by corresponding staff or funding increases (EUA, 
2016).  A  concept  for  capacity  based  financing  of 
university  places  is  planned  in  the  government 
programme  2017-18  and  to  be  implemented  by 
2019.  The  government’s  university  development 
plan  for  2016-2021  had  already  identified  a 

the  EU 

average 

27 

 
3.3. Labour market, education and social policies 

strategy in 2016 to improve the social dimension in 
higher education and therefore  make better use of 
the human capital available. 

funding gap of EUR 500 million, in addition to the 
EUR 600 million  generally  available  for  2016-
2018  to  implement  such  a  scheme  based  on 
financing.  The  additional 
capacity  oriented 
EUR 116 million  granted  to  higher  education  in 
2016 falls short of covering this. Adequate funding 
and 
a 
student/staff 
precondition for realising the ambition of having a 
higher  education  system  that  is  characterised  by 
excellence.  In  addition,  Austria  has  developed  a 

supportive 

ratios 

are 

28 

 Box 3.3.1: Integration of refugeesAustria has made considerable efforts to accommodate and integrate refugees. The Austrian government decided in 2016 to implement a programme containing a variety of measures to swiftly integrate refugees and to some extent also those asylum seekers considered to have prospects of being granted residency. Key features of this programme are an expansion of German-language and orientation courses, including education on Austrian values and integration requirements. The package also supports initiatives for community services to be performed by asylum seekers. For those asylum seekers, with high prospects of being granted residency, a compulsory integration year together with language classes is planned. The recently adopted Recognition Act aims to speed up recognition of the qualifications of non-EU nationals and to introduce more flexible procedures for those who have no formal evidence (certificates) of their qualifications. Several organisations and the social partners are proposing initiatives for developing an integration process that starts at the moment of the asylum application, including faster and broader access to the labour market. Overall, it can be expected that integrating migrants and refugees who entered the country in 2015-2016 into the labour market quickly and successfully could also help Austriaʼs social cohesion and growth as well as generate additional tax revenues. Asylum seekers and refugees are entering the labour market only gradually. Asylum seekers can enter the Austrian labour market after a waiting period of 3 months, based on a labour market test that allows entry into a number of sectors (e.g. tourism and agriculture as well as apprenticeships in occupations facing shortages). Recognised refugees have full access to the labour market, but face considerable difficulties in finding a job because of their insufficient knowledge of German, their skills and discrimination (see Country Report 2016). Overall, there appears to be further room for increasing the number and reach of language courses — German language courses for refugees often do not go beyond B1 level (BMEIA, 2016). The process of identifying and registering the qualification level based on competency checks has improved, but it is still difficult to give an overall assessment of refugees’ qualification levels. Austria faces a challenge to integrate a large number of asylum seekers and refugees into its education system. In 2015, 88 851 people applied for asylum in Austria and by September 2016 a further 35 000 had done so. The 2015 level was three times the 2014 figure and included 9 331 unaccompanied minors under 18 years and 663 under 14. Integrating over 9 000 pupils (about 1 % of the total school population) into compulsory schools is a challenge, particularly since refugees tend to concentrate in metropolitan areas, with a focus on Vienna. This means there is a need to create additional classes and to allocate additional resources for teaching German as a second language, for integrating pupils from a variety of language backgrounds and for dealing with traumatised children. The federal and regional governments have taken several measures to address the integration of refugees. In all nine regions, a total of 99 specific transition classes for approximately 1 900 young asylum seekers/refugees were created. To expand the language training available to refugees additional resources are being invested in 2016 and 2017, respectively. About 1 150 additional teachers and mobile intercultural teams with a staff of 80 have been engaged, with most of them in compulsory education. Additional funds are being made available to finance one-year transition levels in vocational education and training schools and colleges that allow refugees to catch up on language and other skills. For younger refugees above the compulsory school age, approximately 2 400 offers for basic education courses focusing on literacy are available within the Initiative for Adult Education.  
 
 
 
 
 
3.4. INVESTMENT 

3.4.1.  GENERAL INVESTMENT SITUATION 

Investment  growth  returned  in  2016,  but  with 
continued  weaknesses  of  investment  by  SMEs 
and in the service sector. Investment increased by 
3.6 % 
in  2016  after  an  extended  period  of 
stagnation since the crisis, but is expected to grow 
more slowly in 2017 (2.4 %) and 2018 (2.0 %). On 
a  quarterly  basis,  investments  picked  up  in  Q4  of 
2015  (0.8 %),  peaked  in  Q1  of  2016  (1.3 %)  and 
then declined in the two next quarters (1.2 % in Q2 
and  0.9  %  in  Q3),  according  to  WIFO  (Austrian 
Institute  of  Economic  Research).  The  good 
investment  growth  in  2016  is  mostly  driven  by 
strong  equipment 
investment  as  firms  work 
through  a  backlog  of  necessary  replacements. 
for 
is 
Business  expansion 
investment  only  for  a  minority  of  businesses 
(39 %),  which  cited  digitalisation  and  expected 
improvements  in  market  conditions  as  their  main 
motives  to  invest.  Investment  plans  are  strong  in 
the  manufacturing  and  exporting  sectors,  while 
businesses 
than 
tourism)  and  SMEs  in  general  are  more  hesitant 
(WKÖ,  2016).  Increased  investment  by  Austrian 
businesses,  notably 
in  business 
expansion,  is  crucial  for  sustained  growth  and  to 
absorb  the  increasing  labour  supply  (see  Section 
3.3).  

the  service  sector  (other 

the  key  driver 

investment 

in 

3.4.2.  REGULATORY FRAMEWORK IN THE 

SERVICES SECTOR 

2016d, 

Commission, 

Austria remains one of the Member States with 
the  highest  regulatory  barriers  in  the  services 
sector.  In  Austria,  market  services(19)  directly 
account for 50 % of GDP and 45 % of employment 
(European 
pp. 2-3). 
Furthermore, around 35 % of the value created by 
Austrian  manufacturing  is  created  by  service 
inputs (ECSIP, 2014, p. 59). Better performance in 
the  services  provided  to  firms  (business  services) 
would  therefore  have  positive  productivity  effects 
on  Austrian  manufacturing  too.  In  key  business 
services,  such  as  legal,  accounting,  architectural 
and  engineering  services,  Austrian  regulation  is 
restrictive and, except for lawyers and accountants, 
significantly  more restrictive than  the  EU  average 
(European  Commission,  2016e/f  and  see  Graph 

(19)  Market services are defined as NACE sectors G to N. 

3.4.1) (20).  The  number  of  trades  subject  to  a 
particular  access  requirement  is  twice  as  high  in 
Austria  as,  for  example,  in  Germany.  This  high 
level  of  regulation  has  gone  hand  in  hand  with 
declining  wage-adjusted  labour  productivity  and 
negative levels of allocative efficiency in this area 
(European  Commission,  2016a,  p. 67).  It  also 
to  wage 
limits  employment  and  contributes 
inequalities.  Around  22 %  of  the  Austrian  labour 
force works directly in regulated professions. 

Graph 3.4.1:  Regulatory restrictiveness indicator 2016 

Austria and the EU 

Source: European Commission 

revision 

regulates  access 

The Austrian government announced a revision 
of  the  trade  licence  act  in  late  2016  which  will 
bring  welcome  improvements  but  falls  short  of 
removing  key  barriers.  The  trade  licence  act 
(Gewerbeordnung) 
to  and 
exercise  of  currently  around  540  trades.  Apart 
from  administrative  simplification  aspects,  the 
draft 
access 
removes 
requirements  for  19  of  these  trades  (Teilgewerbe) 
but  maintains  specific  access  requirement  for  80 
trades (reglementierte Gewerbe). This compares to 
41  of  such  trades  in,  for  example,  Germany  and 
includes trades which typically present low risks to 
consumers. The planned reform also increases the 
scope  of  activities  a  tradesperson  can  exercise  in 
other  trades  without  being  required  to  obtain  an 
additional licence. As a consequence of the current 

specific 

(20)  For  civil  engineers  Austria  has  the  most  restrictive 
regulation  among  EU  Member  States,  for  architects  the 
second most restrictive and for patent/trademark agents the 
third most restrictive. 

29 

0001020304AccountantArchitectCivil engineerLawyerPatent agentReal estate agentTourist guidescoreEUAT 
 
                                                           
 
                                                           
3.4. Investment 

Commission,  2016i).  More 
recently  start-up 
numbers  have  been  increasing,  by  3.5 %  from 
2015  to  2016  (WKÖ,  2017),  partly  reflecting  the 
general recovery of the economy. Implementing its 
2015  start-up  strategy 
(Land  der  Gründer) 
(BMWFW, 2015), in July 2016 Austria announced 
a package of measures to facilitate the creation of 
new  businesses,  comprising  financial  support  and 
administrative simplification measures. 

Austrian  start-ups  have  a  good  chance  of 
surviving but face difficulties in scaling up. The 
business  survival  rate  in  Austria  is  above  the  EU 
average  (74 %  compared  to  65 %,  both  2013; 
European  Commission,  2016i).  However, 
in 
Austria  the  share  of  high-growth  firms  among 
active  companies  with  at  least  10  employees  is  at 
7.3 % considerably below the EU average of 9.2 % 
(see  Graph  3.4.2).  This  lack  of  high-growth  firms 
presents  Austria  with  a  productivity  challenge,  as 
company  productivity  is  highly  correlated  with 
firm size. While studies have shown that start-ups 
making  the  transition  to  become  bigger  firms 
create  a  disproportionate  number  of  new  jobs 
fast-growing 
(European  Commission  2016g), 
innovative  firms  represented  only  about  2.1 %  of 
employment  in  the  Austrian  business  economy 
compared  with  an  EU  average  of  3.3 %  (2014; 
European Commission 2016i). 

Business  creation  and  enterprise  growth  are 
held  back  by  a  combination  of  regulatory  and 
cultural  obstacles.  Starting  a  business  in  Austria 
takes  8  days  (the  second  longest  in  the  EU)  and 
costs  EUR 305  on  average,  which  does  not  meet 
the  EU  targets  of 3 days  and EUR  100  set by  the 
Council  in  2011  (figures  refer  to  limited  liability 
companies) (European Commission, 2016h). In the 
composite  indicator-set  of  framework  conditions 
for  high-growth  innovative  enterprises  (European 
Commission,  2016i),  entrepreneurial  culture  is  an 
area  where  Austria  scores  below  the  EU  average 
(0.32  compared  to  0.42).  Fear  of  failure,  for 
example,  is  an  important  deterrent  for  would-be 
entrepreneurs  in  Austria,  which  is  among  the  few 
European  countries  where  resolving  insolvencies 
(and thus preparing the ground for an entrepreneur 
to get a second chance) has become more difficult 
in  recent  years  (European  Commission,  2016j, 

requirement to hold separate licences, there are one 
third more licences than licence holders. The scope 
increase will mitigate but not remove this issue.  

patent/trademark 

Other  efforts  to  lower  access  and  exercise 
barriers  in  business  services  and  regulated 
professions  are  not  progressing.  Austria  has  not 
yet  used  the  mutual  evaluation  of  regulated 
professions  to  systematically  lower  regulatory 
barriers.  By  way  of  numerical  example,  reducing 
the  restrictiveness  for  patent  agents  in  Austria  to 
the EU average could raise the number of firms by 
around  1 %  and  reduce  the  profession’s  gross 
operating  rate  by  3 %,  thus  lowering  the  input 
costs  of  its  customers  (European  Commission, 
2016f).  Restrictions  on  interdisciplinary  firms 
between  regulated  professions  remain  in  force  in 
Austria and particularly affect architects, engineers 
and 
to 
systematically  review  such  restrictions  started  in 
November  2015  but have not resulted  in  changes, 
despite  a  genuine  business  demand  to  receive 
interdisciplinary  services  from  one  provider.  A 
similar 
from 
effect 
result 
form  or  exclusivity 
shareholding,  company 
requirements,  such  as  exist  in  Austria  notably  for 
architects,  engineers  and  patent/trademark  agents. 
Professions 
engineers, 
accountants,  tax  advisers,  patent/trademark  agents 
and  tourist  guides  also  have  a  particularly  wide 
scope  of  activities  reserved  to  them  in  Austria.  In 
combination  with  access  requirements  or  high 
training obligations, this can limit competition and 
investment in the activities covered. 

architects, 

limiting 

agents. 

Efforts 

such 

can 

as 

3.4.3.  INVESTMENT IN BUSINESS CREATION AND 

SCALING UP 

Austria’s  rate  of  creating  new  businesses  is 
growing  in  line  with  the  recovering  economy, 
but  from  a  comparatively  low  level.  Austrian 
start-ups create on average 2.4 jobs in the first year 
and 7.4 jobs in the first 3 years (BMWFW, 2015, 
p. 7),  which  shows  the  importance  of  business 
for  employment.  Austria’s  business 
creation 
environment  has  traditionally  been  difficult  for 
starting a business. Its enterprise birth rate(21) was 
7.4 %  compared  to  an  EU  average  of  10.8 %  in 
2013,  the  last  year  of  EU-wide  data  (European 

(21)  The  number  refers  to  newly  created  enterprises  as  a 

percentage of the total number of active enterprises. 

30 

 
                                                           
3.4. Investment 

3.4.4.  FUNDING OF PRIVATE SECTOR 

INVESTMENT 

funding 

short-term  bottlenecks 
Austria  has  no 
regarding  bank  credit,  but  private  sector 
investment  would  benefit 
from  a  more 
developed  equity  financing  culture.  Austrian 
companies  traditionally  rely  on  bank  lending  for 
funding(23)  and  only  7 %  of  Austrian  businesses 
consider  finding  bank  credit  to  be  a  problem 
2016k).  A  more 
(European  Commission, 
diversified  Austrian 
system  would 
however broaden the scope of companies, projects 
and  business  models  that  receive  funding  and 
would  also  allow  a  broader  class  of  citizens  to 
participate and benefit in high-growth projects and 
firms.  This  could  compensate  for  the  declining 
availability  of  small-scale  financing  (business 
loans  of 
than  EUR  25 000)  (European 
Commission,  2016l,  p.  11).  The  alternative 
financing  law  adopted  in  2015  has  resulted  in  a 
crowdfunding, 
noticeable 
the 
demonstrating 
that 
regulatory 
funding 
options.  Social  entrepreneurship  and  (family) 
foundations are untapped sources of funding. 

increase 
in 
the  positive 

framework  can  have  on 

impact 

less 

Venture  capital  financing  in  Austria  remains 
scarce  and  relies  heavily  on  the  public  sector. 
Venture capital and private equity fund volumes in 
Austria  (as  a  proportion  of  GDP)  decreased  by 
more  than  two  thirds  in  the  aftermath  of  the 
financial  crisis  and  have  not  yet  recovered.  The 
availability  of  venture  capital  in  Austria  also 
remains below the EU average (0.051 % of GDP in 
2015  versus  0.063  %  at  EU  level)  (European 
Commission,  2016m).  The  main  weakness  is  the 
mobilisation  of  own  funds  within  Austria  –  the 
inflow  of  risk  capital  is  higher  than  the  outflow, 
which  suggests  that  there  are  enough  suitable 
projects to invest in. The public sector carries out a 
high share of venture capital investment due to the 
weakness  of  private 
financing.  Austria  has 
announced  a  number  of  measures  to  stimulate 
private  venture  capital  financing,  such  as  the 
premium 
introduction 
(Risikokapitalprämie),  an  increase  in  the  volume 
the  Austria 
of 

guarantees 

capital 

given 

risk 

by 

of 

a 

p. 58) (22). In addition, direct transfers of registered 
offices  from  Austria  abroad  or  vice-versa  are  still 
not  possible  under  national  legislation,  except  for 
companies  which  use  the  Societas  Europaea  legal 
form.  This  lack  of  a  suitable  framework  makes  it 
more  difficult  and  costly  for  Austrian  companies 
and  companies  from  other  European  countries 
alike  to  scale  up  on  a  cross-border  basis  and  take 
advantage of business opportunities offered by the 
single market. 

Graph 3.4.2:  High-growth enterprises as % of all active 

enterprises with at least 10 employees 

Source: European Commission 

to 

partly 

social 

started 

implement 

Austria  has 
fiscal 
incentives  to  stimulate  investment.  Given  the 
impact of taxation and other excises on investment 
incentives,  Austria  has  announced  a  number  of 
measures  in  late  2016  and  early  2017.  These 
include 
security 
subsidizing 
contributions  of  innovative  start-ups  from  social 
security contributions for the first 3 employees and 
the  first  3  years,  thereby  mitigating  an  important 
obstacle  to  job  creation  by  small  firms  (see  also 
Section  3.3).  Austria  also  plans  to  provide  a  total 
of EUR 175 million to SMEs which increase their 
capital  goods  investment  compared  to  the  3 
(Investitionszuwachsprämie). 
preceding 
years 
Finally,  Austria  announced 
to  grant  more 
favourable  depreciation  possibilities  to  companies 
with  more  than  250  employees  for  promoting 
investment.  Such  firms  are  allowed  an  additional 
write-down of 30 % on investment goods in 2017. 

(22)  In  January  2017,  Austria  has  announced  a  revision  of  the 
insolvency  rules  to  allow  failed  entrepreneurs  a  faster 
resolution of the insolvency proceedings. 

(23)  According  to  the  2016 SAFE  survey  (p. 18),  90 %  of 
Austrian  SMEs  do  not  consider  equity  capital  as  relevant 
for  their  funding  needs,  which  is  higher  than  in  previous 
years. 

31 

051015MTUKLVIESEHUSKLTBGHRFILUNLESPLEUDKEEPTDEFRCZBESIATITROCY% 
 
                                                           
                                                           
3.4. Investment 

most  often  cited  by  Austrian  businesses  (WKÖ, 
2016).  On  average  Austria  ranks  slightly  above 
other  Member  States  in  terms  of  businesses  using 
digital technology (European Commission, 2017b). 
Austrian  businesses  are  ahead  of  their  European 
peers  in  the  use  of  e-invoicing.  This  is  related  to 
requirements  by  Austrian  public 
e-invoicing 
important 
authorities  and  demonstrates  how 
government  practices  can  be  in  promoting  the 
uptake  of  digital  technologies.  But  only  15 %  of 
Austrian  SMEs  sell  online,  which  despite  a  1 pps 
increase  from  2015  to  2016  is  still  below  the  EU 
average.  While  41 %  of  Austrian  firms  exchange 
value  chain  data  electronically  (above  the  EU 
average  of  36%),  only  10 %  use  cloud  services 
(below the EU average of 13.5 %). 

Austria  has  started  to  screen  and  adapt  its 
regulatory  framework  to  the  challenges  and 
opportunities of digital business models. Digital 
business models, such as those of the collaborative 
economy, can provide significant price and choice 
advantages  for  Austrian  consumers.  They  also 
allow  a  wider  range  of  people  to  participate 
productively  in  the  economy  than  traditional 
business  models.  The  uptake  of  such  business 
models  in  Austria  is  lagging  behind  the  EU 
average,  with  only  2 %  of  Austrian  consumers 
having  participated  in  the  collaborative  economy 
and  81 %  not  having  even  heard  of  it  (the 
respective  EU  averages  are  5 %  and  73 %)  (ING, 
2015,  p. 5).  Among  the  Austrian  users  of  these 
to  be  a 
liability  questions  seem 
services, 
preoccupation  (TNS,  2016,  p. 23),  while  public 
authorities  have  focused  on  taxation  questions 
pp. 42)(24). 
(European  Commission 
Adopting  a  modern  regulatory  framework  for 
digital  business  models  is  one  of  the  12  guiding 
principles  of  the  Digital  Roadmap  for  Austria 
(BKA, BMWFW, 2017).  

2016n, 

(24)  On  9 November  2016  the  Austrian  government  adopted  a 
legislative 
initiative  concerning  online  hotel  booking 
platforms  and  their  contractual  relation  to  accommodation 
providers. In January 2017, Austria announced measures to 
address  taxation  issues  resulting  from  online  activities  of 
foreign firms. 

Wirtschaftsservice,  the  creation  of  an  Austrian 
private-equity  growth  fund  (EUR  30  million  with 
expected leverage to EUR 100 million), as well as 
(Mittelstands-
a  new  participation  holding 
finanzierunggesellschaft). 

Graph 3.4.3:  Venture capital as % of GDP 

Source: European Commission 

of 

burden 

administrative 

Public  capital  markets  underperform 
in 
providing  access  to  capital  markets  for  SMEs 
and mid-caps. Such markets play a pivotal role in 
offering  exit  options  for  investors  through,  for 
example,  initial  public  offerings.  However,  the 
high 
regulation, 
insufficient research on listed SMEs in Austria and 
the resulting low visibility of listed companies for 
potential  investors  create  bottlenecks  that  prevent 
junior market segments from growing. Multilateral 
trading  facilities  are  particularly  suitable 
to 
facilitate  SME  access  to  public  capital  markets. 
The  respective  offering  of  the  Vienna  Stock 
Exchange (Wiener  Börse)  is  however  restricted  to 
registered  shares,  which  hampers 
its  growth 
(BMWFW,  2016,  p.  47).  A  further  instrument  is 
the indirect stock exchange participation of SMEs 
via a quoted holding company.  

3.4.5.  INVESTMENT IN DIGITAL 
TRANSFORMATION 

Austrian  businesses  excel  in  the  use  of  some 
digital  technologies  (e.g.  e-invoicing),  but  lag 
behind  their  peers  in  others  (e.g.  e-commerce). 
Digitalisation  is  one  of  the  investment  reasons 

32 

0.000.020.040.060.080.100.120.14EEFIUKLVNLIEFRLTSEBECYPTEUDKHUHRATDELUESPLITBGROCZSKSIELMT% of GDP 
 
 
                                                           
3.4. Investment 

33 

 Box 3.4.1: Investment challenges and reforms in AustriaSection 1. Macroeconomic perspective  Investment in Austria (see also Section 1) held up fairly well throughout the financial crisis. Compared to the EU average the decline was less severe and the recovery quicker. Since the end of 2015 investment activity by the corporate sector has picked up, partly due to replacement needs. Higher private consumption triggered by the 2016 tax reform has also helped increase investment.  Austrian companies have sufficient financial resources so it is not the availability of bank credit that is acting as a macroeconomic constraint on investment but rather the lack of opportunities in a climate of uncertainty and subdued consumption. Regarding public investment, housing demand in Austria is high due to continuing immigration and a growing population. This calls for higher investment in social housing, but the availability of fiscal space can constitute a macroeconomic constraint. Section 2. Assessment of barriers to investment and ongoing reforms  Barriers to investment in Austria exist but are relatively modest overall, as the European Commissionʼs assessment confirms (European Commission, 2015). Some reforms have been adopted in the area of labour taxation (see Section 3.1) as well as regulated professions and administrative simplification (see Section 3.4). Continued efforts and further reform measures to improve the business environment and better meet consumption and housing demand will help strengthen overall investment in Austria. Main barriers to investment and priority actions underway: 1. Taxes on labour as well as the overall tax wedge remain high despite the 2016 tax reform. Fiscal drag tends to increase the tax wedge overtime, for which the announced indexation of tax brackets can help to counter this effect (see Sections 1 and 3.1). Reducing labour costs for companies in general like the reduction of non-wage labour costs for employers by around EUR 1 billion annually and shifting taxation to more growth-friendly sources like property or environmental taxes can incentivise investment activities. 2. The high degree of regulation of the services sector as well as of trade licences constitutes a barrier to investment and competition. While the reform of the trade licence act presented in 2016 brings some improvements, restrictions on access to trades and professions, and to exercising them, continue to hinder market access and business development (see Section 3.4). 3. Despite recent efforts, the business environment in Austria can benefit from more start-ups and scaling up. The enterprise birth rate, while improving, is still on a low level as is the proportion of high-growth companies. Business creation and growth are key triggers of investment and job creation (see Section 3.4).Regulatory/ administrative burdenCSRTaxationPublic administrationAccess to financePublic procurement /PPPsCooperation btw academia, research and businessJudicial systemFinancing of R&D&IInsolvency frameworkBusiness services / Regulated professionsCSRCompetition and regulatory frameworkRetailEPL & framework for labour contracts ConstructionWages & wage settingDigital Economy / TelecomEducation EnergyLegend:TransportNo barrier to investment identifiedCSRInvestment barriers that are also subject to a CSRSome progressNo progressSubstantial progressLimited progressFully addressedPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
 
 
 
 
 
3.5. SECTORAL POLICIES 

3.5.1.  INNOVATION POLICY 

like 

Austria ranks second among Member States on 
public  and  private  R&D  spending  but  has  not 
yet  achieved  a  matching  performance 
in 
innovation.  In  Austria  R&D  spending  as  a 
percentage  of  GDP  amounted  to  3.07 %  in  2015 
(Eurostat),  the  second-highest  level  in  the  EU. 
Austria  is  also  among  the  EU  countries  with  the 
strongest increase in R&D intensity since 2000, as 
a  result  of  increases  in  both  public  and  business 
R&D  expenditure.  However, 
in  other 
comparable  Member  States,  progress  on  R&D 
intensity has slowed in recent years, especially for 
public  expenditure.  Despite 
the  high  overall 
spending levels, funding of basic research remains 
low  and  there  is  scope  to  increase  excellence  in 
research, a field where Austria scores only near the 
EU  average  (11.7 %  of  publications  are  highly 
cited,  compared  to  an  EU  average  of  10.5 %  in 
2013).  The  increase  in  the  budget  for  universities 
by EUR 615 million for the period 2016-2018 is an 
important  step.  Public  spending  on  R&D  co-
financed by private companies, an indicator of the 
in  R&D, 
level  of  public-private  cooperation 
accounted for 0.042 %  of  Austria’s  GDP  in 2013, 
compared  with  an  EU  average  of  0.052 %. 
Austria’s  performance  on 
innovation  outputs 
leaves room for improvement in some areas. These 
include: 
the  sales  shares  of  new  product 
innovations (9.8 % in 2012, below the EU average 
of  12.4 %);  licence  and  patent  revenues  from 
abroad  (0.25 %  of  GDP  in  2014,  below  the  EU 
average  of  0.54 %);  and  medium-  and  high-tech 
product  exports  (57.4 % in  2015,  only  slightly 
above the EU average of 56.1 %). 

Since  formulating  its  innovation  leadership 
ambition 
tabled  a 
in  2011,  Austria  has 
multitude  of  initiatives  and  programmes  but 
has not yet evaluated their overall effectiveness. 
In  2011  Austria  formulated  a  comprehensive 
national  strategy  to  boost  the  performance  of  its 
research  and  innovation  system  (Der  Weg  zum 
Innovation  Leader).  Among 
the  more  recent 
follow-up  measures  are  the  research  action  plan 
published in 2015 and new guidelines for research, 
technology  and  innovation  funding  which  entered 
into  force  on  1 January  2015.  In  line  with  a  shift 
from  direct  to  indirect  support  such  as  tax 
incentives,  the  research  premium  was  increased 
from 10 % to 12 % in January 2016. In early 2017 
Austria  announced  a  further  increase  to  14  % 

effective as of January 2018. There has also been a 
growing  number  of  initiatives  in  recent  years 
focusing  on  improving  knowledge  transfer  and 
cooperation  between  public  research  (including 
research at universities) and business. The ongoing 
evaluation  of  the  effectiveness  of  the  research 
premium could help to further optimise its impact. 

Graph 3.5.1:  Evolution of business and public R&D intensity 

Source: European Commission 

3.5.2.  TELECOMMUNICATION INDUSTRY 

Austria  faces  particular  challenges  in  ensuring 
that  next-generation  broadband  coverage  also 
extends  to  rural  areas.  In  2016,  89 %  of  all 
households  in  Austria  were  covered  by  a  high-
speed broadband (next-generation access) network, 
which is above the EU average. Austria increased 
the  coverage  of  high-speed  broadband  in  rural 
areas from 26 % in 2015 to 41 % in 2016 reducing 
the  'digital  divide'  between  urban  and  rural  areas. 
However, it only ranks at EU average in providing 
adequate  access  in  rural  areas  for  individuals  and 
businesses  to  the  digital  economy  and  digital 
society.  In  response  to  the  challenge  of  financing 
the  high  cost  of  high-speed  roll  out  in  rural  and 
mountainous  areas,  Austria  has  started  in  2016  to 
implement  an  ambitious  funding  scheme  from  the 
proceeds of spectrum revenues – distribution of the 
so-called  Broadband  Billion  (Breitbandmilliarde). 
In January 2017, Austria announced an increase of 
its  national  targets  of  availability  and  take-up  of 
high-speed  broadband,  including  connecting  all 
schools,  SMEs  and  75 %  of  citizens  with  high-
speed broadband by 2020. In addition, Austria has 

34 

0.00.51.01.52.02.5040506070809101112131415(% of GDP)Public R&D intensity (including higher education expenditure)Business R&D intensity 
 
 
3.5. Sectoral policies 

management and bidding-zone definition in central 
Europe do not necessarily reflect actual congestion 
accurately,  and  this  is  leading  to  increasing 
limitations  on  cross-border  flows  of  electricity. 
The issue lacks a joint regional solution agreed by 
all  affected  neighbours.  Swift  implementation  of 
the  planned  cross-border  capacities  in  particular 
with  Germany,  Italy  and  Switzerland  remains  a 
priority. On gas infrastructure, Austria’s role as an 
important 
the 
transit  country  benefits 
implementation  of  a  more  regional  approach  to 
network  planning.  A  further  reinforcement  of 
interconnections is under development. 

from 

resource  productivity 

There  is  untapped  potential  for  the  Austrian 
economy to benefit from more efficient resource 
(which 
use.  Austria’s 
measures  how  efficiently 
the  economy  uses 
material  resources  to  produce  wealth)  improved 
modestly  from  1.60  EUR/kg  in  2011  to  1.80 
EUR/kg  in  2015  but  remained  below  the  EU 
average  of  2.18  (Eurostat,  2016).  This  might  be 
explained  by  the  high  income  and  its  export-
oriented  manufacturing  sector.  No  overarching 
policy programme exists to move Austria towards 
a  circular  economy,  though  various  government 
bodies have taken some measures and initiatives in 
recent  years  relating  to  eco-innovation  and,  to  a 
limited  extent,  to  the  circular  economy.  In  2012 
Austria  adopted  an  action  plan  to  improve  its 
overall  resource  efficiency  by  50 %  compared  to 
2008 by 2020. This target will not be met without 
additional  efforts,  as  resource  productivity  is 
expected to grow by only 1.2 % a year under a no-
policy-change scenario. 

3.5.4.  PUBLIC PROCUREMENT AND E-

GOVERNMENT 

low  on 

level  and  also  ranks 

Austria  has  one  of  the  lowest  publication  rates 
for  public  procurement  contracts  advertised  at 
EU 
joint 
procurement  between  public  authorities.  In 
2015 the share of public contracts for works, goods 
and  services  (including  utilities  and  defence) 
published  by  the  Austrian  authorities  and  entities 
under EU procurement legislation was only 2.2 % 
of GDP. This is a slight reduction of 0.1 pp. from 
2014  and  is  only  around  half  the  EU  average  of 
4.17 %.  Contract  notices  from  Austrian  tendering 
authorities are not always complete, as in the 32 % 
of  notices  in  2016  where  the  actual  contract 

started  a  process  to  create  a  5G  strategy  until  the 
end of 2017 and aims at starting the roll-out of 5G 
(mobile) technologies by 2018 leading to coverage 
of  all  regional  capitals  (Landeshauptstädte)  by 
2020. 

3.5.3.  ENERGY, CLIMATE AND RESOURCES 

Austria is on track to meet only two of the three 
Europe  2020  targets  on  energy  and  climate 
change. It is well on track towards its 2020 target 
on renewable energy and is stepping up its efforts 
to  ensure  achievement  of  the  energy  efficiency 
target. However, while it complied in 2015 with its 
annual 
reducing  greenhouse  gas 
emissions  (EEA  approximated  data),  Austria  is 
among  five  Member  States  which  are  expected  to 
miss their target for 2020(25). 

target 

for 

Graph 3.5.2:  Europe 2020 emission reduction targets 

Source: European Commission 

Active  regional  cooperation  remains  critical  to 
the  development  and  operation  of  Austria’s 
electricity  and  gas  networks.  Implementation  of 
the  new  energy  infrastructure  law  adopted  in 
January  2016  has  started.  This  lays  out  the 
framework for accelerating the granting of permits 
for  energy  infrastructure  projects  and  implements 
the  one-stop  shop  required  under  the  TEN-E 
Regulation  (EU)  No  347/2013.  Minor  progress 
was achieved towards completing the high-tension 
380-kV  ring  in  Austria  with  the  positive  result  of 
the  environmental  assessment  at  regional  level. 
The  current  national  arrangements  for  congestion 

(25)  See also table in Annex A. 

35 

-30-20-1001020304050IEBELUATDKFIDEESUKFRNLITPLLVSESIEEROSKCZLTHRMTELBGPTHUCY(reduction as % of base year emissions)Projected reduction overachievement/not used allowanceProjected ESD emissions reduction in 2020Gap between 2020 projections and reduction targetESD reduction target for 2020ESD allowed emission increases 
 
                                                           
3.5. Sectoral policies 

volume  was  not  indicated.  Furthermore,  in  2016 
Austria  used  central  purchasing  bodies  on  joint 
procurement among public authorities for only 5 % 
of tenders, which constitutes no improvement over 
the  2011  value  and  is  markedly  below  the  EU 
average  of  9 %  (European  Commission,  2016o). 
The  principles  of  good  public  procurement 
practices  also  hold  for  public-private  partnerships 
and mixed rental and public works agreements. 

in 

scores 

Austria 
providing 
highly 
e-government  to  businesses  and  citizens  but 
risks  problems  in  rolling  out  e-procurement. 
The  vast  majority  (98 %)  of  the  most-used  public 
services  are  available  online,  notably  via  the 
platform ‘Digitales Österreich’. Of these, 58 % are 
mobile  friendly.  The  usability  of  these  services 
also scores high in terms of support and interactive 
feedback functionalities. Austria plans to introduce 
the  right  for  citizens  and  businesses  to  digitally 
auf 
contact 
elektronischen  Verkehr  mit  Behörden).  It  also 
plans  to  upgrade  the  existing  e-ID  card  to  an 

administration 

(Recht 

public 

identity 

electronic  proof  of 
(elektronischer 
Identitätsnachweis)  and  to  further  expand  the 
mobile  accessibility  of  online  public  services.  In 
January 2017, Austria announced that the platform 
‘data.gv.at’  will  be  expanded  by  2020  to  include 
open data from the private sector and enable access 
to all public data as open data. In contrast, Austria 
has  not  yet  fully  transposed  the  e-procurement 
provisions of the 2014 Procurement Directives (26). 
Individual  public  authorities  (e.g.  Lower  Austria, 
Vienna) are beginning to introduce e-procurement 
systems  but  these  differ  from  each  other.  Ways 
exist  for  the  Austrian  authorities  to  ensure  that, 
even  with  several  technical  solutions,  bidders 
throughout  the  EU  could  participate  in  calls  for 
tender.  The 
so  by 
the 
implementing 
e-government  action  plan  such  as  ‘once-only’ 
submitting  information  on  the  (winning)  bidder 
and  ‘interoperability  by  default’,  and  by  using 
harmonised technical standards. 

could  do 

authorities 

principles 

from 

the 

(26)  Directives 2014/24/EU, 2014/25/EU and 2014/23/EU. 

36 

 Box 3.5.1: Selected highlightsA comprehensive income tax reform The 2016 tax reform is a good example of how a comprehensive approach to reducing the cost of labour can have a very positive effect on growth and economic activity. By lowering taxes for the large majority of low- and medium-income earners and at the same time increasing the tax rate for the highest tax bracket, it gave an impulse to private consumption and investment without putting too much strain on public finances. The question is not merely about raising or lowering taxes but rather how to find the right mix of measures that have a positive impact on growth without excessively undermining the fiscal position. The introduction of a ‘negative tax’, in the form of a partial repayment of social security contributions, enabled low-income earners with no taxable income to benefit from the reform as well. The income tax reform took effect at the beginning of 2016 and increased households’ disposable income. This gave a strong boost to private consumption, which grew by 1.5 % in 2016 after stagnating for 3 years between -0.3 % and 0.0 %. This in turn spurred a 7.0 % jump in investment in machinery and equipment as companies tried to keep up with the increased domestic demand. GDP growth in 2016 was thus driven largely by the tax reform and its stimulating effect on private consumption and investment. Moreover, the reduction in the tax wedge from 49.5 % to 46.7 % helped employment and investment further by lowering the cost of labour in Austria and increasing the country's attractiveness to foreign investors. Regarding the social dimension, the tax reform is a step towards improving equality and social cohesion. The implicit tax rate on labour decreased by around 2 pps (European Commission, 2017c). This reduction has been more pronounced in the lower half of the income distribution, amounting to around 2.4 pps for the first five income deciles. The reform also contributed to reducing the poverty rate by about one pp. to 12.5 %. Before the reform 13.3 % of the population had an equivalised disposable income below the poverty line of EUR 1 117 (60 % of median equivalised disposable income at the individual level). Overall, the tax reform has increased economic growth and investment as well as social inclusion and cohesion in Austria. These positive trends could be maintained in the future by continuing to reform the taxation and social welfare system in order to further reduce the cost of labour.  
                                                           
 
 
 
 
 
ANNEX A 

Overview table 

Commitments 

2016 Country-specific recommendations (CSRs) 

CSR 1:  Ensure  that  the  deviation  from  the  medium-
term  budgetary  objective  in  2016  and  in  2017  is 
limited  to  the  allowance  linked  to  the  budgetary 
impact of the exceptional inflow of refugees in 2015, 
and to that effect achieve an annual fiscal adjustment 
of  0.3 %  of  GDP  in  2017  unless  the  medium-term 
budgetary  objective  is  respected  with  a  lower  effort. 
Ensure  the  sustainability  of  the  healthcare  system, 
and  of  the  pension  system  by  linking  the  statutory 
pension  age  to  life  expectancy.  Simplify,  rationalise 
and  streamline  fiscal  relations  and  responsibilities 
across the various layers of government. 

  Ensure  that  the  deviation  from  the  medium-term 
budgetary objective in 2016 and in 2017 is limited 
to the allowance linked to the budgetary impact of 
the exceptional inflow of refugees in 2015, and to 
that effect achieve an annual fiscal adjustment of 
0.3  %  of  GDP  in  2017  unless  the  medium-term 
budgetary  objective  is  respected  with  a  lower 
effort. 

Summary assessment (27) 

some  progress 

Austria  has  made 
in 
addressing  CSR 1  (this  overall  assessment  of 
CSR  1  does  not  include  an  assessment  of 
compliance  with  the  Stability  and  Growth 
Pact): 

  The  compliance  assessment  with 

the 
Stability and Growth Pact will be included 
in Spring when final data for 2016 will be 
available. 

(27)  The following categories are used to assess progress in implementing the 2016 country-specific recommendations: 

• 

No  progress:  The  Member State  has  not  credibly  announced  nor adopted  any  measures  to  address  the  CSR.  Below  a  number  of 
non-exhaustive typical situations that could be covered under this, to be interpreted on a case by case basis taking into account 
country-specific conditions: 
no legal, administrative, or budgetary  measures have been announced in the National Reform  Programme or in other official 
communication  to  the  national  Parliament  /  relevant  parliamentary  committees,  the  European  Commission,  or  announced  in 
public (e.g. in a press statement, information on government's website);  
no non-legislative acts have been presented by the governing or legislator body;   
the Member State has taken initial steps in addressing the CSR, such as commissioning a study or  setting up a study group to 
analyse possible measures that would need to be taken (unless the CSR explicitly asks for orientations or exploratory actions), 
while clearly-specified measure(s) to address the CSR has not been proposed. 

• 
• 

announced certain measures but these only address the CSR to a limited extent;    

Limited progress: The Member State has: 
• 
and/or 
• 

presented legislative acts in the governing or legislator body but these have not been adopted yet and substantial non-legislative 
further work is needed before the CSR will be implemented;  
presented non-legislative acts, yet with no further follow-up in terms of implementation which is needed to address the CSR. 

• 

Some progress: The Member State has adopted measures that partly address the CSR  
and/or  
• 

the Member State has adopted measures that address the CSR, but a fair amount of work is still needed to fully address the CSR 
as  only  a  few  of  the  adopted  measures  have  been  implemented.  For  instance:  adopted  by  national  parliament;  by  ministerial 
decision; but no implementing decisions are in place. 

Substantial progress: The Member State has adopted measures that go a long way in addressing the CSR and most of which have 

been implemented. 

Full implementation: The Member State has implemented all measures needed to address the CSR appropriately. 

37 

 
 
 
 
 
 
                                                           
 
 
 
 
 
A. Overview table 

  Ensure the sustainability of the healthcare system, 

sustainability 

reported 
of 

  Some  progress  can  be 
the 

in 
ensuring 
the 
healthcare  system.  The  2017  financial 
equalisation  law  has  set  more  stringent 
expenditure 
targets.  The  provision  of 
outpatient  care  has  been  strengthened  by 
the  creation of  a  new  legal framework for 
multi-disciplinary  primary  care  centres 
with  an  earmarked  budget.  Incentives  for 
hospitals 
treat  outpatient  cases  as 
inpatient cases have been reduced. 

to 

  Limited  progress  in  ensuring  the  long-
term  sustainability  of  the  pension  system, 
as financial incentives for working beyond 
the  statutory  retirement  age  are  likely  to 
effective 
marginally 
retirement age. 

increase 

the 

  by  linking  the  statutory  pension  age  to  life 

expectancy. 

  No progress has been made in addressing 
CSR  1  on  increasing  the  sustainability  of 
the pension system by linking the statutory 
retirement  age  to  life  expectancy.  The 
Austrian  government  has  no  intention  to 
take  measures  establishing  a  link  between 
the  statutory  retirement  age  and 
life 
expectancy. 

  Some 

if 

in 

streamlining 

progress 
and 

simplifying, 
rationalising 
fiscal 
relations  and  responsibilities  across  the 
various  layers  of  government.  The  2017 
financial  equalisation  law  implemented  a 
few  steps  to  increase  the  tax  autonomy  of 
sub-national  governments,  even 
the 
revenue-raising 
misalignment  between 
responsibilities 
powers  and 
spending 
remains  high.  The  system  of 
inter-
government  transfers  has  been  slightly 
revenue-sharing 
simplified,  while 
system  has  been  made  more 
task-
orientation. The efficiency and adaptability 
of the fiscal framework has been improved 
with the introduction of the legal basis for 
regular  spending  reviews  and  a  system  of 
benchmarks.  The  different  government 
subsectors  have  committed  to  a  reform  of 
their respective competencies. 

the 

  Simplify, 

rationalise  and 

fiscal 
relations  and  responsibilities  across  the  various 
layers of government. 

streamline 

38 

 
 
 
 
 
 
 
 
 
 
A. Overview table 

CSR 2:  Improve  the  labour  market  participation  of 
women.  Take  steps  to  improve  the  educational 
achievements  of  disadvantaged  young  people,  in 
particular those from a migrant background. 

Austria  has  made 
addressing CSR 2: 

some  progress 

in 

 

Improve 
women. 

the 

labour  market  participation  of 

  Some  progress  can  be  reported  regarding 
increasing  childcare 
infrastructure  and 
services. The right for part-time workers of 
a  business  to  receive  information  about 
full-time job offers has been implemented. 
Awareness-raising  of  the  advantages  and 
disadvantages  of  full-time  and  part-time 
employment  has  been  enforced.  Overall 
the  increasing  labour  market  participation 
of  women  is  mainly  based  on  part-time 
employment. No new measures have been 
taken  to  substantially  increase  full-time 
employment of women. 

  Take 

to 

steps 

educational 
improve 
achievements  of  disadvantaged  young  people,  in 
particular those from a migrant background. 

the 

  Some  progress  in  addressing  the  need  to 
improve  the  educational  achievements  of 
disadvantaged  young  people,  in  particular 
those  from  a  migrant  background.  This 
progress takes the form of the step-by-step 
implementation  of  the  education  reform 
agreed in September 2015 which allocates 
EUR  750  million  for  expanding 
the 
number of  all-day  schools over  the next  6 
years. Reform measures in early childhood 
education  and  care  and  primary  schools 
have already been implemented. Measures 
schoolsʼ  autonomy  and 
to 
improve 
the 
federal  level  and  the  regions  are  planned 
for  adoption  before  April  2017.  However, 
these measures have not yet had an impact 
on education outcomes. 

task  distribution  between 

increase 

39 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
in 

the 

and 

area  of 

regulatory 

services, 
CSR 3:  Reduce, 
for 
administrative 
investments, 
authorisation 
requirements  and  restrictions  on  legal  form  and 
shareholding,  and 
to  setting  up 
interdisciplinary companies. 

impediments 

restrictive 

barriers 

such 

as 

  Reduce, in the area of services, administrative and 
investments,  such  as 
and 

regulatory  barriers  for 
restrictive 
requirements 
restrictions on legal form and shareholding, 

authorisation 

A. Overview table 

Austria  has  made 
addressing CSR 3: 

limited  progress 

in 

of 

regulated 

Gewerbe) 

for  performing 

  Limited  progress.  Austria  presented  a 
draft  revision  of  the  trade  licence  act 
(Gewerbeordnung) 
in  November  2016. 
This  revision  removes  access  barriers  for 
19  trades  (Teilgewerbe),  abolishes  the 
initial  registration  fee  and  increases  the 
scope 
side  activities 
without  an  additional  licence  (15-30 % 
instead  of  currently  around  10 %).  The 
trades 
high 
number 
(reglementierte 
remains 
unchanged,  however,  and  the  law  still 
requires  separate  licences  for  each  of  the 
459 free trades (freie Gewerbe). Austria is 
also 
for 
the  procedure 
installations  on  business 
authorising 
premises 
(Betriebsanlagen).  Low-risk 
installations will benefit from a simplified 
procedure, 
granting 
authorisations  will  be  shortened,  a  one-
stop  shop  for  different  types  of  permits 
will 
publication 
requirements  will  be  reduced.  As  regards 
other restrictions on access to and exercise 
of 
regulated  professions,  only 
relatively  minor  changes  have  been 
implemented. 

simplifying 

deadlines 

created 

and 

the 

for 

be 

  and  impediments  to  setting  up  interdisciplinary 

companies. 

  No progress. Efforts which were started in 
November  2015  to  remove  restrictions  on 
interdisciplinary 
have 
companies 
subsequently been discontinued. 

40 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. Overview table 

Europe 2020 (national targets and progress) 

Employment rate target: 77-78 % 

Employment rate for the population aged 20 to 
64: 

R&D target: 3.76 % of GDP 

National greenhouse gas (GHG) emissions target: 

-16 %  in  2020  compared  with  2005  (in  sectors  not 
included in the Emissions Trading Scheme) 

2020 Renewable energy target: 34 % 

74.4 % in 2012, 

74.6 % in 2013, 

74.2 % in 2014 and 

74.3 % in 2015. 

Given  the  current  trend  in  the  Austrian 
employment  rate,  it  remains  a  challenge  to 
meet the national target of 77-78 % by 2020. 

to  make  progress 

Austria  continued 
in 
increasing  R&D  intensity.  R&D  expenditure 
as a percentage of GDP increased from 2.97 % 
in 2013 to 3.06 % in 2014 and 3.07 % in 2015, 
the second-highest level in the EU. However, 
progress  needs  to  be  accelerated  to  meet  the 
ambitious 2020 target. 

Although  complying with  its  annual  emission 
reduction  target  in  2015  [EEA  approximated 
data],  Austria  is  among  the  five  Member 
States  which  are  expected  to  miss  their 
greenhouse  gas  emission  reduction  target  for 
2020.  In  the  light  of  the  latest  projections 
submitted  by  Austria,  the  emission  target  for 
sectors not covered by the Emissions Trading 
Scheme  is  expected  to  be  exceeded  by  4 
percentage  points  (12  %  emission  reduction 
by  2020  compared  to  2005  instead  of  a  16 % 
reduction  target).  Austria  may  therefore  need 
to  take  additional  measures  to  meet  its  target 
or  make  use  of  the  flexibility  mechanisms 
provided in the Effort Sharing Decision. 

target 

Austria  remains  on  track  towards  meeting  its 
2020 
the  use  of 
for  promoting 
renewable  energy.  Energy  from  renewable 
sources 
represented  33.6 %  of  Austria’s 
energy consumption in 2015 (proxy), close to 
its  2020  target  of  34 %(28).  Austria  ranks 
fourth  in  the  EU  on  the  share  of  energy 
obtained from renewable sources. 

(28)  Renewable energy shares for 2015 are approximations and not official data, reflecting the available data (04.10.2016). 

41 

 
 
 
                                                           
A. Overview table 

Energy efficiency target: 

AT’s  2020  energy  efficiency  target  is  31.5 Mtoe 
expressed in primary energy consumption (25.1 Mtoe 
expressed in final energy consumption) 

Austria 
is  stepping  up  efforts,  however 
increased  its  primary  energy  consumption 
from  30.45 Mtoe  in  2014  to  31.33 Mtoe  in 
2015.  Final  energy  consumption  increased  as 
well  from  26.74 Mtoe  in  2014  to  27.37 Mtoe 
in  2015.  Austria  has  set  an  ambitious  energy 
efficiency target, requiring a real reduction of 
20 %  in  energy  consumption  compared  to  a 
sound  and  updated  forecast.  The  target  is 
underpinned 
comprehensive 
implementation  and  monitoring.  Maintaining 
the  rate  of  reduction  of  primary  energy 
consumption (2005-2014) would be sufficient 
for 
the  primary  energy 
consumption  target  for  2020  (31.5 Mtoe). 
However,  it  would  not  be  sufficient  for 
meeting  the  final  energy  consumption  target 
for 2020 (25.1 Mtoe). 

staying  below 

by 

Early school/training leaving target: 9.5 % 

Austria  is  already  outperforming  the  Europe 
2020 targets:  

8.5 % in 2011 

7.6 % in 2012 

7.3 % in 2013 

7.0 % in 2014 

7.3 % in 2015. 

However,  efforts  to  reduce  the  early  school 
leaving  rate  among  young  people  with  a 
migrant background need to be maintained. 

The  target  has  been  fulfilled,  with  a  tertiary 
education rate of 38.7 % in 2015. 

In  the  baseline  year  2008,  the  number  of 
people at risk of poverty and social exclusion 
was  1 699 000.  The  respective  number  for 
2015  was  1 551 000, 
less, 
requiring additional efforts to meet the target. 

i.e.  147 000 

Tertiary education target: 38 % 

Risk of poverty or social exclusion target: -235 000 

42 

 
 
ANNEX B 

MIP Scoreboard 

Table B.1: 

The MIP Scoreboard for Austria 

1) House price index: e = source NCB. 
2) b: break in time series. e: estimated.  
Note: Figures highlighted are those falling outside the threshold established in the European Commission’s Alert Mechanism 
Report. For real effective exchange rate and unit labour costs, the first threshold applies to euro area Member States. 
Source: European Commission, Eurostat and Directorate General for Economic and Financial Affairs (for real effective 
exchange rate), and International Monetary Fund 

43 

Thresholds201020112012201320142015Current account balance, (% of GDP) 3 year average-4%/6%3.32.42.01.71.92.1-35%-5.2-1.9-3.21.32.22.9Real effective exchange rate - 42 trading partners, HICP deflator3 years % change±5% & ±11% -2.0-1.9-4.70.71.91.8Export market share - % of world exports5 years % change-6%-12.3-12.1-21.1-17.8-16.3-9.6Nominal unit labour cost index (2010=100)3 years % change9% & 12% 8.95.93.76.37.76.16%4.4be3.04.82.91.43.514%0.33.01.30.70.92.1133%132.9130.1129.2128.0126.2126.460%82.882.682.081.384.485.5Unemployment rate3 year average10%4.74.94.85.05.35.616.5%-1.91.50.4-3.2-1.10.6-0.2%0.90.70.81.10.80.40.5%-0.10.20.00.10.30.52%0.10.4-1.30.21.41.2Activity rate - % of total population aged 15-64 (3 years change in p.p)Long-term unemployment rate - % of active population aged 15-74 (3 years change in p.p)Youth unemployment rate - % of active population aged 15-24 (3 years change in p.p)External imbalances and competitivenessNew employment indicatorsNet international investment position (% of GDP)Deflated house prices (% y-o-y change)Total financial sector liabilities (% y-o-y change)Private sector credit flow as % of GDP, consolidatedPrivate sector debt as % of GDP, consolidatedGeneral government sector debt as % of GDPInternal imbalances 
 
 
 
 
ANNEX C 

Standard tables 

Table C.1: 

Financial market indicators 

1 Latest data Q2 2016. 
2 Quarterly values are not annualised. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

44 

201120122013201420152016Total assets of the banking sector (% of GDP)327.3307.4283.3265.1251.3238.5Share of assets of the five largest banks (% of total assets)38.436.536.736.835.8-Foreign ownership of banking system (% of total assets)20.922.223.124.826.6-Financial soundness indicators:1)              - non-performing loans (% of total loans)4.04.34.26.25.54.9              - capital adequacy ratio (%)13.614.215.415.616.216.5              - return on equity (%)2)1.44.1-0.71.17.64.0Bank loans to the private sector (year-on-year % change)2.00.8-1.00.50.61.7Lending for house purchase (year-on-year % change)3.82.62.23.04.34.3Loan to deposit ratio108.8107.4103.4100.599.698.5Central Bank liquidity as % of liabilities2.32.71.61.82.11.7Private debt (% of GDP)130.1129.2128.0126.2126.4-Gross external debt (% of GDP)1) - public57.361.266.674.770.170.8    - private37.540.033.235.136.936.7Long-term interest rate spread versus Bund (basis points)*71.187.844.032.425.028.7Credit default swap spreads for sovereign securities (5-year)*76.878.919.820.116.418.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.2: 

Labour market and social indicators 

1 The unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within 2 weeks. 
2 Long-term unemployed are people who have been unemployed for at least 12 months. 
3 Not in education, employment or training. 
4 Average of first three quarters of 2016. Data for total unemployment and youth unemployment rates are seasonally 
adjusted. 
Source: European Commission (EU Labour Force Survey). 

45 

201120122013201420152016 4Employment rate(% of population aged 20-64)74.274.474.674.274.374.7Employment growth (% change from previous year)1.61.00.30.90.61.3Employment rate of women(% of female population aged 20-64)69.269.670.070.170.270.8Employment rate of men (% of male population aged 20-64)79.279.379.178.378.478.7Employment rate of older workers (% of population aged 55-64)39.941.643.845.146.349.0Part-time employment (% of total employment, aged 15-64)24.525.226.026.927.327.7Fixed-term employment (% of employees with a fixed term contract, aged 15-64)9.69.39.29.29.19.0Transitions from temporary to permanent employment42.550.444.548.944.3:Unemployment rate1 (% active population, age group 15-74)4.64.95.45.65.76.1Long-term unemployment rate2 (% of labour force)1.21.21.31.51.71.9Youth unemployment rate (% active population aged 15-24)8.99.49.710.310.611.3Youth NEET3 rate (% of population aged 15-24)7.36.87.37.77.5:Early leavers from education and training (% of pop. aged 18-24 with at most lower sec. educ. and not in further education or training)8.57.87.57.07.3:Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)23.626.127.140.038.7:Formal childcare (30 hours or over; % of population aged less than 3 years)3.07.08.07.0:: 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.3: 

Labour market and social indictors (continued) 

1 People at risk of poverty or social exclusion: individuals who are at risk of poverty and/or suffering from severe material 
deprivation and/or living in households with zero or very low work intensity.  
2 At-risk-of-poverty rate: proportion of people with an equivalised disposable income below 60 % of the national equivalised 
median income.  
3 Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone. 
4 People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months. 
5 For EE, CY, MT, SI and SK, thresholds in nominal values in euros; harmonised index of consumer prices = 100 in 2006 (2007 
survey refers to 2006 incomes). 
Source: For expenditure for social protection benefits ESSPROS; for social inclusion EU-SILC. 

46 

Expenditure on social protection benefits (% of GDP)201020112012201320142015Sickness/healthcare7,37,27,37,37,4:Disability2,22,12,12,12,0:Old age and survivors14,214,014,314,614,8:Family/children3,12,92,82,82,8:Unemployment1,61,51,51,61,6:Housing0,20,10,10,10,1:Social exclusion n.e.c.0,40,40,40,40,5:Total29,028,228,528,929,2:of which: means-tested benefits2,42,32,32,42,5:Social inclusion indicators201020112012201320142015People at risk of poverty or social exclusion1 (% of total population)18,919,218,518,819,218,3Children at risk of poverty or social exclusion  (% of people aged 0-17)22,422,120,922,923,322,3At-risk-of-poverty  rate2 (% of total population)14,714,514,414,414,113,9Severe material deprivation rate3  (% of total population)4,34,04,04,24,03,6Proportion of people living in low work intensity households4 (% of people aged 0-59)7,88,67,77,89,18,2In-work at-risk-of-poverty rate (% of persons employed)7,57,68,17,97,27,9Impact of social transfers (excluding pensions) on reducing poverty43,546,544,244,444,545,7Poverty thresholds, expressed in national currency at constant prices5119291195711730115761192011774Gross disposable income (households; growth %)0,72,93,80,42,11,6Inequality of income distribution (S80/S20 income quintile share ratio)4,34,14,24,14,14,1GINI coefficient before taxes and transfers50,749,949,749,549,949,8GINI coefficient after taxes and transfers28,327,427,627,027,627,2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.4: 

Product market performance and policy indicators 

1 The methodologies, including the assumptions, for this indicator are shown in detail at 
http://www.doingbusiness.org/methodology.  
2 Average of the answer to question Q7B_a. ‘[Bank loan]: If you applied and tried to negotiate for this type of financing over 
the past six months, what was the outcome?’. Answers were scored as follows: zero if received everything, one if received 
most of it, two if only received a limited part of it, three if refused or rejected and treated as missing values if the application is 
still pending or or if the outcome is not known. 
3 Percentage population aged 15-64 having completed tertiary education. 
4 Percentage population aged 20-24 having attained at least upper secondary education. 
5 Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail at http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm 
6 Aggregate OECD indicators of regulation in energy, transport and communications. 
Source: European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation indicators); SAFE (for outcome of SMEs’ applications for bank loans). 

47 

Performance indicators201020112012201320142015Labour productivity (real, per person employed, year-on-year % change)Labour productivity in industry5.743.261.552.041.131.20Labour productivity in construction-5.52-2.04-1.220.52-1.22-1.18Labour productivity in market services0.611.36-0.690.080.361.08Unit labour costs (ULC) (whole economy, year-on-year % change)ULC in industry-5.430.232.961.731.201.48ULC in construction3.954.294.723.354.751.84ULC in market services0.881.244.053.752.222.58Business environment201020112012201320142015Time needed to enforce contracts1 (days)397.0397.0397.0397.0397.0397.0Time needed to start a business1 (days)25.025.025.025.022.022.0Outcome of applications by SMEs for bank loans20.230.240.230.350.410.49Research and innovation201020112012201320142015R&D intensity2.742.682.932.973.063.07Total public expenditure on education as % of GDP, for all levels of education combined5.915.805.625.66nanaNumber of science & technology people employed as % of total employment373839414647Population having completed tertiary education3161617182728Young people with upper secondary education4868586879089Trade balance of high technology products as % of GDP-0.10-0.030.130.190.500.09Product and service markets and competition200320082013OECD product market regulation (PMR)5, overallna1.371.19OECD PMR5, retail3.503.302.40OECD PMR5, professional services3.213.082.71OECD PMR5, network industries62.471.841.55 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C. Standard tables 

Table C.5:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2005 prices). 
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR). 
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR). 
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR). 
          Waste intensity: waste (in kg) divided by GDP (in EUR). 
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP.     
Weighting of energy in HICP: the proportion of ‘energy’ items in the consumption basket used for the construction of the HICP 
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change). 
Real unit energy cost: real energy costs as a percentage of total value added for the economy . 
Environmental taxes over labour taxes and GDP: from European Commission’s database, ‘Taxation trends in the European 
Union’. 
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2005 
EUR). 
Real unit energy costs for manufacturing industry excluding refining: real costs as a percentage of value added for 
manufacturing sectors. 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP. 
Electricity and gas prices for medium-sized industrial users: consumption band 500-20 00MWh and 10 000-100 000 GJ; figures 
excl. VAT.   
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste. 
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP. 
Proportion of greenhouse gas (GHG) emissions covered by EU Emissions Trading System (ETS) (excluding aviation): based on 
greenhouse gas emissions (excl. land use, land use change and forestry) as reported by Member States to the European 
Environment Agency. 
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value 
added (in 2005 EUR). 
Transport carbon intensity: greenhouse gas emissions in transport activity divided by gross value added of the transport 
sector. 
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels. 
Aggregated supplier concentration index: covers oil, gas and coal. Smaller values indicate larger diversification and hence 
lower risk.   
Diversification of the energy mix: Herfindahl index over natural gas, total petrol products, nuclear heat, renewable energies 
and solid fuels. 
* European Commission and European Environment Agency 
Source:  European Commission (Eurostat) unless indicated otherwise 

48 

Green growth performance201020112012201320142015MacroeconomicEnergy intensity kgoe / €0,120,110,110,110,110,11Carbon intensity kg / €0,310,300,290,290,27-Resource intensity (reciprocal of resource productivity)kg / €0,680,690,680,660,670,66Waste intensity kg / €0,13-0,12-0,20-Energy balance of trade % GDP-2,9-3,7-3,9-3,5-3,0-Weighting of energy in HICP%7,868,899,099,419,758,86Difference between energy price change and inflation %1,42,21,1-0,1-1,8-3,0Real unit of energy cost% of value added13,813,714,113,712,6-Ratio of environmental taxes to labour taxesratio0,100,110,100,100,10-Environmental taxes% GDP2,32,42,42,42,4-Sectoral Industry energy intensity kgoe / € 0,170,160,150,160,150,15Real unit energy cost for manufacturing industry excl. refining% of value added12,814,113,713,112,7-Share of energy-intensive industries in the economy% GDP10,5311,4411,3310,0910,2010,33Electricity prices for medium-sized industrial users€ / kWh0,110,110,110,110,110,10Gas prices for medium-sized industrial users€ / kWh0,040,040,040,040,040,04Public R&D for energy % GDP0,010,010,010,020,020,02Public R&D for environmental protection% GDP0,010,020,020,020,010,01Municipal waste recycling rate%59,456,757,757,756,356,0Share of GHG emissions covered by ETS*%38,739,337,837,336,837,4Transport energy intensitykgoe / €0,680,650,650,670,660,68Transport carbon intensitykg / €1,751,651,651,751,69-Security of energy supplyEnergy import dependency%62,970,364,561,666,160,8Aggregated supplier concentration indexHHI28,934,640,525,236,3-Diversification of energy mixHHI0,280,260,270,270,27- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REFERENCES 

Arnold,  J.,  Brys,  B.,  Heady,  C.,  Johansson,  Å.,  Schwellnus,  C.,  &  Vartia,  L.,  (2011),  Tax  Policy  For 
Economic Recovery and Growth, Economic Journal, Vol. 121, F59 -F80 . 

BB  and  Bifie  (2016),  Bundesministerium  für  Bildung  and  Bundesinstitut  für  Bildungsforschung, 
Innovation  &  Entwicklung  des  österreichischen  Schulwesens,  Nationaler  Bildungsbericht  Österreich 
2016, Wien. 

Bifie  (2016),  Bundesinstitut  für  Bildungsforschung,  Innovation  &  Entwicklung  des  österreichischen 
Schulwesens, PISA 2015, Grundkompetenzen am Ende der Pflichtschulzeit im internationalen Vergleich.    

BKA,  BMWFW  (2017),  Bundeskanzleramt  und  Bundesministerium  für  Wissenschaft,  Forschung  und 
Wirtschaft, Digital Roadmap Austria, Wien. 

BMASK (2016), Bundesministerium für Arbeit, Soziales und Konsumentenschutz, Das Beschäftigungs-, 
Rehabilitations- und Pensionsmonitoring für das erste Halbjahr 2016 — Kurzfassung, Wien. 

BMWFW  (2015),  Bundesministerium  für  Wissenschaft,  Forschung  und  Wirtschaft,  Land  der  Gründer: 
Auf dem Weg zum gründerfreundlichsten Land Europas, Wien. 

BMWFW  (2016),  Bundesministerium  für  Wissenschaft,  Forschung  und  Wirtschaft,  Wirtschaftsbericht 
Österreich 2016, Wien. 

CEDEFOP (2015), European Centre for the Development of Vocational Training, Skills forecasts country 
report – Austria, Thessaloniki. 

CEDEFOP  (2016),  European  Centre  for  the  Development  of  Vocational  Training,  VET  in  Austria  — 
Policies & measures to address the Riga mid-term deliverables, Thessaloniki. 

Der  Rechnungshof  (2016),  Schüler  mit  Migrationshintergrund  —  Antworten  des  Schulsystems;  Follow-
up-Überpüfung, Wien. 

ECB (2016), The Household Finance and Consumption Survey: results from the second wave, Household 
Finance and Consumption Network, Statistics Paper Series, No. 18, European Central Bank, Frankfurt am 
Main. 

ECSIP  (2014),  European  Competitiveness  and  Sustainable  Industrial  Policy  Consortium,  Study  on  the 
relationship between industry and services in terms of productivity and value creation, Wien. 

EUA (2016), European University Association, Public Funding Observatory 2016, Brussels. 

European  Commission  (2013),  Tax  reforms  in  EU  Member  States  2013,  Tax  policy  challenges  for 
economic growth and fiscal sustainability, Publications Office of the European Union, Luxembourg. 

European  Commission  (2014),  Cross  country  review  of  taxes  on  wealth  and  transfers  of  wealth, 
Publications Office of the European Union, Luxembourg. 

European Commission (2015a), The 2015 Ageing Report: Economic and budgetary projections for the 28 
EU Member States (2013-2060), Publications Office of the European Union, Luxembourg. 

European  Commission  (2015b),  Education  and  Training  Monitor  2015  —  Volume  2,  Austria, 
Publications Office of the European Union, Luxembourg. 

49 

 
 
References 

European  Commission  (2016a),  Country  Report  Austria  2016,  Including  an  In-Depth  review  on  the 
prevention  and  correction  of  macroeconomic  imbalances,  Publications  Office  of  the  European  Union, 
Luxembourg. 

European  Commission  (2016b),  SA.45940  (2016/N)  —  Austria  —  Repurchase  offer  for  guaranteed 
liabilities of Heta Asset Resolution AG, Publications Office of the European Union, Luxembourg. 

European Commission (2016c), Education and Training Monitor 2016 — Volume 2, Austria, Publications 
Office of the European Union, Luxembourg. 

European Commission (2016d), European semester thematic fiche for services, Publications Office of the 
European Union, Luxembourg. 

European  Commission  (2016e),  Reform  recommendations  for  regulation  in  professional  services, 
COM(2016)820, Publications Office of the European Union, Luxembourg. 

European  Commission  (2016f),  Reform  recommendations  for  regulation  in  professional  services,  Staff 
Working Document SWD (2016)436, Publications Office of the European Union, Luxembourg. 

European  Commission  (2016g),  Europe's  next 
COM(2016)733, Publications Office of the European Union, Luxembourg. 

leaders: 

the  start-up  and  scale  up 

initiative, 

European  Commission  (2016h),  Start-up  procedures,  country  by  country  assessment  for  2015.  March 
2016, Publications Office of the European Union, Luxembourg. 

European Commission (2016i), Framework Conditions for High Growth Innovative Enterprises (HGIEs), 
Publications Office of the European Union, Luxembourg. [forthcoming] 

European Commission (2016j), Single Market Integration and Competitiveness Report 2016, Publications 
Office of the European Union, Luxembourg. 

European Commission (2016k), Survey on the access to finance of enterprises (SAFE), Analytical Report 
2016, Publications Office of the European Union, Luxembourg. 

European Commission (2016l), SBA fact sheet 2016 Austria, Publications Office of the European Union, 
Luxembourg. 

European  Commission  (2016m),  European  Innovation  Scoreboard  2016,  Annex  B  Performance  by 
Indicator, Publications Office of the European Union, Luxembourg. 

European  Commission  (2016n),  A  European  agenda  for  the  collaborative  economy,  Staff  Working 
Document SWD(2016)184, Publications Office of the European Union, Luxembourg. 

European Commission (2016o), Single Market Scoreboard 2016, covering the period 01/2015 to 12/2015, 
European Commission, Brussels. 

European  Commission  (2017a),  2016 Debt  Sustainability  Monitor,  Publications  Office  of  the  European 
Union, Luxembourg. 

European Commission (2017b), Digital Scoreboard 2017, European Commission, Brussels. 

50 

 
 
References 

European Commission (2017c),  Personal income taxation in Austria  — A look at the impact of the tax 
reform of 2015/2016 on the budget, labour market incentives and income distribution, Publications Office 
of the European Union, Luxembourg. 

Fiskalrat (2016), Recommendation of the Fiscal Advisory Council on Austria’s budget policy, Adopted at 
the Fiscal Advisory Council meeting on June 29, 2016, Wien. 

GÖG  and  BMGF  (2016),  Gesundheit  Österreich  GmbH  (GÖG)  and  Ministerium  für  Gesundheit  und 
Frauen, Zielsteuerung-Gesundheit Monitoringbericht I/2016, Wien. 

ING (2015), ING International Survey, What’s mine is yours — for a price. Rapid growth tipped for the 
sharing economy, ING International Survey, Amsterdam. 

OECD (2016a), Reviews of school Resources: Austria, Paris. 

OECD (2016b), Education at a Glance 2016. OECD Indicators, Paris. 

Rechnungshof (2016), Instrumente zur finanziellen Steuerung der Krankenversicherung RH, Wien. 

Stadtrechnungshof  Wien  (2017a),  Unternehmung  Wiener  Krankenanstaltenverbund,  Prüfung  der 
Wartezeiten  von  Patientinnen  bzw.  Patienten  auf  eine  strahlentherapeutische  Behandlung,  StRH  II  - 
KAV-5/15, Wien. 

Stadtrechnungshof  Wien  (2017b),  Unternehmung  Wiener  Krankenanstaltenverbund,  Prüfung  der 
Verweildauer bei Hüft- und Knieoperationen, StRH II - 31/16, Wien. 

Statistik Austria (2015a), Bundesanstalt Statistik Österreich, Arbeitsmarktsituation von Migrantinnen und 
Migranten in Österreich. Modul der Arbeitskräfteerhebung 2014, Wien. 

Statistik Austria (2015b), Bundesanstalt Statistik Österreich, Bildung in Zahlen 2014/15, Wien. 

Statistik Austria (2016), Bundesanstalt Statistik Österreich, Kindertagesheimstatistik 2015/2016, Wien. 

TNS  (2016),  TNS  Political  &  Social,  Flash  Eurobarometer  438:  The  Use  of  Collaborative  Platforms, 
Brussels. 

WKÖ  (2016),  Wirtschaftskammer  Österreich,  Wirtschaftsbarometer  Oktober  2016,  Wirtschaftskammer 
Österreich, Wien. 

WKÖ  (2017),  Wirtschaftskammer  Österreich,  Unternehmensgründungen  1993-2016,  Vorläufige 
Ergebnisse Jänner 2017, Wien. 

51