COMMISSION STAFF WORKING DOCUMENT Country Report Austria 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 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
Date: 2020-02-26
Institutions: European Commission, Secretariat-General
Subjects: Austria, economic situation, green economy, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2020  SWD(2020) 519 final  COMMISSION STAFF WORKING DOCUMENT Country Report Austria 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 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(2020) 150  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.   Competitiveness, Reforms and investment 

3.5.   Environmental sustainability 

Annex A: Overview Table 

Annex B: DSA statistical annex 

Annex C: Standard Tables 

Annex D: Investment guidance on Just Transition Fund 2021-2027 for Austria 

Annex E: Progress towards the Sustainable Development Goals (SDGs) 

References 

LIST OF TABLES 

Key economic and financial indicators - Austria 

Recent pension-related fiscal measures 

Summary table on 2019 CSR assessment 

Table 1.1: 
Table 2.1: 
Table 3.1.1:  Measures to reduce the tax wedge on labour 
Table 3.1.2: 
Table C.1: 
Table C.2: 
Table C.3: 
Table C.4: 
Table C.5: 
Table C.6: 

Labour market and education indicators 

Headline Social Scoreboard indicators 

Social inclusion and health indicators 

Financial market indicators 

Green growth 

Product market performance and policy indicators 

1 

3 

7 

13 

17 

17 

28 

32 

40 

49 

53 

59 

60 

66 

67 

72 

12 
15 
20 
25 
60 
61 
62 
63 
64 
65 

 
 
 
 
LIST OF GRAPHS 

Graph 1.1: 

GDP growth and contributions [TO BE UPDATED] 

Graph 1.2: 

Labour productivity 

Graph 1.3: 

Contributions to potential growth 

Graph 1.4: 

Labour productivity (real GVA per worker), EU-28, Austria (NUTS-2 regions), 2000-2017 

Graph 1.5: 

Benchmark for nominal compensation growth 

Graph 1.6: 

Key fiscal indicators 

Graph 2.1: 

Overall multiannual implementation of 2011-2019 CSRs to date 

Graph 3.1.1:  Austria's tax mix and ITRs in EU comparison 

Graph 3.1.3:  Composition of Austria’s labour tax wedge in EU comparison 

Graph 3.1.2:  Marginal effective tax rate of a single household without children 

Graph 3.1.4: 

Income relief provided by 2020 Tax Reform Act and 2020 Pension Adjustment Act 

Graph 3.1.5:  Consumption tax mix in EU comparison 

Graph 3.1.6 

Simulated CO₂ tax scenarios and compensatory measures 

Graph 3.1.7  Distributional and equity effects 

Graph 3.2.1:  Credit to the private sector (y-o-y % change) 

Graph 3.2.2:  Price developments and valuation gaps 

Graph 3.2.3:  Venture capital in Austria (million euro), 2007-2018 

Graph 3.3.1:  Rates of activity, unemployment and NEET (not in education, employment or training) 

Graph 3.3.2:  Vacancies per registered unemployed and labour shortage by sector 

Graph 3.3.3:  Main indicators of poverty, 2005-2018 

Graph 3.3.4:  Participation of children under 3 years of age in formal childcare, 2010-2017 

Graph 3.4.1:  Productivity levels and change in the share of employment for aggregated sectors 

2009 - 2018 

Graph 3.4.2:  Austria’s innovation strengths and weaknesses 

Graph 3.5.1:  Change in total GHG emissions 1990-2017 

LIST OF BOXES 

Box 2.1: EU funds and programmes to address structural challenges and to foster growth and 

competitiveness in Austria 

Box 3.1.2: The distributional and equity effects of introducing an explicit price for CO₂ 

Box 3.3.3: Monitoring performance in light of the European Pillar of Social Rights 

Box 3.4.4: Digitalisation as an opportunity for rural Austria 

Box 3.4.5: Investment challenges and reforms in Austria 

7 

7 

8 

8 

9 

10 

13 

18 

19 

19 

20 

22 

23 

23 

28 

30 

31 

32 

32 

34 

37 

40 

42 

49 

16 

23 

39 

44 

48 

2 

 
 
 
 
 
EXECUTIVE SUMMARY 

is  considerable  scope 

In  a  context  of  growing  uncertainty  and  rapid 
technological change, further structural reform 
and  targeted  investment  could  help  Austria 
achieve  more  sustainable and inclusive  growth. 
The  Austrian  economy  has  performed  well  in 
recent  years,  consistently  recording  one  of  the 
highest  levels  of  per  capita  GDP  in  the  EU. 
However,  rapidly  changing  economic  conditions 
underscore  the  need  to  tackle  key  outstanding 
challenges. Austria is still far away from reaching 
its  greenhouse  gas  emissions  targets  and  this  will 
make it more difficult to achieve carbon neutrality 
for 
by  2040.  There 
comprehensive  reform  of  the  tax  system  to  foster 
environmental sustainability, fairness and inclusive 
growth. Over the medium term, population ageing 
and  the  untapped  labour  market  potential  of 
women, the low-skilled and people with a migrant 
background  are  expected  to  limit  the  extent  to 
which  labour  contributes  to  economic  growth  and 
this will require further reform efforts. In addition, 
people’s  educational  success 
is  still  heavily 
influenced  by  their  socio  economic  background. 
As  a  result,  future  productivity  growth  hinges  on 
improving innovation outcomes, digitalisation, the 
business  environment  and  human  capital.  At  the 
same  time,  curbing  public  expenditure  remains 
essential 
fiscal 
sustainability.  More  comprehensive  reform  of  the 
fiscal  framework  could  make  public  spending 
more efficient, especially at subnational level.  

long-term 

ensuring 

to 

to 

line  with  worsening  sentiment 

The  broad-based,  solid  economic  growth  of 
recent  years  lost  momentum  in  2019  and  is 
expected  to  remain  moderate  in  2020-2021. 
Austria  had  experienced  fast  growth  (2.1-2.5%) 
from 2016, but this  slowed down in 2019 (1.6%). 
indicators, 
In 
growth  is  set  to  remain  moderate  in  2020-2021, 
mostly  due 
industrial 
expected 
production, export and investment growth. Private 
consumption  is  expected  to  remain  the  main 
contributor  to  growth.  After  peaking  in  2016,  the 
unemployment rate decreased strongly and reached 
4.5% in 2019 (the lowest rate since the crisis) and 
is  expected  to  only  slightly  increase  (4.6%)  in 
2020-2021.  Over  the  medium  term,  with  labour 
contributing 
factor 
capital 
productivity  will  become  more  important  for 
potential growth. 

lower 

total 

less, 

and 

Public  finances  are  developing  favourably. 
Having improved to 0.2% of GDP in 2018 on the 

3 

the  economic  boom, 

back  of 
the  general 
government  budget  surplus  is  expected  to  have 
grown  further  to  0.4%  in  2019  thanks  to  higher 
than  expected  revenues.  The  headline  balance  is 
expected  to  narrow  to  0.2%  of  GDP  in  2020, 
before expanding again to 0.4% in 2021, assuming 
no policy changes. The dip in 2020 is largely due 
to  a  series  of  discretionary  fiscal  measures  that 
were  adopted  shortly  before  the  snap  elections  in 
September 2019.  

in 

needs 

to  focus 

investment 

Identifying 
green 
technology  and  sustainable  solutions,  and 
securing  adequate  funding  will  be  key  to 
delivering on climate and energy objectives and 
shaping  a  new  growth  model.  To  remain 
competitive  in  international  markets,  Austria  will 
need 
the  ecological 
investment  on 
transition,  research  and  (digital)  innovation,  and 
human  capital.  For  the  last  decade,  its  investment 
ratio  has  been  above  the  euro  area  average,  but 
investment  growth  is  expected  to be  less  lively  in 
the  coming  years.  The  high 
level  of  R&D 
expenditure  is  not  translating  sufficiently  into 
innovation outcomes. Digital technologies are still 
not  widely  used,  particularly  among  smaller 
businesses, and restrictive service sector regulation 
is  hampering 
Increasing  energy 
efficiency  and  the  share  of  renewables  would 
strengthen  Austria’s  sustainable  growth  potential. 
Investment in skills, affordable full-time childcare 
and all-day schools  would help to improve labour 
market  outcomes,  in  particular  for  disadvantaged 
groups and women.  

investment. 

Austria  has  made  overall  limited (1)  progress  in 
country-specific 
addressing 
2019 
recommendations. (2)  There  has  been 
some 
progress in the following areas: 

the 

 

focusing 
development, innovation and digitalisation;  

investment 

research 

on 

and 

(1)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
country-specific  recommendation 
the 
overview table in the Annex. 

is  presented 

in 

(2)  As  a  result  of  the  governmental  crisis  in  June  2019,  a 
caretaker  government  took  over  until  the  end  of  the  year. 
Following  snap  elections  and  coalition  talks,  the  new 
government  was  sworn  in  at  the  beginning  of  2020.  The 
following analyses report on planned measures and reforms 
as  announced 
the  new  government  programme. 
However,  the  new  plans  are  not  incorporated  in  the 
assessment  of  the  implementation  of  the  country-specific 
recommendations.   

in 

 
 
                                                           
Executive summary 

  supporting  productivity  growth  by  stimulating 
digitalisation  of  businesses  and  company 
growth; 

particularly  SDG 3  (good  health  and  well-being). 
However, it scores below EU average for SDG 13 
on climate action. 

 

reducing the tax wedge; 

  ensuring  the  sustainability  of  the  health  care 

Other key structural issues analysed in this report, 
which  point  to  particular  challenges  for  Austria’s 
economy, are the following: 

system and 

  supporting 
women. 

full-time 

employment 

among 

There  has  been  limited  progress  in  the  following 
areas: 

  ensuring  the  sustainability  of  the  pension  and 

long-term care systems; 

  simplifying fiscal relations; 

 

 

reducing  regulatory  barriers  in  the  service 
sector, and 

raising 
the 
disadvantaged groups. 

levels  of  basic 

skills 

for 

There has been no progress in the following areas: 

  Labour market outcomes for the low skilled. 

could 

level,  due 

subnational 

  The fiscal framework is still overly complex 
and the tax mix relies too strongly on labour. 
Austria’s  fiscal  federalism  provides  weak 
incentives  for  efficient  public  spending  at 
to  a  considerable 
subnational 
mismatch  of  revenue-raising  and  spending 
responsibilities.  Greater 
tax 
autonomy  paired  with  a  more  transparent 
allocation  of  competences  across  levels  of 
government 
political 
accountability  and  incentives  to  contain  costs. 
The  tax  system  has  considerable  scope  for 
reform to  foster fairness, inclusive  growth and 
environmental sustainability. High labour taxes 
create  significant  disincentives  for 
labour 
supply.  Relying  more  on 
demand  and 
taxes, 
environmental 
and 
wealth-related 
including  a  consistent 
taxation  of  CO2 
emissions would be more efficient gains, make 
climate-friendly 
sources  more 
energy 
competitive and provide fiscal space  to reduce 
more distortive taxes. 

improve 

Austria  performs  relatively  well  on  the  social 
scoreboard supporting the European pillar of social 
rights.  Policies  to  reduce  poverty  and  social 
exclusion  are  generally  effective  and  income 
inequality is below the EU average. However, the 
relatively 
childcare 
availability 
compromises  the  labour  market  participation  of 
women.  

low 

of 

As  regards  progress  in  its  Europe  2020  targets, 
Austria  is  performing  well  on  tertiary  education 
and  early  school  leaving.  In  addition,  Austria  is 
close  to  its  national  target  for  its  share  of 
renewable  energy  and 
the  employment  rate. 
However,  despite  the  recently  adopted  climate 
package, it is unlikely to reach its national energy 
efficiency and climate targets by 2020. 

Austria  performs  well  on  the  United  Nations’ 
(SDGs), (3) 
sustainable 

development 

goals 

(3)  Within the scope of its legal basis, the  European Semester 
can help drive national economic and employment policies 

4 

  The  projections  for  pension,  health  and 
long-term  care  expenditure  point  to  a 
challenge  for  long-term  fiscal  sustainability. 
While  improving  pension  adequacy,  the  2020 
Pension Adjustment Act includes measures that 
thwart previous reform efforts to improve fiscal 
sustainability. Progress on reducing health care 
spending 
and 
pharmaceutical  expenditure  is  still  well  above 
the  EU  average.  Despite  recent  measures,  the 
relies  on  a 
long-term  care  system  still 
comparatively large share of informal care and 
the 
public 
spending. 

sustainability 

challenges 

hospital 

slow 

and 

of 

is 

towards the achievement of the United Nations Sustainable 
Development  Goals  (SDGs)  by  monitoring  progress  and 
ensuring  closer  coordination  of  national  efforts.  The 
present report contains reinforced analysis and monitoring 
on  the  SDGs.  A  new  annex  (ANNEX  E)  presents  a 
statistical  assessment  of  trends  in  relation  to  SDGs  in 
Austria during the past five years, based on Eurostat’s EU 
SDG indicator set. 

 
 
                                                           
                                                                                   
  Overall  employment  has  grown,  but  the 
employment  gender  gap  has  widened  since 
2016. The gender gap in part-time employment 
is  among  the  widest  in  the  EU,  driven  largely 
by  a  lack  of  affordable  high-quality  full-time 
childcare. Supporting the full-time employment 
of  women  could  alleviate  labour  shortages  in 
some  sectors  and  address  the  gender  gaps  in 
pay and pensions in the long term. People with 
migrant backgrounds, the low-skilled and older 
workers  are  other  groups  whose  potential  is 
underutilised. Meanwhile, the growing number 
labour 
of  vacancies  points 
shortages. 

to  emerging 

  While 

social 

situation 

the  overall 

is 
improving,  is  the  benefits  are  not  spread 
evenly  across  social  groups.  The  share  of 
people at risk of poverty or social exclusion has 
continued to fall, reaching its lowest level since 
2005.  However,  the  risks  remain  high  for 
vulnerable  groups 
single-parent 
households,  foreign-born  adults  and  families 
with  three  or  more  dependent  children.  Also, 
the risk of poverty varies significantly between 
regions,  with  people  in  cities  generally  more 
affected than those in towns, suburbs and rural 
areas.  

such  as 

  Prices  and  rents  are  growing  strongly,  but 
housing  remains  comparatively  affordable; 
risks  in  the  banking  sector  are  contained. 
rents, 
rising  housing  prices  and 
Despite 
Austria’s subsidy scheme and elaborate system 
of  limited-profit  housing  associations  keep 
costs  relatively  low.  Consequently,  housing 
cost  overburden  is  less  of  an  issue  than  in  the 
EU  on  average,  but  some  groups  remain 
vulnerable.  Risks  to  the  banking  sector  seem 
contained,  despite  dynamic  mortgage  lending, 
but they warrant close monitoring. 

educational 

  Educational  attainment  remains  strongly 
influenced  by  socio-economic  or  migrant 
background.  According  to  the  2018  PISA 
not 
survey, 
improved,  with 
large  share  of  students 
underperforming,  a  quarter  in  reading  and  a 
fifth  in  mathematics  and  science.  While  the 
early  school  leaving  rate  is  below  the  EU 
average,  it  remains  significantly  higher  among 
foreign-born pupils. Digital skills levels remain 

outcomes 

had 

Executive summary 

below  the  best-performing  countries.  Teacher 
shortages are possible. 

  Austria’s  future  competitiveness  depends 
partly  on  additional  efforts  in  research  and 
innovation.  Austria  has  been  exceeding  the 
European  R&I  investment  target  since  2014. 
However, its innovation outcomes do not fully 
reflect  this.  R&D  intensity  is  very  uneven  due 
to a lack of coordination between federal states. 
Further  challenges  are  the  modest  level  of 
investment  in  basic  research,  low  employment 
in  fast-growing  innovative  firms,  the  limited 
availability  of  venture  capital  (especially  in 
scale-up stages), and  the untapped potential of 
female researchers. 

  Administrative  burden  and 

restrictive 
regulation continue to hold back the service 
tape, 
sector.  Despite  efforts 
heavy. 
burdens 
administrative 
Regulatory 
for 
restrictiveness 
professional  services,  such  as  accounting, 
architecture, engineering, real estate agents and 
in retail. Addressing this would also benefit the 
manufacturing  sector,  which  relies  on  an 
innovative and competitive services sector.  

to  cut  red 
remain 
is 

high 

  Challenges 

lag  behind 

remain 
of 

as 
smaller 

regards 
firms 

the 
digitalisation 
and 
broadband  coverage  in  rural  areas.  On  key 
aspects  of  digitalisation,  Austria’s  smaller 
the 
firms 
best-performing Member States. Public support 
for broadband deployment remains, but Austria 
is 
in  particular  on  rural 
ultrafast  broadband.  The  digitalisation  strategy 
lacks monitoring and performance targets. 

lagging  behind, 

their  peers 

in 

of  CO2 

  Greenhouse gas emissions are still far above 
EU  and  national  targets;  without  further 
measures carbon neutrality is unlikely to be 
realised  by  2040.  Reaching  EU  and  national 
climate  targets  will  require  internalising  the 
e.g. through  
costs 
emissions, 
reform. 
tax 
implementing  an  eco-social 
Reducing 
is 
essential  for  meeting  air  quality  standards  and 
climate  goals.  Austria  is  shifting  transalpine 
transport  to  rail,  but  more  effort  is  needed  on 
urban  mobility.  Promoting  reuse,  recyclability 
and  secondary  raw  materials  markets  could 

transport-related 

emissions 

5 

 
 
the 

next  multi-annual 

boost 
the  circular  economy  and  drive 
innovation. The transition to  climate  neutrality 
is  a  challenge  for  the  regions  with  carbon-
industries.  The  Commission’s 
intensive 
proposal  for  a  Just  Transition  Mechanism 
under 
financial 
framework  for  the  period  2021-2027,  includes 
just 
a  Just  Transition  Fund,  a  dedicated 
transition  scheme  under  InvestEU,  and  a  new 
public  sector  loan  facility  with  the  EIB.  It  is 
designed  to  ensure  that  the  transition  towards 
EU  climate  neutrality  is  fair,  by  helping  the 
most affected regions in Austria to address the 
social  and  economic  consequences.  Key 
priorities  for  support  by  the  Just  Transition 
Fund,  set  up  as  part  of  the  Just  Transition 
in  Annex D, 
Mechanism,  are 
building  on  the  analysis  of  the  transition 
challenges outlined in this report. 

identified 

Executive summary 

6 

 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

capacity  utilisation,  strong  housing  demand  and 
overall low financing costs. However, in a context 
of  high  uncertainty  and  weakening  industrial 
production,  investment  growth  turned  negative  in 
Q2 and Q3 2019 and is set to remain less dynamic 
in  2020-2021.  On  the  other  hand,  excess  demand 
for  housing  is  likely  to  support  investment  in  the 
construction  sector  (see  below  and  Section 3.2.2). 
Public  sector  investment  is  also  expected  to  be 
conducive  to  growth.  Austria’s  investment  ratio 
has been consistently above the euro area average 
since 2009. It has been increasing again gradually 
since  the  crisis,  reaching  24%  of  GDP  in  2018. 
This  is  mostly  due  to  an  increase  in  the  share  of 
business 
(household  and  public 
investment have remained broadly stable). 

investment 

Potential and productivity growth 

Graph 1.2: 

Labour productivity 

GDP growth 

Austria’s  strong  economic  growth  of  recent 
years, slowed in 2019 and is expected to remain 
moderate  in  2020-2021.  Austria’s  small  open 
economy  is  well  integrated  in  global  value  chains 
and its economic performance is closely linked to 
EU  and  global  developments.  From  2016,  it 
experienced  fast  growth  (2.1-2.5%).  After  a 
still-strong  outturn  in  the  first  quarter  of  2019, 
GDP  growth  slowed  significantly  in  the  second 
and  third  quarters.  This  is  due  to  falls  in  exports 
and  in  equipment  investment.  The  decrease  in 
exports  concerned  various  sectors,  in  particular 
chemicals and related products but also machinery 
and  transport  equipment  and  manufactured  goods 
(affected  inter  alia  by  weaknesses  in  the  German 
automotive  sector).  Looking  ahead,  persistent 
headwinds  from  the  external  environment  and 
weak  readings  from  business  and  sentiment 
indicators  point  to  lower  growth,  of  around  1.3% 
in  2020-2021  (see  Graph 1.1).  Solid  wage  growth 
and  fiscal  measures  are  expected  to  stimulate 
private  consumption  and  hence  support  growth, 
together with investment in the construction sector 
(see Section 3.2.2). 

Graph 1.1:  GDP growth and contributions 

Source: European Commission 

Potential  growth 
is  set  to  remain  below 
pre-crisis levels, as productivity growth remains 
moderate.  Like 
that  of  most  EU  countries, 
Austria’s  potential  growth  has  been  decelerating 
since before the crisis. Despite increasing again in 
recent  years,  it  is  expected  to  remain  at  around 
1.7%  in  the  coming  years.  This  reflects  the 
long-term  downward 
factor 
productivity  (TFP)  growth  (see  Graph 1.2  and 
Section 3.4.1;  European  Commission,  2019a)  and 
a  declining  contribution  from  labour  due  to 
projected 
the  working-age 
population. Since 2008, the contribution of capital 

lower  growth 

trend 

total 

in 

in 

[1] Winter forecast for real GDP growth 
Source: European Commission, (2020) 

Investment 

In line with the economic slowdown, investment 
decelerated  in  2019.  From  2015,  Austria  saw 
investments  pick  up  significantly,  thanks  to  high 

7 

909510010511011512012513013514000010203040506070809101112131415161718Index, 2000=100Nominal unit labour costsTotal factor productivity - ATTotal factor productivity - EAReal labour productivity per personReal labour productivity per hour worked 
 
  
  
1. Economic situation and outlook 

accumulation 
to  potential  growth  has  been 
relatively  stable,  while  hours  worked  contributed 
little until 2015 (see Graph 1.3). This was due inter 
alia to an increasing share of part-time work. Over 
the medium term, population ageing is expected to 
depress  the  contribution  of  labour,  increasing  the 
importance  of  capital  and  TFP  in  sustaining 
potential growth (see Section 3.4.1). 

the  EU  average 

productivity  (real  gross  value  added  per  worker) 
ranged  from  100%  of 
in 
Burgenland to 129% in Vienna  in 2016. They are 
less  pronounced  than  in  Germany  and  Italy  and 
decreased  between  2010-2017.  This  was  mostly 
due  to  negative  labour  productivity  developments 
in  Vienna  (-0.4%  p.a.)  and  increases  in  all  other 
Länder (see Graph 1.4). 

Graph 1.3:  Contributions to potential growth 

Graph 1.4: 

Labour productivity (real GVA per worker), EU-
28, Austria (NUTS-2 regions), 2000-2017 

Source: European Commission 

Source: European Commission 

Regional disparities  

Inflation 

Economic  disparities  between  Austrian  regions 
are  among  the  smallest  in  the  EU  and  have 
narrowed steadily. In 2016, per capita GDP was 
highest in the urban NUTS 3 territories of Vienna, 
Sankt  Pölten,  Graz,  Linz-Wels,  Salzburg,  and 
Innsbruck. (4) It was also high in more rural areas 
in  West  Austria  (most  territories  in  Tyrol  and 
Vorarlberg),  where  it  was  35  percentage  points 
(pps)  above  the  EU  average.  However,  in  rural 
parts of Burgenland, Weinviertel, Mühlviertel and 
Upper  Carinthia  it  reached  only  about  77-87%  of 
the  EU-average.  In  2017,  per  capita  GDP  in  the 
regions  of  Salzburg  and  Vienna  (NUTS  2  level, 
Länder) was 52 pps above the EU average, while it 
stood  at  only  91%  in  Austria’s  least  developed 
labour 
region,  Burgenland.  Disparities 

in 

(4)  NUTS 3 correspond to the smallest of the 3 levels in which 
EU  regions  are  classified  under  the  "Nomenclature  of 
territorial  units  for  statistics"; in  Austria,  NUTS  3  regions 
are groups of Bezirke. 

8 

Inflation  is  expected  to  fall  below  2%,  but  to 
remain  above  the  euro  area  average.  Inflation 
was above 2% in 2017 and 2018, but is expected to 
fall 
to  1.5%-1.6%  over  2019-2021.  The 
fluctuations are driven mainly by oil prices, rising 
in  2017-2018  and  falling  in  2019.  In  the  coming 
years,  core  inflation  is  set  to  exceed  headline 
inflation,  due  to  traditionally  higher  costs  in 
services  and  price  pressures  linked  to  strong 
domestic  demand  and  wage  increases.  Prices 
continue  to  increase  in  tourism-related  services 
such  as  hotels  and  restaurants,  though  this  might 
be  linked  to  rising  input  prices  (Schnabel  et  al., 
2015). This, together with continuously increasing 
costs  for  housing  (see  Section 3.2.2),  water, 
electricity  and  fuels,  is  expected  to  keep  inflation 
above euro area levels (1.2-1.4%) in 2019-2021. 

-0.50.00.51.01.52.02.5060708091011121314151617181920212223y-o-y (%)Capital accumulationTFPTotal labour (hours)PF potential growth50556065707580859095100000102030405060708091011121314151617Capital regionOther NUTS-2 regionsNational averageEU-28Thousands of EUR per  employed person 
  
                                                           
  
Labour market 

in 

force, 

labour 

increase 

On  the  back  of  strong  economic  growth,  the 
labour  market  improved  markedly  in  2018. 
Employment grew by 1.7% in 2018 and despite the 
parallel 
the 
the 
unemployment  rate  decreased  to  4.9%.  In  2019, 
employment  growth  is  expected  to  have  slowed 
the  economic  cool  down,  while 
along  with 
unemployment  fell  to  4.5%,  the  lowest  rate  since 
the  crisis.  It  is  expected  to  increase  slightly  to 
4.6%  in  2020-2021.  Over  the  last  five  years, 
towards  reaching 
Austria  has  made  progress 
SDG 8 on decent work and economic growth. 

Wages and competitiveness 

In the past, structural factors had a dampening 
effect  on  wage  growth,  but  wages  picked  up  in 
2018.  Nominal  compensation  per  employee 
increased by 2.9% in 2018 and is expected to have 
continued  growing,  at  2.8%,  in  2019.  As  nominal 
wages grew faster than inflation, real wages saw a 
1.2%  increase  in  2018,  supporting  employees’ 
purchasing  power.  For  2019, they  are  expected  to 
have  grown  by  0.9%.  In  general,  the  main 
determinants  of  nominal  wage  growth  are  labour 
productivity  and  past  inflation.  However,  rising 
participation  rates  and  the  increased  openness  of 
the  economy  have  been  found  to  reduce  wage 
growth  in  past  decades  (Fenz  et  al.,  2019).  This 
might  explain  why  wage  growth  was  slower  than 
what could have been expected on the basis of the 
historical  relationship  with  inflation,  productivity 
and unemployment (see Graph 1.5). (5) 

Unit  labour  costs  (ULC)  growth  remained 
contained,  at  2.2%.  Despite  slowing  somewhat 
between 2015 and 2017, nominal ULC growth has 
stayed  relatively  stable  since  2012,  fluctuating 
around  2%  and  reaching  2.2%  in  2018  (see 
together  with  a  nominal 
Graph 1.5).  This, 
appreciation  of  the  euro,  contributed  to  real 
effective  exchange  rate  appreciation  (REER),  in 
line  with  main  euro  area  peers.  While  Austria’s 

(5)  This  is  a  benchmark  for  wage  growth  consistent  with 
internal  and  external  labour  market  conditions.  It  is 
calculated  as  wage  growth  predicted  on  the  basis  of 
changes  in  labour  productivity,  prices,  the  unemployment 
rate,  and  wage  growth  consistent  with  the  real  effective 
exchange  rate  (REER)  based  on  constant  unit  labour  cost 
(ULCs) 
(European  Commission,  2018a;  European 
Commission, 2015). 

1. Economic situation and outlook 

cost  competitiveness (6)  has  declined  recently,  in 
2019,  it  is  expected  to  have  been  boosted  by  a 
modest depreciation of the REER. 

Graph 1.5: 

Benchmark for nominal compensation growth 

Source: European Commission 

Social developments  

the 

income  of 

While income inequality remains below the EU 
average,  wealth  inequality  is  high.  In  2018,  the 
disposable 
richest  20%  of 
households  was  about  four  times  higher  than  that 
of 
the  poorest  20%.  This  constitutes  an 
improvement  with  respect  to  2017  and  is  well 
below  the  EU  average.  Income  inequality  before 
transfers  is  also  declining  and  below  the  EU 
average.  However,  GDP  growth  has  outpaced  the 
growth  of  household  incomes  from  2010  to  2018 
and gross disposable household incomes were still 
below  the  pre-crisis  levels  in  2018,  calling  the 
inclusiveness  of 
into 
question.  In  addition,  Austria  ranks  high  in  terms 
of  inequality  based  on  net  wealth,  mainly  due  to 
low  house-ownership  rates  at  the  bottom  of  the 
wealth  distribution.  The 
system 
continues  to  perform  well  in  reducing  income 
inequality  and  protecting  people  from  social 
exclusion. The risk of poverty and social exclusion 
fell  further  below  the  EU  average  and  pre-crisis 
levels, but the foreign-born population continues to 
be  more  exposed,  including  in  work  poverty. 
in  2018, 
Moreover,  despite 

the  economic  recovery 

improvements 

tax-benefit 

(6)  Measured  as  relative  ULCs:  REER  based  on  the  ULC 

deflator. 

9 

-2-10123456789901030507091113151719%Prediction based on inflation, productivityand unemploymentActual nominal compensation growthNominal compensation growth consistentwith constant ULC-based REER 
                                                           
  
                                                           
1. Economic situation and outlook 

in other regions, reducing slightly the gap between 
Vienna  and  the  rest  of  the  country  (European 
Commission,  2019a).  Risks  to  the  banking  sector 
stemming from the increasing exposure of banks to 
the  real  estate  sector  seem  contained  so  far  (see 
Section 3.2.1),  but  parallel  increases  in  rents  put 
pressure  on  the  affordability  of  housing  (see 
Section 3.3.3). 

Public finances and fiscal sustainability 

Public  finances  have  developed  favourably.  On 
the  back  of  the  economic  boom,  and  for  the  first 
time  in  several  decades,  the  general  government 
budget reached a surplus position in 2018 (0.2% of 
GDP).  This  surplus  is  estimated  to  have  grown 
further  in  2019  (0.4%  of  GDP),  thanks  to  higher 
than  expected  revenues.  The  headline  balance  is 
expected  to  narrow  to  0.2%  of  GDP  in  2020, 
before  expanding  again  to  0.4%  in  2021  (see 
Graph  1.6).  The  expected  dip  in  2020  is  largely 
due  to  a  series  of  discretionary  fiscal  measures 
such  as 
lower  health 
contributions,  and  increased  pensions.  Given  the 
positive  development  of  general  government  net 
lending,  the  structural  balance  is  projected  to  be 
above  the  medium-term  objective  of  -0.5%  of 
GDP,  improving  from  -0.3%  of  GDP  in  2018  to 
0.3% in 2020. Public  debt is expected to continue 
its downward path from 74.0% of GDP in 2018 to 
69.9% and 67.2% in 2019 and 2020, respectively. 

tax  credits, 

increased 

Graph 1.6: 

Key fiscal indicators 

inequality  of  opportunity  remains  high,  especially 
for children of low-skilled parents. 

External position 

current 

account  balance 

The 
remained 
relatively  stable,  along  with  a  slightly  positive 
net international investment position. In the past 
years,  Austria’s  current  account  balance  remained 
broadly  stable,  around  2%,  driven  mostly  by  a 
positive trade balance. GDP and aggregate demand 
grew strongly in 2018, leading to a small increase 
in  the  current  account  surplus  from  1.7%  in  2017 
to 2.4%. This is due mostly to higher exports than 
imports  in  the  services  sectors,  in  particular  in 
tourism-related  services,  but  exports  in  other 
business services have also increased. After strong 
growth in 2018, exports growth weakened in 2019, 
and is expected to remain moderate in 2020-2021. 
The 
position 
continued  its  gradual  increase,  reaching  3.7%  of 
GDP in 2018, which is in line with fundamentals. 
The  export  market  shares 
(5-year 
cumulated  change)  improved  further,  to  4%,  after 
its sharp decline in the early 2010s. 

international 

investment 

indicator 

net 

Private sector debt 

Private sector debt  continues to decline. On the 
back of rising GDP, private sector debt continued 
to  decline  in  2018,  albeit  slightly,  reaching  121% 
of  GDP.  The  fall  was  driven  by  a  decline  in 
households’  and  non-financial  corporations’  debt 
(to  49.6%  and  71.4%  respectively),  despite  an 
increase  in  credit  flows  to  the  latter  in  the  past  3 
years (by 2.3-2.5% in 2016-2018). Private debt and 
credit 
the 
macroeconomic scoreboard thresholds. 

remain  well 

growth 

below 

Housing 

House  prices  have  been  growing  strongly, 
driven mostly by developments in Vienna. In the 
past decade, Austria has seen repeated house price 
surges,  leading  to  the  strongest  price  rises  in  the 
euro  area  relative  to  a  low  pre-crisis  levels.  This 
can  be  mainly  attributed  to  an  accumulation  of 
excess  demand  (higher  demand  than  supply),  also 
due  to  the  low  interest  rate  environment  (see 
Section 3.2.2;  Schneider,  2019).  The  rises  were 
driven mostly by the capital, Vienna, where prices 
have  doubled  over  the  past  decade.  However, 
between 2015 and 2018, prices also grew strongly 

Source: European Commission, 2019 autumn forecast  

10 

-2.0-1.5-1.0-0.50.00.51.015161718192021% of GDPStructural balanceOutput gapOne-offsGeneral gov. balanceForecast 
  
1. Economic situation and outlook 

United  Nations’  Sustainable  Development 
Goals (SDG) 

Austria performs generally well with regard to the 
SDGs. In the context of this report, progress can be 
noted  in  relation  to  SDG 1  (no  poverty)  due  to 
social transfers. For SDG 3 (good health and well-
being)  Austria  performs  very  well  due  to  a  low 
level  of  unmet  health  care  needs.  In  relation  to 
SDG 4 (quality education) the overall performance 
is  better  than  the  EU  average  with  the  notable 
exception of the indicator on underachievement in 
reading.  Strong  industries  in  relation  to  water 
management  and  waste  treatment  lead  to  a  very 
good  performance  for  SDG 6  (clean  water  and 
sanitation).  Also  for  SDG 7  (affordable  and  clean 
energy  and  SDG 8  (decent  work  and  economic 
growth)  a  good  performance  can  be  noted.  In 
relation 
innovation  and 
infrastructure),  more  innovation  outcomes  would 
improve  the  performance  The  performance  for 
SDG 12 (responsible consumption and production) 
could  improve  through  a  more  circular  economy 
while  for  SDG 13  (climate  action)  the  slight 
increase  in  greenhouse  gas  emissions  lead  to  a 
below average result. 

to  SDG 9  (industry, 

11 

 
Table 1.1: 

Key economic and financial indicators - Austria 

1. Economic situation and outlook 

(1) NIIP excluding direct investment and portfolio equity shares. 
(2) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the 
section on taxation. 
(4) Defined as the income tax on gross wage earnings plus the employee's social security contributions less universal cash 
benefits, expressed as a percentage of gross wage earnings. 
Source: Eurostat and ECB as of 4-2-2020, where available; European Commission for forecast figures (Winter forecast 2020 for 
real GDP and HICP, Autumn forecast 2019 otherwise). 

12 

2004-072008-122013-1620172018201920202021Real GDP (y-o-y)3.00.60.92.52.41.61.31.3Potential growth (y-o-y)2.11.01.11.61.71.71.71.7Private consumption (y-o-y)1.90.90.61.41.1...Public consumption (y-o-y)2.11.21.11.10.9...Gross fixed capital formation (y-o-y)1.7-0.21.94.03.9...Exports of goods and services (y-o-y)7.61.22.45.05.9...Imports of goods and services (y-o-y) 6.21.32.75.04.6...Contribution to GDP growth:Domestic demand (y-o-y)1.90.70.91.91.7...Inventories (y-o-y)0.4-0.10.00.20.0...Net exports (y-o-y)0.90.0-0.10.20.9...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.30.00.40.70.70.60.60.5Capital accumulation (y-o-y)0.70.50.50.60.60.60.60.6Total factor productivity (y-o-y)1.20.50.20.30.40.40.50.6Output gap0.2-0.4-1.00.20.90.80.40.1Unemployment rate5.34.75.75.54.94.64.64.6GDP deflator (y-o-y)2.11.71.91.11.71.91.71.7Harmonised index of consumer prices (HICP, y-o-y)2.02.31.32.22.11.51.61.5Nominal compensation per employee (y-o-y)2.52.22.11.62.92.82.01.9Labour productivity (real, person employed, y-o-y)1.7-0.40.10.80.7...Unit labour costs (ULC, whole economy, y-o-y)0.92.52.00.82.22.31.31.1Real unit labour costs (y-o-y)-1.20.80.0-0.30.50.5-0.4-0.6Real effective exchange rate (ULC, y-o-y)0.00.00.90.31.2-1.3-1.1-0.8Real effective exchange rate (HICP, y-o-y)-0.3-0.70.81.12.1-0.9-0.5-0.3Net savings rate of households (net saving as percentage of net disposable income)11.210.07.27.37.7...Private credit flow, consolidated (% of GDP)5.92.21.83.63.9...Private sector debt, consolidated (% of GDP)124.1129.7124.8121.8121.0...of which household debt, consolidated (% of GDP)50.953.151.050.249.6...of which non-financial corporate debt, consolidated (% of GDP)73.276.673.871.671.4...Gross non-performing debt (% of total debt instruments and total loans and advances) (2).3.45.03.02.3...Corporations, net lending (+) or net borrowing (-) (% of GDP)0.01.91.60.3-0.1-0.5-0.3-0.2Corporations, gross operating surplus (% of GDP)26.925.324.124.524.524.324.524.6Households, net lending (+) or net borrowing (-) (% of GDP)5.24.02.32.02.22.22.12.0Deflated house price index (y-o-y)0.72.94.63.22.5...Residential investment (% of GDP)4.44.34.34.54.5...Current account balance (% of GDP), balance of payments2.92.62.21.62.32.12.02.1Trade balance (% of GDP), balance of payments3.83.23.43.23.6...Terms of trade of goods and services (y-o-y)-0.7-0.70.9-1.3-0.6-0.1-0.1-0.1Capital account balance (% of GDP)-0.1-0.1-0.2-0.1-0.1...Net international investment position (% of GDP)-12.8-5.12.72.83.7...NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)-9.8-11.3-10.9-4.4-5.0...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)175.9193.7170.9148.2142.2...Export performance vs. advanced countries (% change over 5 years)14.7-3.3-8.9-0.11.8...Export market share, goods and services (y-o-y)-0.5-4.80.9-0.93.01.0-0.8-1.2Net FDI flows (% of GDP)1.42.81.0-0.80.7...General government balance (% of GDP)-2.8-3.2-1.8-0.70.20.40.20.4Structural budget balance (% of GDP)..-0.7-0.9-0.30.00.00.3General government gross debt (% of GDP)66.579.183.378.374.069.967.264.6Tax-to-GDP ratio (%) (3)42.242.243.342.442.842.842.742.5Tax rate for a single person earning the average wage (%) (4)33.433.534.132.432.8...Tax rate for a single person earning 50% of the average wage (%) (4)20.921.122.821.421.7...forecast 
 
   
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

implementing 

Austria’s  progress 
the 
in 
recommendations addressed to it in 2019 (7) has 
to be seen in a longer-term perspective since the 
introduction of the European Semester in 2011. 
Of  all  the  Country  Specific  Recommendations 
(CSRs)  addressed  to  it  since  2011,  Austria  has 
made  at  least  ‘some  progress’  on  70%,  and 
‘limited’ or ‘no progress’ on 30% (see Graph 2.1). 
It  has  made  substantial  progress  in  consolidating 
public finances and stabilising the financial sector. 

Graph 2.1:  Overall multiannual implementation of 2011-

2019 CSRs to date 

* The overall assessment of the CSRs related to fiscal policy 
excludes compliance with the Stability and Growth Pact 
** 2011-2012 annual assessment: Different CSR assessment 
categories 
** The multiannual CSR assessment looks at implementation 
until the 2020 country report since the CSRs were first 
adopted. 
Source: European Commission 

As  regards  the  2019  CSRs,  Austria  has  made 
overall  limited (8)  progress. (9)  Limited  progress 
was  made  on  CSR1  on  the  sustainability  of  the 
pension,  health  and 
long-term  care  systems, 
together  with  the  alignment  of  financing  and 
spending responsibilities. Overall, limited progress 
was  also  made  on  CSR  2.  Some  progress  was 
made in shifting taxes away from labour to sources 
less  detrimental 
inclusive  and  sustainable 
growth,  for  supporting  full-time  employment  for 
women,  while  limited  progress  was  recorded  for 

to 

(7)  For the assessment of other past reforms, see in particular 

Section 3. 

(8)  Information  on  the  level  of  progress  and  action  taken  to 
address  the  policy  advice  in  each  subpart  of  a  CSR  is 
presented  in  the  overview  table  in  Annex  A.  This  overall 
assessment  does  not  include  an  assessment  of  compliance 
with the stability and growth pact. 

(9)  A caretaker government was in office in the second half of 
2019.  Following  snap  elections  in  September  2019  and 
coalition  talks,  a  new  govenrment  was  sworn  in  at  the 
beginning  of  2020.  The  analysis  takes  account  of  the  new 
government programme, where appropriate. 

in 

research 

improving 
the  educational  achievements  of 
disadvantaged  young  people.  No  progress  was 
made in improving labour market outcomes for the 
low-skilled. Some progress was made on CSR 3 on 
investments 
and  development, 
innovation  and  digitalisation,  and  supporting 
productivity  growth  by  stimulating  businesses’ 
digitalisation  and  company  growth  and  reducing 
regulatory  barriers  in  the  service  sector.  Limited 
growth  was  recorded  as  regards  investments  in 
sustainability  and  reducing  regulatory  barriers  in 
the service sector. 

Austria  has  taken  positive  steps  to  increase 
efficiency  in  the  health  care  sector,  but  the 
savings  potential  is  still  unclear.  Important 
reform  measures  to  address  the  CSR  (e.g.  the 
introduction of a  'target-based governance'  system 
and  the  2017  Primary  Health  care  Act  have  been 
adopted  in  recent  years  and  are  currently  being 
implemented.  The  reform  to  merge  the  21  social 
health  insurance  funds  to  5  is  also  expected  to 
improve  efficiency.  There 
is  progress,  but 
implementation  is  not  fully  on  track  for  every 
reform  and  the  savings  potential  of  each  of  the 
reforms  is  still  unclear.  The  overutilization  of 
hospital  and  pharmaceutical  care,  the  overlap  of 
competencies in the health care sector, and the role 
of prevention remain to be addressed. 

fails 

Since  2014,  action  has  been  taken  to  increase 
the  effective  retirement  age,  but  recent 
measures  go  partly  in  the  opposite  direction. 
The  2020 Pension  Adjustment  Act  adopted  in  the 
run-up  to  the  snap  elections  at  the  end  of 
to  address 
September  2019  not  only 
includes 
sustainability  challenges,  but  also 
measures  that  undermine  previous  reform  efforts. 
While a targeted increase of low pension incomes 
may  be  justified  by  the  objective  of  pension 
adequacy,  the  undiscounted  pension  after  45 
contribution  years  thwarts  previous  efforts  to 
increase  the  effective  pensionable  age  and  raises 
fairness  issues.  The  measure  is  conflicting  with 
recently observed labour market shortages. 

the 

improve 

Austria  has  continued  to  implement  initiatives 
to 
framework,  but 
fiscal 
subnational  tax  autonomy  is  still  inadequate. 
The  2017  Intergovernmental  Fiscal  Relations  Act 
helped  to  simplify  financial  relations  between  the 
various  layers  of  government,  but  it  cannot  be 

13 

No Progress7%Limited Progress23%Some Progress61%Substantial Progress7%Full Implementation2% 
 
  
                                                           
 
2. Progress with country-specific recommendations 

through administrative simplification measures and 
e-government  solutions.  It  has  also  reviewed  the 
regulation of trades and opened the stock market to 
listings of SMEs, although venture capital remains 
an  issue.  It  has  not  yet  addressed  the  restrictions 
for  key  professions 
the 
Commission),  nor  carried  out  a  wider  review  of 
service sector regulation. 

identified  by 

(as 

Digitalisation  has  been  a  political  priority  for 
some  time,  but  a  more  ambitious  approach 
seems  warranted.  The  caretaker  government 
continued  to  implement  useful  initiatives  in  all 
areas of digitalisation, without providing the major 
political  impetus  expected  in  2019  (previously 
announced  as  year  of  digitalisation).  Overall 
coherence  and  thus  the  impact  of  digitalisation 
policy  efforts  would  have  benefited  in  particular 
from  the  adoption  of  specific,  measurable  targets. 
Gaps also remain in digital infrastructure. 

and 

investments 

There is scope for increasing investments in the 
environmental 
ecological 
transition 
sustainability.  Public 
the 
from 
climate and energy fund fell in 2018, compared to 
the previous year. However, private investments in 
the  ecological  transition  have  increased,  due  to 
investors’ growing interest in sustainable financing 
and a wider range of green finance opportunities.  

considered  a  major  step  towards  greater  tax 
autonomy  or  a  more  transparent  assignment  of 
competence.  The  plan  to  introduce  task-oriented 
allocation  of  shared  taxes  to  municipalities  in  the 
fields  of  elementary  education  and  compulsory 
schools  was  suspended  having  failed  to  produce 
results.  The  first  spending  reviews  to  assess  the 
effectiveness  and  efficiency  of  subnational  public 
spending in the areas of health care in schools and 
municipal  water  management  are  expected  to  be 
finalised  in  early  2020.  A  benchmarking  model 
was established for comparative assessment of the 
subnational 
efficiency  and  effectiveness  of 
spending  and  is  being  extended  to  other  policy 
areas. 

Several  measures  have  helped  to  reduce  the 
labour  tax  wedge.  The  tax  burden  has  been 
reduced  for  low-income  earners,  families  with 
working  parents  and  employers.  However,  the 
overall tax structure remains  unchanged and there 
is  still  scope  for  shifting  the  tax  burden  to  more 
growth-friendly 
revenue.  A 
future-oriented  strategy  to  support  environmental 
sustainability,  fairness  and  inclusiveness  would 
require  a  more  thorough  reform  of  the  tax  mix. 
Several  measures  go  in  this  direction,  but  more 
needs to be done to secure efficiency gains.  

sources 

of 

Austria  has  partly  improved  labour  market 
outcomes  for  women.  While  more  women  are  in 
work  than  in  2011,  most  of  the  increase  has  been 
in  part-time  employment.  Increased  support  for 
childcare 
facilities  and  all-day  schools  has 
improved  opportunities  for  parents  of  young 
children, but coverage varies between Länder.  

Austria has taken only limited steps to improve 
basic skills for disadvantaged young people and 
people  with  migrant  backgrounds.  While  older 
measures  to  strengthen  early  childhood  education 
and  care  could  have  long-term  positive  effects  on 
educational  outcomes,  the  direction  of  reform 
measures in general education is less promising; in 
fact,  they  undermine  previous  efforts.  However, 
the  new  (January  2020)  government  programme 
contains a range of promising measures.  

At  Member  States’  request, 
the  Commission 
provides  tailor-made  expertise  via  the  structural 
reform  support  programme  to  help  design  and 
implement growth-enhancing reforms. Since 2018, 
it has supported 11 projects in Austria. In 2019, it 
helped  the  authorities  inter  alia  to  strengthen 
primary  health  care.  In  addition,  work  started  on 
designing  and  implementing  a  comprehensive 
education  monitoring system, building capacity in 
the  Austrian  Digitalisation  Agency  and  reducing 
administrative burden. 

and 

efforts 

to 
productivity 

stimulate 
Austria  has  made 
through 
investment 
simplification and support for company growth, 
but  the  service  sector  is  still  highly  regulated. 
Austria  has  reduced  regulatory  compliance  costs 

14 

 
 
2. Progress with country-specific recommendations 

Table 2.1: 

Summary table on 2019 CSR assessment 

(1) This overall assessment of CSR1 does not include an assessment of compliance with the Stability and Growth Pact. 
(2) The assessment of CSR3 does not take into account the contribution of the EU 2021-2027 cohesion policy funds. The 
regulatory framework underpinning the programming of the 2021-2027 EU cohesion policy funds has not yet been adopted 
by the co-legislators pending inter alia an agreement on the multiannual financial framework (MFF). 

Source: European Commission 

15 

Austria Overall assessment of progress with 2019 CSRs:  Some progress* CSR 1:  Ensure the sustainability of the health, long-term care, and pension systems, including by adjusting the statutory retirement age in view of expected gains in life expectancy. Simplify and rationalise fiscal relations and responsibilities across layers of government and align financing and spending responsibilities. Limited progress  Some progress in ensuring sustainability of the health care system  Limited progess in ensuring sustainability of the long-term care system  Limited progress in ensuring sustainability of the pension system   Limited progress in simplifying fiscal relations  CSR 2:  Shift taxes away from labour to sources less detrimental to inclusive and sustainable growth. Support full-time employment among women, including by improving childcare services, and boost labour market outcomes for the low-skilled in continued cooperation with the social partners. Raise the levels of basic skills for disadvantaged groups, including people with a migrant background. Limited progress  Some progress in shifting taxes away from labour to sources less detrimental to inclusive and sustainable growth  Some progress in supporting full-time employment of women  No progress in improving labour market outcomes for the low-skilled  Limited progress in raising the levels of basic skills for disadvantaged groups CSR 3:  Focus investment-related economic policy on research and development, innovation, digitalisation, and sustainability, taking into account regional disparities. Support productivity growth by stimulating digitalisation of businesses and company growth and by reducing regulatory barriers in the service sector. Some progress  Some progress in investments in research and development and innovation  Some progress in investments in digitalisation  Limited progress in investments in sustainability  Some progress in supporting productivity growth  Limited progress in reducing regulatory barriers in the service sector   
 
 
   
 
 
 
2. Progress with country-specific recommendations 

Box 2.1: EU funds and programmes to address structural challenges and to foster growth 
and competitiveness in Austria 

Austria  is  benefiting  from  EU  support.  The  financial  allocation  from  the  EU  cohesion  policy 
funds (1)  for  Austria,  including  national  co-financing,  amounts  to  €2.95  billion  in  the  current 
multiannual financial framework, equivalent to around 0.1% of GDP annually. By the end of 2019, 
some  €2.6 billion (around 88% of the total)  were allocated to specific projects and €906 million 
were  reported  as  having  been  spent  by  selected  projects (2),  showing  a  below  average  level  of 
implementation. 

EU cohesion policy funding has brought many social and economic benefits. Funding from the 
European  Regional  Development  Fund  (ERDF)  has  enhanced  research  and  innovation  (R&I) 
infrastructure, promoted business investment in  R&I and developed links and synergies between 
firms,  R&D  centres  and  the  higher  education  sector.  Funds  have  also  improved  SMEs’  regional 
competitiveness  of  SMEs;  ERDF  support  to  firms  selected  for  support  by  the  end  of  2018  will 
trigger  €918  million  of  private  investment,  and  is  expected  to  boost  employment  by  over  1,800 
full-time  equivalents.  ERDF  funds  contributed  to  the  reduction  of  greenhouse  gas  emissions  by 
38,400 t CO2 eq with projects implemented by end 2018. The European Social Fund (ESF) helps 
to prevent and combat unemployment by extending the range of training on offer and improving 
the  functioning  of  the  labour  market.  So  far,  this  has  helped  22,996  people  who  had  been  long-
term  unemployed.  The  ESF  has  also  promoted  the  social  integration  of  disadvantaged  people 
(34,225), people with a migrant background (90,734), young people/NEETs (20,929) and people 
with a disability (3,761). By the end of 2018, 167,123 had benefited from ESF-funded operations. 

Agricultural  and  fisheries  funds  and  other  EU  programmes  also  help  to  address  Austria’s 
investment  needs.  In  particular,  the  European  Agricultural  Fund  for  Rural  Development 
(EAFRD)  provides  significant  support  to  Austria’s  agricultural  sector,  amounting  to  €7.7 billion 
including  national  co-financing (3).  Other  EU  programmes,  such  as  the  Connecting  Europe 
Facility,  allocated  €894  million  to  specific  projects  that  support  the  highly  frequented  Austrian 
transportation  network.  Horizon  2020,  the  EU’s  framework  R&I  programme,  allocated  EU 
funding of €1.3 billion in Austria (including €263 million for more than 400 SMEs).  

EU funding helps to mobilise private investment. By the end of 2018, European Structural and 
Investment  Funds  (ESIF) (4)  supported  programmes  mobilised  additional  capital  by  committing 
about  €9  million  in  the  form  of  loans,  guarantees  and  equity (5),  which  is  expected  to  leverage 
additional private investment. 

EU funds already invest in action to meet the UN Sustainable Development Goals (SDGs). In 
Austria,  up  to  97%  of  allocations  under  the  ESI  funds  for  2014-2020  support  12  out  of  the  17 
SDGs.  

(1)  European Regional Development Fund (ERDF) and European Social Fund (ESF), including national co-financing.  
(2)  https://cohesiondata.ec.europa.eu/countries/AT 
(3)  The  European  Maritime  and  Fisheries  Fund  (EMFF)  contributes  additional  €13.9  million,  including  national  co-

financing. 

(4)  ERDF, Cohesion Fund, ESF, ESFRD and EMFF. 
(5)  Member  States’  reporting  on  financial  instruments  based  on  Article  46  of  Regulation  (EU)  No  1303/2013,  cut-off 

date 31 December 2018. 

16 

 
 
3.1. Public finances and taxation 

3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

3.1.1.  FISCAL FRAMEWORK 

is 

intergovernmental 

Austria’s  fiscal  federalism  continues  to  be 
characterised  by  a  significant  mismatch  of 
financing  and  spending  responsibilities  at 
subnational  level.  The  opaque  system  of  tax 
sharing, 
transfers  and  cost 
bearing  provides  weak  incentives  for  political 
the 
accountability  and  cost  containment  at 
subnational level as the link between tax revenues 
and  public  expenditure 
largely  blurred 
(European Commission, 2019a; Matzinger, 2015a, 
b). In 2018, subnational governments (Länder and 
local  governments)  raised  about  9.0%  of  total  tax 
revenues (2.4% of GDP), but were responsible for 
roughly 34.5% of total public expenditures (18.7% 
of GDP). As a step towards greater subnational tax 
the  housing  subsidy  contribution 
autonomy, 
became  an  exclusive  state  government  tax  as  of 
2018, leading to a tripling of the own tax revenues 
of the Länder (BMF, 2018). However, the Länder 
have  yet  to  use  their  new  leeway  to  increase  the 
relevant  tax  rates  and  have  not  yet  agreed  a 
common position on how to implement greater tax 
autonomy in practice. 

Implementation of several initiatives introduced 
by  the  Intergovernmental  Fiscal  Relations  Act 
paints a mixed picture. (10) While measures have 
been  taken  to  simplify  the  allocation  of  funds  in 
the  fiscal  equalisation,  measures  to  improve  the 
efficiency  of  public  spending  have  been  less 
successful.  The  plan  to  introduce  a  task-oriented 
allocation  of  shared  taxes  to  municipalities  in  the 
fields  of  elementary  education  and  compulsory 
schools  was  suspended  having  failed  to  produce 
results.  Instead,  the  federal  authorities  agreed  to 
provide  earmarked  grants  in  the  relevant  areas,  in 
line  with  previous  practices.  Spending  reviews  to 
assess 
the  effectiveness  and  efficiency  of 
subnational  public  spending  in  the  areas  of  health 
care  in  schools  and  municipal  water  management 
are  expected  to  be  finalised  in  early  2020.  A 
spending  review  concerning  general  compulsory 
in  August  2018.  A 
schools  was 
finalized 
for  a 
benchmarking  model  was  established 

(10)  The latest Intergovernmental Fiscal Relations Act is for the 
period  2017-2021.  Negotiations  on  the  2022  version  are 
expected to start in the course 2020.  

to  monitor 

comparative  assessment  of  the  efficiency  and 
effectiveness of subnational spending and is being 
extended  to  other  policy  areas.  Efficiency  gains 
and  potential  savings  exist  also  in  the  system  of 
public  subsidies  (Grossmann,  2018).  In  2010,  a 
transparency  database  was  set  up  to  report  on 
individual  applications  and 
the 
appropriate  use  of  granted  subsidies.  However, 
recent  studies  (ibid.)  and  the  Austrian  Court  of 
Audit (2017) criticise the design of the database as 
suffering 
from  conceptual  and  accessibility 
problems  and  incomplete  coverage  of  subsidised 
areas.  The  2019  amendment  of  the  law  on  the 
database aims to address these issues and improves 
inter  alia,  query  rights  for  stakeholders  (e.g. 
funding  agencies).  The  new  government  has 
declared its intention to look into the possibility of 
fiscal sanctions for Länder that fail to submit input 
for the database. 

Increasing  subnational  tax  autonomy  remains 
on  the  political  agenda.  Linking  discussions  on 
subnational  tax  autonomy  to  findings  on  how  to 
make  the  tax  system  more  efficient  could  provide 
new  insights  for  comprehensive  reform  strategies. 
Several  studies  analyse  potential  revenue  and 
tax 
efficiency  effects  of  greater  subnational 
autonomy,  which 
new 
government’s agenda (Pitlik et al., 2015; Bröthaler 
et  al.,  2011).  According  to  the  new  government’s 
programme,  the  new  Intergovernmental  Fiscal 
Relations  Act  will  focus  on  the  alignment  of 
financing  and  spending  responsibilities  and  more 
transparent  distribution  of  competence  across 
layers  of  government.  It  will  establish  that  the 
achievement  of  climate  goals  is  a  common  task 
and a precondition for granting transfers. 

remains 

the 

on 

3.1.2.  TAXATION 

There  is  considerable  scope  for  comprehensive 
tax  reform  to  foster  fairness,  inclusive  growth 
and  environmental  sustainability.  Despite  a 
series  of  tax  relief  reforms  (in  2005,  2010  and 
2015),  Austria  remains  a  high-tax  country  with  a 
tax-to-GDP  ratio  that  constantly  exceeds  the  EU 

17 

 
                                                           
for  allocative  efficiency 

average  (AT:  41.8%,  EU:  39.0%  in  2017).  (11) 
However, rather than the absolute level of taxation, 
what  matters 
(and 
ultimately  economic  growth)  is  the  design  of  the 
tax system, i.e. the relative and effective burden on 
different  tax  bases.  Empirical  studies  suggest  that 
taxes on immovable property and consumption are 
less harmful to long-term growth than personal and 
corporate  income  taxes  and  social  contributions 
(Arnold,  2008;  Arnold  et  al.,  2011;  Acosta-
Ormaechea  and  Yoo,  2012).  Against 
this 
background,  Austria’s  tax  mix  appears  to  be 
relatively  detrimental  to  growth  in  international 
terms  (Köppl  and  Schratzenstaller,  2015a),  which 
is  also  reflected  in  SDG 17.  The  share  of  labour 
taxes  in  total  tax  revenue  is  among  the  highest  in 
the EU; this is also mirrored by a high implicit tax 
rate  (ITR)  on  labour  (Graph  3.1.1).  (12)  On  the 
other  hand,  revenue  from  taxes  on  consumption 
and capital are below the EU average. The ITR on 
consumption is slightly above the EU average, and 
that  on  capital  slightly  below.  Also  revenue  from 
several  specific  taxes  is  low  in  comparison  to  EU 
averages, e.g. taxes on alcohol and tobacco, energy 
and  pollution,  property  taxes  and  taxes  on  the 
capital stock.  

Austria’s  high 
labour  tax  burden  creates 
significant disincentives for labour demand and 
supply.  Austria’s  tax  wedge  on  labour  (a  rough 
indicator  for  incentives  to  work  and  to  recruit 
people)  exceeds  the  EU  average,  in  particular  for 
low and  medium income levels (Graph 3.1.2). (13) 
For  example,  the  overall  tax  wedge  for  a  single 
person on an average wage is 47.6%, as compared 
to  an  EU  average  of  42.9%. (14)  Social  security 
contributions 
the  biggest 
component  of  the  tax  wedge,  especially  at  lower 
income  levels  (AT:  90.5%  vs  EU-23:  80.7%  for 

represent  by 

far 

(11)  According  to  the  Commission  2019  autumn  forecast,  the 
overall  tax  burden  is  set  to  increase  further  to  42.0%  of 
GDP by 2021. 

(12)  The ITR is computed as the ratio of revenue from a specific 
tax  to  its  corresponding  base.  It  is  an  indicator  for  the 
average effective tax burden. 

(13)  The tax wedge on labour is defined as the sum of personal 
income  taxes  and  employee  and  employer  social  security 
contributions net of family allowances divided by the total 
labour  cost 
social 
contributions).  It  is  calculated  for  specific  types  of  tax 
payers in terms of household composition and income level 
expressed  as  percentage  of  average  wage.  Data  are  taken 
from the OECD taxing wages database.  

(gross  wages  plus  employer’s 

(14)  Data  are  taken  from  the  European  Commission  tax  and 

benefit database, which relies on OECD data. 

3.1. Public finances and taxation 

those  on  50%  of  average  earnings).  The  upper 
contribution  limit  for  social  contributions  leads  to 
a lower share in the tax wedge for those on 150% 
of  average  earnings  (approx.  €71,810  in  2018). 
Graph  3.1.2  also  reveals  a  comparatively  high 
burden  on  Austrian  employers  in  terms  of  non-
wage labour costs. 

Graph 3.1.1:  Austria's tax mix (2018) and ITRs (2017) in EU 

comparison 

(1) The ITR on consumption excludes Croatia and the ITR on 
capital and corporate income excludes Croatia and Malta 
for reasons of data availability. All averages are GDP-
weighted. 
Source: European Commission  

Low-income  earners,  in  particular,  face  high 
disincentives to work longer hours. The effective 
marginal  tax  rate  (EMTR)  shows  the  share  of  an 
additional  euro  of  income  that  is  ‘taxed  away’,  in 
the sense that taxes and social contributions accrue 
and cash social benefits are withdrawn. Therefore, 
it provides an insight into the financial disincentive 
to  work  longer  hours. Graph  3.1.2  shows  the 
EMTR for a hypothetical single-person household 
and  eligible  for  the  minimum  income  benefit 
(Mindestsicherung).  (15)  Graph  3.1.2  shows  that, 
for  every  euro  of  this  person’s  gross  monthly 
earnings  up 
is 
withdrawn  from  the  minimum  income  benefit, 
leading to an EMTR of 100%. Earnings up to this 
amount  do  not  affect  the  person’s  disposable 
income. 

the  same  amount 

to  €970, 

(15)  EUROMOD  simulates  Vienna’s  minimum  income  benefit 
provisions (EUROMOD Country Report Austria, p. 36) 

18 

010203040506070% of total taxesMin to max EUAverage EUATSpecifictaxesMain taxcategoriesImplicit tax rates (%)ConsumptionLabourCapitalCorporate incomeEU-Average20.736.331.419.8AT22.241.327.917.2 
                                                           
   
                                                           
3.1. Public finances and taxation 

Graph 3.1.2:  Marginal effective tax rate of a single household without children 

(1) The graph shows the EMTR for a single-person household. The baseline scenario (blue line) uses tax-benefit rules in place in 
2019. The reform scenario (red line) includes the increase of the negative tax and the traffic tax credit introduced by the 2020 
Tax Reform Act.   
Source: European Commission, based on the EUROMOD model. 

Graph 3.1.3:  Composition of Austria’s labour tax wedge in 

EU comparison in 2018 

(1) EU-23 excludes Cyprus, Croatia, Malta, Bulgaria and 
Romania for reasons of data availability. 
(2) Average income tax includes central and local income 
taxes as well as family benefits. 
(3) Social security contributions do not include contributions 
to private pension funds. 
Source: OECD taxing wages database 

For  monthly  earnings  exceeding 
the  minor 
employment threshold (Geringfügigkeitsgrenze) of 
€530,  social  contributions  payable  by  employees 
and  employers  kick  in,  well  before  the  benefit 
withdrawal comes to an end.  Benefits are  entirely 
withdrawn  at  €970  per  month  but  payments  for 

social  contributions  mean  that  the  EMTR  stays  at 
roughly 15%. Despite the traffic tax credit and the 
negative  tax,  the  marginal  effective  rate  jumps 
from 15% to over 30% for monthly gross earnings 
of €1,240-1,280. (16) The increase of the traffic tax 
credit  and  the  negative  tax  under  the  reform 
change  the  EMTR  only  slightly.  For  monthly 
the  effective 
earnings  between  €960-1,000, 
marginal  burden  decreases  under  2020  policy 
rules,  while  it  actually  increases  for  monthly 
earnings  of  €1,090-1,600.  For  gross  earnings 
above  €1,610,  the  two  lines  roughly  coincide 
again.  

Since 2018, several measures have been taken to 
reduce  the  tax  burden  on  low-income  earners, 
families  and  employers.  The  overall  budgetary 
impact  of  these  measures  (see  Table  3.1.1)  is 
roughly estimated at 0.5% of GDP. (17) While the 
measures  implemented  in  2018  mainly  aimed  to 
relieve  families  with  at  least  one  working  spouse, 
the  2020 Tax  Reform  Act  focuses  on  low-income 
earners. 

(16)  The  negative  tax  foresees  a  reimbursement  of  social 

contributions of 50% or at most €400 per year. 

(17)  A  detailed  description  of  the  individual  measures  is 
provided  by  the  Austrian  Parliamentary  Budget  Office 
(2018, 2019a). 

19 

020406050%67%80%100%133%150%167%200%250%in % of total      labour costsearnings in % of average wageAT - average income taxAT - employer social security contributionAT - employee social security contributionEU-23 average tax wedge (sum of the components)EU-23 employer social security contributionEU-23 employee social security contribution020406080100120Marginal effectivetax rate (%)Monthly employment income (gross) 2019 (PIT+SIC+Benefits)2020 (PIT+SIC+Benefits) 
  
                                                           
    
3.1. Public finances and taxation 

Table 3.1.1:  Measures to reduce the tax wedge on labour 

tax  rate  shall  be  reduced,  tax  provisions  for 
farmers shall be simplified and the capital income 
tax  shall  promote  green  or  ethical  investments.  In 
addition,  the  government  intends  to  inquire  ways 
to  tackle  the  cold  progression,  i.e.  the  additional 
tax burden that arises over time when the tax tariff 
is not adjusted for inflation. 

Source: Compilation by European Commission 

Graph 3.1.4:  Income relief provided by 2020 Tax Reform Act 
and 2020 Pension Adjustment Act 

The 2020 Tax Reform Act and the 2020 Pension 
Adjustment Act increase the disposable income, 
especially  at  the  lower  end  of  the  income 
distribution.  Their  distributional  effects  have 
recently been assessed in a  microsimulation study 
by  the  Austrian  Parliamentary  Budget  Office 
(2019a). Graph 3.1.4. shows the  estimated change 
in  annual  disposable 
income  for  employees, 
pensioners,  the  self-employed  and  farmers.  While 
the income relief  for employees and pensioners is 
characterised  by  a  phase-in,  phase-out,  and  a 
plateau region providing maximum relief, the gain 
in  disposable  income  for  the  self-employed  and 
farmers  increases  in  a  linear  fashion  due  to  an 
across-the-board  reduction  of  health  insurance 
contributions. (18) 

There  remains  scope  for  a  future-oriented 
reform  strategy  in  the  area  of  labour  taxation. 
Despite  individual  reform  measures,  the  effective 
marginal burden on employees at the lower end of 
the income distribution remains very high, mainly 
due to social security contributions and a relatively 
high  initial  marginal  tax  rate.  Lower  initial  tax 
rates and an expansion of measures that incentivise 
labour supply could be achieved by broadening the 
tax base. This could involve an overhaul of current 
tax expenditures, e.g. the preferential tax treatment 
of  other  earnings  and  the  commuter  subsidy. 
(Köppl and Schratzenstaller, 2015a,b; Bittschi and 
Kocher,  2018).  The  new  government  programme 
announces to further relief pensioners, employees, 
the  self-employed  and  farmers  with  low  and 
medium  incomes.  Specifically,  the  initial  rates  of 
the personal income tax and the corporate income 

(18)  For  employees,  the  increase  of  the  negative  tax  and  the 
traffic  tax  credit  result  in  up  to  €300  more  disposable 
income  for  annual  earnings  above  the  minor  employment 
threshold.  The  relief  phases  out  for  disposable  incomes 
above  €22,600.  For  farmers  and  the  self-employed,  the 
maximum  relief  is  reached  at  the  upper  health  insurance 
contribution limit..  

(1) The baseline scenario consists of the tax-benefit rules in 
place in 2019. The reform scenario includes all measures 
under the 2020 Tax Reform Act and the 2020 Pension 
Adjustment Act. 
Source: Austrian Parliamentary Budget Office, based on the 
EUROMOD model. 

Austria’s  revenue  from  consumption  taxes  is 
only slightly below the EU average, but there is 
room  for  efficiency  improvements.  Austria’s 
consumption  taxes  account  for  27.6%  of  total  tax 
revenues, slightly below the EU average of 28.3% 
(Graph 3.1.5). Value-added taxes (VAT)  make  up 
the  biggest  share  of  consumption  taxes  and  are 
levied  at  a  standard  rate  of  20%  and  two  reduced 
rates of 13% and 10%. VAT accounts for 18.3% of 
total taxes, close to the EU average of 18.1%. The 
VAT  gap  (an  indicator  for  the  effectiveness  of 
VAT  enforcement  and  compliance)  stood  at  7.9% 
in  2017,  well  below 
the  EU-wide  gap  of 
11.2%. (19)  While  the  effectiveness  of  reduced 
rates  as  a  distributional  tool  is  questionable 
(OECD, 2014; Köppl and Schratzenstaller, 2015b; 
Bittschi  and  Kocher,  2018),  recent  empirical 

(19)  The  VAT  gap  is  the  difference  between  expected  VAT 
revenues  and  actually  collected  VAT  as  a  percentage  of 
VAT  Total  Tax  Liability.  The  smaller  the  gap,  the  more 
effective  the  VAT  enforcement.  Data  are  taken  from  the 
VAT gap report 2019 (CASE, 2019). 

20 

Government programme Kurz I, first half-year 2018Family bonus  Abolishment of deductibility of child care cost and of child allowance under PITReduction of contributions to unemployment insurance for lower income earnersReduction of employer's contribution to accident insuranceTax Reform Act 2020Increase of the pensioner's tax creditIncrease of the negative tax for pensionersIncrease of the negative tax for employeesIncrease of traffic tax credit for employeesDecrease of health contributions for self-employed and farmers-1000100200300400500010,00020,00030,00040,00050,000Change in annual disposable income in €/year Annual disposable income in baseline scenario (in €)EmployeesSelf-employed and farmersPensioners (overall effect including pension adjustment)Pensioners (pensioners' tax credit and negative tax) 
 
  
 
                                                           
 
  
                                                           
3.1. Public finances and taxation 

evidence supports the view that broadening the tax 
base is more supportive of growth than raising the 
standard  rate  (Acosta-Ormaechea  and  Morozumi 
re-
2019).  Against 
introduction in 2018 of the 10% rate on overnight 
stays  is  questionable,  while  the  removal  of  the 
VAT  exemption  for  imports  from  third  countries 
below a value €22 goes in the right direction. 

this  background, 

the 

steering 

Austria  appears  to  make  insufficient  use  of 
taxes on tobacco and alcohol and environmental 
taxes. Taxes on alcohol and tobacco accounted for 
1.5% of total tax revenue in 2017, as compared to 
an  EU  average  of  2.0%.  This  points  to  unused 
effects. (20) 
revenue  potential 
and 
Similarly, Austria is among the countries  with the 
lowest  revenues  from  environmental  taxes  (5.7% 
of  the  total  revenues,  as  compared  to  an  EU 
average  of  6.1%). (21)  Graph  3.1.5  shows  that  its 
mix of environmental taxes, in percentage of total 
tax  collection,  follows  the  EU  average  very 
closely, with energy taxes having the largest share, 
followed  by  transport  taxes.  In  contrast,  taxes  on 
pollution and resource use appear underutilised.  

Increasing  the  level  and  efficiency  of  energy 
taxes is key to reducing emissions. According to 
the  Austrian  Environment  Agency  37%  of 
Austria’s  greenhouse  gas  (GHG)  emissions  were 
covered by the European emissions trading system 
(ETS) in 2017. Private households produced about 
18%  of  total  CO2  emissions  through  heating  and 
transport  (Austrian  Parliamentary  Budget  Office, 
2019b).  Non-ETS  areas  are  subject  to  national 
taxes  and  excises,  which  differ  substantially 
between energy products (e.g. diesel vs petrol) and 
usage 
(heating  vs  propellant).  Furthermore, 
national taxes and excises do not generally reflect 
the  carbon  content  of  specific  energy  sources 
(Kettner-Marx  and  Kletzan-Slamanig,  2018).  As 
regards  the  taxation  of  fuel  (as  a  major  source  of 
GHG  emissions),  Austria  has  the  third  lowest  tax 

(20)  While the tax on tobacco is increased as of 2020, the new 
government  programme  announces  to  abolish  the  tax  on 
sparkling wine and to re-design the tobacco tax.  

(21)  Regulation (EU) No 691/2011 on European environmental 
economic accounts defines an ‘environmental’ tax as a tax 
(i.e. defined  as  such  in  the  European  system  of  accounts 
(ESA  2010))  of  which  the  base  is  a  physical  unit  (or  a 
proxy  of  it)  of  something  that  has  a  proven,  specific 
negative  impact  on  the  environment.  European  statistics 
distinguish  four  categories  of  environmental  tax:  those 
relating to energy, transport, pollution and resources. 

taxes 

rates  on  petrol  and  diesel  in  the  EU  in  terms  of 
purchasing  power  parity 
(Kettner-Marx  and 
Kletzan-Slamanig,  2018).  Moreover,  circulation 
taxes on buses, coaches and heavy-duty trucks are 
relatively  low  and  electric  buses  are  subject  to 
higher 
than  old,  fuel-inefficient  buses. 
Overall,  the  uneven  and  generally  low  levels  of 
energy  taxation  undermine  its  efficiency  and 
effectiveness  as  a  policy 
incentivise 
environmentally  beneficial  consumption.  Rather, 
low  fuel  taxes  attract  consumers  from  outside 
and 
Austria 
and 
Schratzenstaller, 
Kletzan-Slamanig, 2018). (22) 

2015b,  Kettner-Marx 

(Tanktourismus) 

(Köppl 

tool 

to 

technology. 

Consistent  taxation  of  CO2  emissions  would 
increase the competitiveness of climate-friendly 
energy  sources,  in  addition  to  providing  fiscal 
space  to  reduce  more  distortive  taxes.  Higher, 
CO2-related energy taxes would help to internalise 
the social costs of pollution, lead consumers to rely 
more  on  renewable  energy  sources  (SDG 12)  and 
encourage  investors  to  seek  for  innovation  in 
climate-friendly 
Furthermore, 
additional revenues from higher energy taxes could 
be  used  to  finance  tax  cuts  in  other  areas  (e.g. 
labour)  or  to  fund  environmentally  beneficial 
R&D.  Thus,  the  introduction  of  a  CO2  tax  could 
have  a  ‘double  dividend’  in  terms  of  reduced 
emissions  and  positive  growth  effects,  recently 
shown  in  a  simulation  study  by  the  Austrian 
Institute of Economic Research (Kettner-Marx and 
Kletzan-Slamanig,  2018;  Kettner-Marx  et  al., 
2018). Using a dynamic new Keynesian model, the 
study  assesses 
the  short-term  environmental, 
macroeconomic  and  distributional  effects  of 
various  CO2  tax  scenarios  and  compensation 
mechanisms.  The  results  suggest  that  significant 
reductions  in  CO2  emissions  can  be  achieved 
together  with  positive  (albeit  small)  effects  on 
GDP and employment, if the additional revenue is 
used  to  finance  a  reduction  in  employers’  social 
contributions  or  VAT.  However,  as  consumption 
taxes  are  known  to  be  regressive,  an  in-depth 
analysis  of  the  distributional  impact  of  increased 
energy  taxes  including  an  assessment  of  different 
compensatory measures, seems warranted, with an 
eye  to  political  feasibility  and  a  ‘beyond  GDP’ 
debate.  Against 
this  background,  Box  3.1.1 
investigates the distributional and equity effects of 

(22)  The  new  government  programme  announces  measures  to 
prevent ‘fuel tourism’ and to reduce freight transport.  

21 

 
                                                           
 
                                                           
3.1. Public finances and taxation 

Graph 3.1.5:  Austria’s consumption tax mix in EU comparison (2018) 

Source: European Commission, Taxation trends (GDP-weighted EU average). National tax list. 

introducing a  CO2 tax on energy consumed in the 
private  household  sector,  considering  various 
to  mitigate  undesired 
compensatory  measures 
regressive effects. (23) 

Recent  measures  aim  to  incentivise  climate-
friendly  consumption,  but  more  needs  to  be 
done  to  counteract  climate  change.  Recently 
adopted  measures  include  a  redesign  of  the  car 
registration tax including a CO2 component,  VAT 
reductions  for  e-bikes  and  e-publications  and 
abolition  of  the  electricity  tax  for  self-produced 
electricity 
(from  photovoltaics).  The  overall 
budgetary  cost  related  to  the  hitherto  greening  of 
the tax  system is estimated at €55 million (0.01% 
of  GDP).  While  the  new  measures  go  in  the  right 
direction,  more  needs  to  be  done  to  achieve 
effective  climate  protection.  The  new  government 
programme announces an eco-social tax reform to 
counteract  climate  change  while 
into 
account  competitiveness  aspects.  In  a  first  stage, 
the  flight  tax  is  to  be  increased  (for  short  and 
middle  distance  flights)  and  the  duty  on  vehicles 
based on fuel consumption and the truck toll are to 
be re-designed, among others. (24) In a second step, 
CO2 emissions shall be priced.  

taking 

(23)  See the  Austrian Parliamentary Budget Office (2019b) for 
a comprehensive assessment of the distributional impact of 
introducing a CO2 tax.  

(24)  The flight tax was halved in 2018. 

Greater  use  of  wealth-related  taxes  could  help 
to improve the fairness and efficiency of the tax 
system. The tax-benefit system effectively reduces 
income  inequality  (see  Section  3.3.)  but  wealth 
inequality remains among the highest in the EU, as 
confirmed  by  the  third  wave  of  the  ECB’s 
Household  Finance  and  Consumption  Survey 
(Fessler,  Lindner  and  Schürz,  2019).  The 
wealthiest 10% of the population own about 56.4% 
of  total  net  wealth,  while  the  bottom  50%  own 
3.4%.  One  main  reason  for  this  is  that  housing 
wealth,  a  key  component  of  household  net  worth, 
is concentrated at the upper end of both the income 
and  net  wealth  distribution  (ibid.).  At  the  same 
time, revenue from wealth-related taxes plays only 
a small role in Austria (0.8% of GDP versus an EU 
average  of  2.6%  of  GDP  in  2017). (25)  Especially 
the  revenue  potential  from  recurrent  taxes  on 
property,  which  are  deemed  relatively  growth-
friendly,  remains  largely  untapped  due  to  the  use 
of  outdated  cadastral  values  as  the  tax  base 
(European  Commission,  2018b,  2019a).  There  is 
also  a  fairness  issue,  as  the  tax  base  does  not 
reflect  the  current  value  of  property,  so  taxable 
values have not kept up  with real estate prices.  In 
addition,  inheritance  and  gift  taxes,  which  are 
deemed relatively growth-friendly, were abolished 
in 2008. 

(25)  Data  are  taken  from  Taxation  trends  2019  (European 

Commission, 2019m). 

22 

 
                                                           
                                                           
 
3.1. Public finances and taxation 

Box 3.1.2: The distributional and equity effects of introducing an explicit price for CO₂ 

Effective policy action on climate change requires, among others, efficient energy taxes, including an 
explicit price for CO₂. While Austria needs to take action to achieve the agreed reductions in greenhouse 
gas  emissions,  it  currently  makes  little  use  of  efficient  energy  taxation.  However,  the  new  government 
programme announces an eco-social tax reform to internalise the social costs of CO₂  emissions in sectors 
not covered by the European Emissions Trading System, by introducing either a price for CO₂  or a national 
emissions  trading  system.  This  microsimulation  study  contributes  to  the  national  debate  by  analysing  the 
distributional effects of introducing a CO₂  tax on energy consumed by private households.  

Three CO₂  tax scenarios are simulated (Graph 1). In the low- and high-tax scenarios, prices of €60 and 
€120 per tonne of CO₂  are applied on top of existing excises, while in the pure CO₂  tax scenario, existing 
excises  are  abolished  and  a  price  of  €350/t  CO₂   is  applied. (1)  For  the  low-tax  scenario,  two  types  of 
compensations  are  considered:  a  lump-sum  for  all  households  and  a  targeted  benefit  for  households  that 
spend at least 15% of their disposable income on energy consumption. (2)   

Graph 3.1.6: Simulated CO₂ tax scenarios and compensatory measures 

(1) Current excises refer to those in place in 2016, as simulated by the EUROMOD indirect tax tool. The excise on coal 
for heating is not simulated. In contrast to value-added taxes, excise are levied on units of purchased goods.  
Source: European Commission, Joint Research Centre, based on the EUROMOD model 

The EUROMOD indirect tax tool gauges the budgetary and equity effects of simultaneous reforms of 
direct  and  indirect  tax  policies. (3)  In  a  first  step,  it  imputes  private  household  expenditures  for  16 
commodity  groups  into  EUROMOD  input data  (based  on  EU-SILC)  by  means  of  Engel  curves  estimated 
using  national  Household  Budget  Surveys.  (4)  It  then  applies  estimated  implicit  tax  rates  (relative  to 
consumer  prices)  to  compute  households’  indirect  tax  liabilities  for  the  different  commodity  groups.  The 
tool assumes of full tax compliance and that changes in indirect taxes are passed on entirely to consumers. 
As the aim is to assess the ‘overnight’ distributional effect of introducing a CO₂  tax, the simulation assumes 
that households continue to consume the same quantities of all goods as before the tax hike. (5)  

Graph 3.1.7: Distributional and equity effects 

(1) The simulation uses Austrian tax-benefit rules in place in 2016.  
(2) Adjusted disposable income is defined as disposable income minus indirect tax payments.  
Source: European Commission, Joint Research Centre, based on the EUROMOD model 

Well-designed  compensatory  mechanisms  help  attenuate  the  regressive  impact  of  increased  energy 
taxes  (Graph  2).  While  personal  income  taxes  in  Austria  are  highly  progressive,  indirect  taxes  have  in 

23 

02004006008001000Petrol(unleaded)GasoilGasoilNaturalgasElectricityPetrol(unleaded)GasoilGasoilNaturalgasElectricityPetrol(unleaded)GasoilGasoilNaturalgasElectricityLow (60€/t CO2)High (120€/t CO2)Pure (350€/t CO2)Total excise / unitCurrent exciseCO2-related price mark-upTransportHeating Transport Heating Transport Heating0.010.020.030.040.050.060.012345678910Deciles of equivalised disposable incomeDirect taxes -baselineIndirect taxes -baselineIndirect taxes -lowIndirect taxes -highIndirect taxes -pure% of disposable income-7.0-6.0-5.0-4.0-3.0-2.0-1.00.01.02.012345678910Deciles of equivalised disposable incomeLowHighPureLow + lump-sumbenefitLow + targetedbenefit% change of adjusteddisposable incomeBaselineLowHighPureLump-sum benefitTargeted benefit15.4%16.0%16.3%16.6%15.3%15.1%BaselineLowHighPureLump-sum benefitTargeted benefit0.27410.27520.27610.27650.27320.2714Gini coefficientAt-risk-of-povery-rateNote: Poverty line is set to 60% of median equivalised adjusted disposable income.Note: Gini coefficient of adjusted disposable income. 
   
   
3.1. Public finances and taxation 

general  a  regressive  effect  on  the  distribution  of  disposable  income  as  poorer  households  spend  a  larger 
share  of  their  income  on  consumption  goods.  The  higher  the  CO₂ -related  price  mark-up,  the  greater  the 
effect: adjusted disposable income decreases by 0.5-1.1% in the 10th decile and by 1.5-3.2% in the bottom 
decile  in  the  scenarios  without  compensation.  The  introduction  of  a  cash  benefit  renders  the  reform 
progressive, leading to a gain in adjusted disposable income for households until the 6th decile. The net loss 
in adjusted disposable income for households as of the 7th decile is mainly due to higher absolute payments 
for consumption taxes.  

Compensatory measures reduce inequality and the ‘at-risk-of-poverty’ rate. Inequality, as measured by 
the  Gini  coefficient,  increases  in  the  scenarios  without  compensatory  measures,  but  is  reduced  by  the 
targeted  cash  benefit  and  a  lump-sum  compensation.  The  ‘at-risk-of-poverty’  rate  is  affected  in  a  similar 
way. (6)  

(1)  While the ‘mixed’ scenarios currently seem to be politically more feasible (albeit at even lower levels),   the pure-tax 
scenario is the economically efficient in terms of CO₂  reduction, as it levies a uniform tax in line with the carbon 
content  of  a  specific  energy  source.  The  €60/t  (€120/t)  price  mark-up  corresponds  to  the  current  price  in  Finland 
(Sweden), while 350€/t CO₂  reflects a scenario that achieves net zero greenhouse gas emissions in ETS sectors by 
2050 (European Commission, 2018f). The CO₂ -related price is computed as follows: on the basis that 1,000 litres of 
petrol produce roughly 2.3 tonnes of CO₂ , a price of €350/t of CO₂  leads to a tax rate of €805/1,000 l of petrol. The 
average increase of indirect taxes paid by a household in the low-tax scenario (assuming constant quantities) amounts 
to €9.57 per month, i.e. a 0.7% increase in consumption expenditure. 

(2)  In both cases, the compensation is designed in a budget-neutral way, i.e. the additional revenue from indirect taxes is 
entirely used to finance the new cash benefit. The benefit does not interact with the rest of the tax-benefit system, so 
the entitlement to other cash social benefits remains unchanged. The amount per household is obtained as a weighted 
share, using the OECD equivalence scale. For a one-person household, the benefit amounts to €13.78 per month in 
the lump-sum scenario and €22.88 in the targeted scenario. 

(3)  For detailed methodological descriptions see De Agostini et al. (2017).  
(4)    As  a  result,  the  simulation  captures  private  households’  energy  consumption  for  heating  and  transport  only.  Also, 
simulated revenues from indirect taxes hinge on the expenditures reported in Household Budget Surveys, which can 
be subject to over- and underreporting. Comparing the simulated VAT revenues to estimates of theoretical household 
VAT  liability  yields  a  coverage  of  about  87%  (CASE,  2018,  p.75).  For  excises,  no  estimates are  available,  so  this 
reason,  the  present  analysis  focuses  exclusively  on  the  distributional  and  equity  effects  of  the  various  CO₂   tax 
scenarios and does not report budgetary effects. 

(5)  While this assumption is plausible in the short term, the tax is intended to have steering effects that will ultimately 
lead to a reduction of CO₂  emissions and hence tax revenues. This would require a corresponding adjustment of the 
compensation (Austrian Parliamentary Budget Office, 2019b).  

(6)    A  more  granular  distributional  analysis  for  different  types  of  consumers  (car  owners,  commuters,  tenants,  etc.)  is 
needed  to  give  a  full  picture  of  the  distributional  effects.  See,  for  instance,  the  analysis  provided  by  the  Austrian 
Parliamentary Budget Office (2019b). 

3.1.3.  PENSIONS 

expenditure 

Austria’s  public  pension 
is 
comparatively high and projected to increase in 
the  medium  and  long  term.  At  13.8%  of  GDP, 
public spending on pensions  is among the highest 
in  the  EU  (2016  EU  average:  11.2%;  European 
Commission,  2018c).  Based  on  the  projections  of 
the  2018  Ageing  Report,  the  expected  increase  is 
also above the EU average. Spending is projected 
to increase by 1.0 pp of GDP between 2019-2040, 
when most of the baby-boomer generation will be 
in  retirement,  and  by  0.4 pps  of  GDP  between 
2019-2070 (the respective EU averages are 0.9 pps 
and -0.1 pps of GDP). Current pension costs are  

reflected  in  relatively  high  social  contribution 
rates, which account for most of the tax wedge on 
labour. The future increase in spending will either 
reduce  the  fiscal  space  for  other  policy  areas  or 
increase government debt. 

Past  reform  efforts  aimed  to  strengthen  the 
sustainability  of  the  pension  system,  while 
recent  measures  go  partly  in  the  opposite 
direction. Under the  pressure of the financial  and 
sovereign debt crisis and tightened EU fiscal rules, 
the  government  implemented  several  reforms  of 
the  pension  system  between  2009  and  2014  that 
reduced  access  to  early  retirement  schemes  and 
invalidity  pensions.  As  a  result,  the  effective 
retirement  age  has  risen  by  9  months  since  2014, 

24 

 
 
 
 
3.1. Public finances and taxation 

raises fairness issues. Neither does it make sense in 
the  light  of  recently  observed  labour  market 
shortages (see Section 3.3). 

Table 3.1.2:  Recent pension-related fiscal measures 

(1) The pension bonus was adopted in July 2019. 
Source: Compilation by European Commission 

life 

in  working 

is  mirrored 

Austria’s  pension  system  compares  well  in 
terms  of  overall  pension  adequacy,  but  income 
inequality 
in 
retirement.  The  gender  gap  in  pension  income  is 
one  of  the  highest  in  the  EU  (38.8%  in  2018,  as 
compared to the EU average of 35.2%), reflecting 
gender-related income inequalities in working life. 
The risk of poverty or social exclusion for women 
aged  65+  is  almost  twice  as  high  as  that  for  men 
(18.4% vs 9.5% in 2018). As of 2020, the pension 
adjustment  and  the  increased  minimum  pension 
top-up  will  particularly  benefit  pensioners  on 
lower incomes. However, while the pension bonus 
is  intended  to  help  reduce  old-age  poverty,  the 
number of potential beneficiaries is limited as only 
about  19%  of  those  eligible  for  the  top-up  are 
expected  to  fulfil  the  contribution  requirement. 
The  new  government  programme  announces  to 
address  the  problem  of  old  age  poverty  with  a 
series  of  measures,  for  instance  pension  splitting 
among spouses. 

3.1.4.  HEALTH CARE 

Public health care spending continues to pose a 
challenge  for  fiscal  sustainability.  According  to 
the  2018  Ageing  Report,  the  share  of  GDP  spent 
on  public  health  care  is  projected  to  increase  by 
1.3 pps  from  7%  in  2016  to  8.3%  in  2070,  as 
compared  to  an  EU  average  increase  of  0.9 pps. 
The  overutilisation  of  hospital  care  has  been 
identified  as  the  key  driver  of  this  growth.  To 
contain  public  spending,  an  Art.  15a  Agreement 
stipulates 
in  2017-
that  expenditure  growth 
2021will  be  gradually  reduced  so  that  the  annual 
increase in 2021 does not exceed 3.2%. According 

reaching 60.4 years in 2018 (61.5 for men and 59.4 
years for women) (BMASGK, 2019). Nonetheless, 
the  gap  between  the  effective  and  the  statutory 
retirement age persists (3.5 for men and 0.5 years 
for women). Although the pension system is facing 
major  challenges  (fiscal  sustainability,  fairness, 
changing  labour  market  conditions,  etc.),  there 
appears  to  be  little  political  appetite  to  steer  a 
public debate on how to make it fit for the future. 
Indeed, the new government programme envisages 
measures 
the  effective 
retirement  age  without  fundamentally  reforming 
the pension system.  

increase 

further 

to 

the 

together, 

distribution 

While  undermining  previous  reform  efforts  to 
strengthen  fiscal  sustainability,  the  Pension 
Adjustment Act includes measures that further 
improve pension adequacy. Table 3.1.2 provides 
an  overview  of  measures  adopted  in  2019  that 
affect  pension 
incomes.  The  2020  Pension 
Adjustment  Act  provides  for  a  staggered  increase 
of  low  and  medium  pensions  as  of  2020  (see 
Graph  3.1.4).  Taken 
the  pension 
adjustment  and  the  tax  relief  (grey  line)  provide 
pensioners  with  income  relief  exceeding  that  for 
throughout 
employees 
of 
income. (26)  Moreover,  pensioners 
disposable 
benefit as of the first euro, while employees below 
the  minor  employment  threshold  are  not  affected 
by the reform. In addition, there is a larger means-
tested equalisation supplement  (Ausgleichszulage) 
for  pensioners  with  monthly 
incomes  below 
€933.06  (2019  reference  value).  Since  1  January 
2020,  the  pension  bonus  further  increases  the 
incomes of  individuals  with  30 or 40 contribution 
years  of  gainful  employment  (including  up  to  5 
years of child care) and up to 1 year of military or 
civil  service.  The  2020  Tax  Reform  Act  further 
relieves  pension  incomes  through  an  increase  of 
the pensioners’ tax credit and the negative tax. The 
expected  budgetary  impact  of  these  measures 
amounts to roughly 0.2% of GDP. While a targeted 
increase  of  low  pension  incomes  may  be  justified 
by 
the 
the  objective  of  pension  adequacy, 
undiscounted  pension  after  45  contribution 
years (27)  clearly  undermines  previous  efforts  to 
increase  the  effective  pensionable  age  and  also 

(26)  The  maximum  income  increase  of  €410  for  pensioners  is 
reached  at  an  annual  disposable  income  of  roughly 
€16,200,  compared  to  €300  for  employees  with  annual 
disposable income around €8,360. 

(27)  The  measure  enables  men  with  45  years  of  pension 

insurance contributions to retire at the age of 62.  

25 

Pension Adjustment Act 2020Staggered pension increase above the adjustment factorIncrease of the minimum pension top-up by 3.6%Extraordinary increase of the minimum pension top-up for couplesUndiscounted pension after 45 contribution yearsAbolishment of waiting period for pension adjustmentPension bonus1Tax Reform Act 2020Increase of the pensioner's tax creditIncrease of the negative tax for pensioners 
                                                           
 
  
 
to the second comprehensive monitoring report for 
the  period  2017-2021,  expenditure 
remains 
beneath  the  ceilings  in  the  years  2017  to  2019. 
Though  expenditure  growth  has  been  below  the 
in  cost-
introduction,  gains 
its 
target  since 
efficiency 
and 
structural 
through 
initiatives have yet to materialise. 

reforms 

The strengthening of primary health care is still 
ongoing  and  potential  savings  remain  unclear. 
Until  December  2019,  35  of  the  planned  75 
multidisciplinary  primary  health  care  (PHC)  units 
were set up or are currently being realised. (28) The 
Austrian  Medical  Chamber  and  Social  Health 
Insurance  signed  a  collective  contract  on  the 
establishment of the PHC units in  April  2019. (29) 
The  savings  potential  hinges  on  using  primary 
health care as the entry point into the health system 
and  resource  shifts  away  from  inpatient  care, 
which also relies on patient uptake.  

reforms 

Hospital  and  pharmaceutical  spending  are  still 
above the EU average. With €1,099.06 per capita 
purchasing  power  standard  (PPS),  public  hospital 
inpatient  curative  and 
spending  measured  as 
rehabilitative care was well above the EU average 
of  €556.01  in  2017.  Similarly,  pharmaceutical 
spending in the same year stood at €322.77 in per 
capita  PPS,  higher  than  the  EU  average  of 
€225.18. The  share  of  public  current  health 
spending going to inpatient care (28.36% in 2017) 
has  only  declined  by  1.27 pps  since  2010,  despite 
to  strengthen  primary  and 
ongoing 
ambulatory  care.  The  number  of  acute-care  beds 
per  1,000  of  population  in  2017  was  46%  higher 
than  the  EU  average  and  the  third  highest  in  the 
EU.  Activity-based  reimbursement  for  outpatients 
is  expected  to  support  the  shift  to  a  less  hospital-
centric  model.  In  2016,  generic  medicine  use  had 
increased  only  slowly  from  2005,  to 53%.  This  is 
slightly above the EU average, but is still far below 
the  top  performers  (OECD/European  Observatory 
on  Health  Systems  and  Policies,  2019).  The 
increasing number of physicians without contracts 
with  the  social  health  insurance  and  the  expected 
wave  of  retirements  may  have  an  impact  on 
accessibility. 

3.1. Public finances and taxation 

Gains 
in  cost-efficiency  could  be  achieved 
through  better  prevention.  Austria  has  a  low 
level  of  unmet  health  care  needs  and,  in  the  five 
past  years,  achieved  further  progress  on  SDG 3 
(Good  health  and  well-being).  However,  healthy 
life  years  at  birth  are  substantially  below  the  EU 
average  (AT:  57  years,  EU  average:  64  years  in 
2017), although per capita spending on prevention 
is  only  slightly  below.  Mortality  from  treatable 
causes  is  below  the  EU  average,  indicating  the 
general  effectiveness  of  the  health  system,  but 
more than 12,000 deaths could have been avoided 
in  2016  through  effective  public  health  and 
prevention,  and  nearly  6,000 
through  more 
effective  and 
timely  health  care.  The  new 
government  commits  to  continue  and  step  up 
ongoing  reforms,  in  particular  in  primary  and 
hospital  care  as  well  as  preventive  measures  and 
the health care provision in rural areas. 

3.1.5.  LONG-TERM CARE 

still 

into 

care 

feeds 

transfers 

Despite recent measures, public expenditure on 
fiscal 
long-term 
sustainability  challenges.  With  no  substantial 
changes  in  the  system  of  service  delivery,  the 
fiscal  risks  currently  remain  unchanged.  The 
abolition  of  the  recourse  to  assets  (Pflegeregress) 
from  central 
is  compensated  by 
government.  The  authorities  also 
introduced 
increases  in  the  cash  benefit  allowances  for  each 
level of dependency,  which will start with a 1.8% 
rise in January 2020. This is expected to cost €50 
million in addition to the existing spending of €2.7 
billion,  which  targets  about  464,000  recipients. 
Other measures include an accreditation system to 
support  the  quality  of  home  care  provision. 
Overall,  recent  measures  do  not  appear  to  help 
reduce costs. 

system 

long-term 

delivers 
care 
The 
comparatively  high-quality  services,  but  faces 
staffing  challenges.  The  long-term  care  system 
relies  comparatively  heavy  on  informal  care.  The 
24-hour care at home  with privately  hired or self-
employed carers, is increasingly used and relies to 
a  great  extent  on  people  from  central  and  eastern 
European  Member  States. (30)  Women  make  up 

(28)  https://www.sv-primaerversorgung.at  
(29)  The  agreement  sets  targets  for  increasing  the  use  of  IT  to 
improve coordination and efficiency, e.g. by ePrescriptions 
and an electronic personal vaccination file. 

(30)  As per December 2019, 33,464  24-hour carers worked for 
patients  receiving  public  financing. Of  these,  17,006  were 

26 

 
                                                           
                                                           
3.1. Public finances and taxation 

to 

retirement) 

85.2%(31) of formal long-term care staff and about 
two thirds of the employees who take leave to care 
for  dependants  are  women.  According  to  recent 
estimates,  the  nursing  care  staff  requirement  for 
the year 2030 (additional demand and replacement 
due 
is  approximately  76,000 
persons.  (Rappold  and  Juraszovich,  2019).  Work 
on  a  masterplan  for  long-term  care  (Masterplan 
Pflege)  had  started  with  the  aim  of  improving 
quality,  staffing  and  financing.  The  work  was 
curtailed  by 
the  previous 
the  early  end  of 
government.  The  new  government  announced  a 
fundamental reform of the long-term care system. 

3.1.6.  DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

indicators  and 

the  S0  and  S1 

While  risks  of  fiscal  stress  appear  to  be 
contained  in  the  short  and  medium  term, 
Austria  continues  to  have  a  medium  fiscal 
sustainability  risk  in  the  long  term.  The  values 
of 
the  debt 
sustainability  analysis  are  below 
the  critical 
thresholds  (see  Annex  B).  However,  the  S2 
indicator  shows  that,  relative  to  the  baseline  no-
policy-change scenario, an improvement of 2.3 pps 
of  GDP  in  the  structural  primary  balance  will  be 
needed to prevent the debt-to-GDP ratio increasing 
continuously  over  the  long  term.  The  S2  value  is 
driven  by 
in  age-related 
government  expenditure,  in  particular  long-term 
care  (contribution  of  1.4 pps  of  GDP  to  the  S2 
value), health care (1.0 pp) and pensions (0.6 pps) 
(see Annex B).  

the  projected  rise 

Romanian  (51%),  9,913  Slovakian  (30%),  2,614  Croatian 
(8%) and 1,861 Hungarian (6%). 

(31)  Statistic  Austria 

(2019c),  Pflegedienstleistungsstatistik 

2018 

27 

 
 
                                                                                   
3.2.  FINANCIAL SECTOR 

3.2.1.  BANKING SECTOR AND INSURANCE 

SECTOR 

The  banking  sector  has  continued  to  benefit 
from  benign  macroeconomic  conditions 
in 
recent  years.  Supported  by  positive  economic 
developments,  the  system-wide  solvency  ratio 
perked  up  to  18.7%  at  the  end  of  June  2019, 
0.3 pps  higher  than  at  the  same  point  the  year 
before. The common equity  Tier 1 ratio increased 
to 15.5% at the end of June 2019, which is slightly 
higher  than  the  euro  area  average.  Nevertheless, 
there  is  still  scope  for  the  significant  credit 
institutions  under  the  supervision  of  the  Single 
Supervisory Mechanism to catch up with their euro 
area  peers.  Asset  quality  has  also  strengthened 
further, with the non-performing loans (NPL) ratio 
declining to 2.3% at the end of June 2019, 1.1 pps 
below  the  euro  area  average.  Asset  quality  has 
been  supported  by  NPLs  declining  for  both 
for 
corporates  and  households,  with  NPLs 
corporate  exposures  being  by  2.9 pps  lower  than 
the  euro  area  average  of  6.1%  at  the  end  of  June 
2019.  On  the  back  of  several  macro-prudential 
measures adopted by supervisors, foreign currency 
(mainly Swiss franc) loans to Austrian households 
and  non-financial  corporations  declined  by  73% 
from  October  2008.  However,  the  vulnerabilities 
associated  with  the  outstanding  stock  of  bullet 
loans (denominated in foreign exchange) linked to 
repayment  vehicles require close oversight.  Green 
financing  has  also  become  a  priority.  The  first 
green  bond  issuance  by  an  Austrian  bank  was 
made in June 2018.  

Despite  the  low  interest  rates,  banks  made 
efforts  to 
improve  their  profit  generation 
capacity.  The  profitability  of  Austrian  banks 
continued  to  be  solid  in  the  first  half  of  2019, 
despite  low  interest  rates.  The  return  on  equity 
stood  at  4.2%  (ECB  data,  non-annualised),  higher 
than  the  EU  average  of  3.4%,  but  slightly  lower 
than  the  4.5%  registered  in  June  2018.  The 
profitability  of  the  significant  Austrian  credit 
institutions  continues  to  display  some  pockets  of 
interest  margins 
their  net 
vulnerability,  with 
remaining  under  pressure,  as  in  previous  years. 
Some 
further  progress  has  been  made  on 
improving  operational  efficiency,  as  banks’  cost-
to-income-ratio declined from 65.5% at the end of 
June  2018  to  63.9%  at  the  end  of  June  2019, 
marginally  lower  than  the  EU  average  of  64.7%. 
Nevertheless,  further  efforts  appear  warranted  to 

3.2. Financial sector 

adapt  business  models  to  the  challenges  posed  by 
new  IT  and  digitalisation  and  to  tackle  remaining 
structural cost issues.  

Graph 3.2.1:  Credit to the private sector (y-o-y% change) 

Source: ECB 

in  September  2019 

Developments linked to the buoyant  residential 
real estate market have not posed challenges so 
far  to  banking  sector  stability.  Lending  to 
households  expanded  further  in  2019,  increasing 
(see 
by  4.3%  y-o-y 
Graph 3.2.1).  Meanwhile,  mortgage 
lending 
remained dynamic and perked up by 5.3% y-o-y in 
September  2019.  Despite  the  robust  mortgage 
lending  and  continued  house  price  increases  (see 
Section 3.2.2),  authorities  have  concluded  that  the 
counter-cyclical capital buffer can be kept at zero. 
To  date,  credit  institutions  have  applied  the 
Austrian  Financial  Stability  Board’s  September 
2018  recommendation  and  quantitative  guidance 
lending  (European 
on  sustainable  real  estate 
Commission,  2019a).  While  banks  are  broadly 
complying  with  the  recommended  quantitative 
thresholds, 
close 
monitoring  and  supervisory  dialogue.  As  from 
January 2020, enhanced reporting requirements on 
real estate exposures are mandatory and applicable 
for  all  credit  institutions.  In  the  event  of  more 
adverse  developments,  the  supervisory  authorities 
can  activate  the  borrower-based  macro-prudential 
instruments under the Austrian Banking Act. 

outliers 

several 

require 

Central,  eastern  and  south-eastern  Europe  has 
continued  to  play  an  important  role  for  the 
activities  and  profitability  of  Austrian  banks. 
The  consolidated  foreign  claims  of  banks  with 

28 

-6-4-20246810Jan 14May 14Sep 14Jan 15May 15Sep 15Jan 16May 16Sep 16Jan 17May 17Sep 17Jan 18May 18Sep 18Jan 19May 19Sep 19PrivateNon-financial corporationsHouseholdsLending for house purchaseConsumer credityoy % change 
  
3.2. Financial sector 

finalised  at  the  end  of  June  2019,  following  a 
decision  by  the  FMA.  Immigon  opened  the 
liquidation proceedings with a view to distributing 
its  remaining  capital  and  liquidity.  Since  some 
liabilities  are  not  maturing  until  2028,  Immigon 
will  be  removed  from  the  company  register  in 
2029.  The  divestment  of  KA  Finanz’s  assets  has 
also  advanced,  with  total  assets  being  reduced  to 
€7.2 billion at the end of 2018. The winding-down 
process  is  on  track  to  be  completed  by  2026,  as 
envisaged.  

A  much-debated  reform  of  the  institutional 
framework for banking supervision, announced 
in  2018,  will  not  be  further  pursued.  In 
November  2018, 
the  previous  government 
announced a reform introducing a new supervisory 
model  based  on  the  consolidation  in  the  FMA  of 
banking  supervision  activities  (including  on-site 
inspections  and  off-site  analysis  at  micro  level), 
which  are  currently  shared  between  the  Austrian 
National Bank (OeNB) and the FMA. The reform 
would  carve  out  other  competences  from  the 
OeNB,  such  as 
the 
institutions  and  deposit 
supervision  of  credit 
guarantee  schemes.  However,  the  OeNB’s  role  in 
the area of financial stability and macro-prudential 
supervision  would  be  further  strengthened.  The 
reform  envisages  also  an  enhanced  role  for  the 
Ministry of Finance in regulatory issues in the area 
of  competence  of  the  FMA.  In  the  announced 
format,  several  aspects  of 
the  reform  raise 
concerns as to its impact on the governance as well 
as  on  the  operational  and  financial  independence 
of the FMA.  

its  operational  role 

in 

life 

traditional  business  of 

Low  interest  rates  continue  to  put  a  strain  on 
insurance 
the 
undertakings.  While  the  non-life  and  health 
insurance business in Austria continued to expand 
by  3.6%  and  4.3%  respectively,  in  2018,  the  life 
insurance  business  remained  under  pressure,  as 
gross  written  premiums  went  down  by  3.8%. 
Overall,  total  gross  written  premiums  of  Austrian 
insurance undertakings increased by 1.2% in 2018. 
Traditional  life  insurance  products  continue  to  be 
those  most  affected  by  the  current  low  interest 
environment.  The  maximum  interest  rate  for  life 
insurance  contracts  with  interest  rate  guarantee 
was  adjusted  downwards  by  the  supervisor  and 
currently stands at 0.5% (as compared with 2.25% 
10  years  ago).  Despite  the  headwinds  in  the  life 
insurance sector, the Austrian insurance companies 

Austrian majority ownership in central, eastern and 
south-eastern  Europe  (CESEE)  stood  at  roughly 
€217 billion  at  the  end  of  June  2019,  up  from 
€210 billion  in  2018. The  top  three  host  countries 
for  Austrian  banks  with  international  activities 
continue  to  be  Czechia,  Slovakia  and  Romania, 
which  accounted  for  roughly  63%  of  the  total 
assets of the CESEE subsidiaries at the end of June 
2019.  Meanwhile,  Czechia,  Russia  and  Slovakia 
were the most profitable markets at the end of June 
2019,  generating  roughly  67%  of  Austrian  banks’ 
total profit.  Asset quality  has improved further on 
the  back of the benign  macroeconomic conditions 
in the CESEE region coupled with the lower loan-
loss  provisioning  needs.  Since  December  2010, 
foreign currency loans granted to clients in CESEE 
have gone down by roughly 67%. 

situation 

prudential 

The 
of  Austrian 
subsidiaries  has  strengthened,  but  they  remain 
exposed  to  developments  in  host  countries. 
While  the  overall  prudential  situation  of  Austrian 
subsidiaries in the CESEE region has strengthened, 
they  remain  exposed  to  developments  stemming 
from  measures taken by host  countries (additional 
tax  burden  due  to  bank  taxes,  measures  targeting 
foreign  exchange  loans,  in  particular  Swiss  franc 
loans).  Also,  the  issuance  of  debt  instruments 
complying with the minimum requirement for own 
funds  and  eligible  liabilities  (MREL)  may  be 
challenging for the Austrian subsidiaries operating 
in  host  countries  with 
less-developed  capital 
markets. 

The  winding-down  of  public  vehicles 
for 
impaired  assets  does  not  pose  risks  to  public 
finances.  The  disposal  of  the  impaired  assets  of 
the  three  asset  management  companies  –  the 
financial defeasance vehicles HETA, Immigon and 
KA  Finanz  –  has  further  proceeded  without  any 
adverse  impact  on  public  finances.  At  the  end  of 
2018, HETA managed to divest roughly 90% of its 
total  assets.  Based  on  the  recoveries  so  far,  the 
Austrian Financial Market  Authority (FMA)  – the 
resolution  authority  –  decided  to  increase  the 
recovery  ratio  from  64.4%  to  86.32%.  Due  to  the 
cash  reserves  obtained  from  divestments,  HETA 
made  a  third  distribution  of  proceeds  to  creditors 
(€2.05 billion) 
in  December  2019.  Based  on 
preliminary  estimates,  the  bondholders  subject  to 
bail-in  are  expected 
roughly 
€3.6 billion to the orderly resolution of HETA. The 
resolution  process  of  Immigon  was  formally 

to  contribute 

29 

 
3.2. Financial sector 

While  investment  in  construction  picked  up  since 
2016,  the  parallel  increase  in  GDP  meant  that 
residential  investment  as  a  percentage  of  GDP 
remained  roughly  stable.  It  increased  slightly,  to 
4.5%, 
in 
2012-2016. 

in  2017-2018,  compared 

to  4.3% 

Graph 3.2.2:  Price developments and valuation gaps 

[1] Overvaluation gap estimated as an average of the 
price/income, price/rent and fundamental model valuation 
gaps 
Source: European Commission, OeNB 

Most  indicators  suggest  that  house  prices  are 
overvalued by 10% or more. Several assessment 
indicators  suggest  an  average  house  prices 
overvaluation  of  10-14%  (see  Graph 3.2.2).  As 
prices have increased more than income, the price 
to  income  ratio  is  29%  (Q3 2019)  above  its 
long-term  average  and  among  the  highest  in  the 
euro  area.  In  2018,  a  100 m²  dwelling  cost  on 
the  average  annual 
average  10.7 years  of 
household  income,  somewhat  more  than  in  most 
euro  area  countries.  The  OeNB  fundamentals 
indicator  for  residential  property  prices  increased 
further for Vienna, reaching 26% in Q3 2019, and 
went up to 14% for the country as a whole (OeNB, 
2019).  A  key  difference  from  other  euro  area 
markets  is  that  rents  also  increased  strongly.  This 
has  affected  the  affordability  of  housing  (see 
Section 3.3.3, 
subsidies). 
on 
However,  the  price  to  rent  ratio  is  only  15% 
(Q3 2019)  above  its  long-term  average  and  the 
model-based  methods  point 
low 
valuation  gap.  Risks  to  the  banking  sector  seem 
contained (see Section 3.2.1). 

to  a  rather 

housing 

also 

have  continued  to  maintain  sufficient  solvency 
ratios.  Activities  in  other  countries  continue  to  be 
important for its insurance sector, as five insurance 
groups with international activities (VIG, UNIQA, 
Grawe,  Merkur  and  Wüstenrot)  operate  in  27 
countries  in  western  Europe  and  CESEE.  These 
markets  have  contributed  significantly  to  the  total 
written  premiums  of  Austrian  insurers,  with  the 
foreign  business  accounting  for  40.3%  of  total 
gross written premiums in 2018, marginally higher 
than in 2017. 

3.2.2.  HOUSING MARKET AND REAL ESTATE 

FINANCING 

House  prices  have  risen  strongly  in  the  past 
decade,  but  recent  data 
show  opposing 
tendencies.  House  prices  have  gone  up  strongly, 
with  nominal  prices  82%  above  2006  levels  (see 
also Section 1). In the last 2 years, real house price 
growth  has remained contained  with 2.5% growth 
(4.7%  nominally)  in  2018,  after  3.2%  (5.3% 
nominally)  in  2017  (Eurostat).  By  contrast,  the 
OeNB  nominal  residential  property  price  index 
shows  a  clear  acceleration,  with  6.9%  nominal 
growth  in  2018  after  3.8%  in  2017.  Both  sources 
indicate  high  nominal  year-on-year  growth  in 
Q3 2019 of 6.18% (Eurostat) and 5.2% (OeNB). In 
Vienna,  prices  increased  by  9.8%  in  Q2,  a 
development 
in  2013,  but  growth 
decreased slightly in Q3 to 7.6%. In other Länder, 
prices grew moderately and have been decelerating 
for several successive quarters (OeNB, 2019). 

last  seen 

Excess  demand  for  housing  appears  to  have 
peaked 
in  2016,  as  building  permits  and 
construction  picked  up.  After  peaking  in  2016, 
increased construction activity and weaker demand 
are expected to eliminate excess demand by 2020, 
though  it  may  take  longer  in  Vienna  (Schneider, 
2019; European Commission, 2019a). This is also 
visible  in  the  strong  increase  in  the  number  of 
building  permits  issued  in  2016  (+16.9%)  and 
2017  (+10.2%).  While  growth  in  the  demand  for 
building permits  fell  strongly in 2018 (-16.9%), it 
was still high (70,000 permits). First estimates for 
2019  show  stable  development.  The  fact  that 
permit applications focused on multi-family homes 
suggests  that  the  dwelling  stock  in  cities  (in 
particular  Vienna)  may  grow  faster  than  in  past 
years  (IIBW,  2019).  Construction  of  dwellings 
increased  by  6.2%  in  2017  and  1.3%  in  2018. 

30 

60708090100110120-20-1001020300001020304050607080910111213141516171819Index, 2015=100% deviation of current priceOeNB fundamentals indicator for residential property pricesPrice to income vs. hist. avg.Price to rent vs. hist. avg.Overall valuation gapEurostat official MIP deflated house price index (rhs) 
  
3.2. Financial sector 

3.2.3.  CAPITAL MARKETS AND ACCESS TO 

Graph 3.2.3:  Venture capital investment in Austria, 2007-

FINANCE 

2018 

companies, 

The  financial  sector  is  dominated  by  banks, 
while  capital  markets  have  scope  for  further 
development.  For  Austrian 
in 
particular SMEs, bank credit is the main source of 
external  financing.  In  2018,  as  in  previous  years, 
non-financial  corporations  have  heavily  relied  on 
bank  loans,  which  represented  46.4%  of  GDP, 
12 pps above the EU average. By contrast, funding 
from  capital  markets  stood  at  20.3%  of  GDP  and 
remained  significantly  below  the  EU  average  of 
49.7%  in  2018.  The  Vienna  Stock  Exchange 
experienced  a  setback  in  2018,  as  the  Austrian 
index (ATX) lost 19.7%. This was on the back of 
muted  growth  prospects  in  various  EU  Member 
States and falling investment sentiments in light of 
a  more  restrictive  US  monetary  policy  and 
uncertainties  induced  by  trade  conflicts.  Austria 
also has some catching up potential as regards the 
number of listed companies (OECD, 2019a). 

Despite  useful  measures  taken  in  recent  years, 
companies’ access to non-bank financing is still 
subdued. The Vienna Stock Exchange launched a 
new segment dedicated to SMEs in January 2019. 
Despite  favourable  listing  conditions  in  terms  of 
simplified  requirements  and  lower  costs,  only  six 
SMEs  have  been  listed  so  far.  The  modest  use  of 
equity  financing  is  only  partly  explained  by 
demand side factors, such as the concerns of some 
SMEs  related  to  losing  control.  Most  SMEs  have 
not  had  access  to  debt  financing  via  the  capital 
market,  through  issuing  bonds  or  commercial 
papers. This is mainly due to the lack of economies 
of  scale,  as  tapping  the  bond  market  entails 
to 
significant 
Demmou et al. (2019), policies aimed at providing 
similar  access  to  equity  and  venture  capital  could 
have  a  positive  impact  on  the  economy  through 
increases  in  productivity  growth.  The  impact  is 
particularly  pronounced 
that  make 
intensive use of intangible assets, such as software, 
patents,  R&D  expenditure  and  human  or 
organisational  capital.  The  new  government 
programme 
reduce 
includes  measures 
administrative burdens relating to capital markets. 

costs.  According 

transaction 

in  sectors 

to 

Source: Invest Europe (2019), compilation European 
Commission 

the  crisis,  venture  capital 

Austria  is  lagging  behind  peer  countries  as 
regards  the  availability  of  equity  capital, 
including venture capital. As percentage of GDP, 
venture  capital  investment  is  still  relatively  low 
(0.02%) compared to Denmark (0.1%) and Sweden 
(0.09%),  but  it  has  been  catching  up  steadily 
(Invest  Europe,  2019).  The  small  size  of  the 
market  also  involves  a  high  degree  of  volatility. 
investments 
After 
dropped  sharply,  driven  by  a  decline  in  private 
investment,  while  the  public  sector  took  a  more 
prominent  role  (European  Commission,  2017). 
investment  has 
Since  2015,  venture  capital 
increased  exceeding  even  pre-crisis  levels,  but  it 
remains  scarce  for  companies  outside  Vienna 
(Flachenecker  et  al.,  2020).  The  recent  expansion 
has  been  driven  by  an  increase  in  funding  for 
(see 
start-up 
Graph 3.2.3).  Administrative 
and 
restrictive service sector regulations may be partly 
responsible  for  the  low  supply  of  domestic  equity 
capital  (AVCO,  2019).  Several  funds  were  put  in 
place  through  the  ‘Venture  Capital  Initiative’, 
including  three  in  the  investment  phase.  These 
funds invest, inter alia, in IT, medical engineering 
and industrial biotechnology. The new government 
programme 
incentives  for 
private venture capital for innovative start-ups and 
SMEs.  

companies 
barriers 

later-stage 

improved 

includes 

and 

31 

020406080100120070809101112131415161718Million euroSeedStart-upLater stage 
  
3.3. Labour market, education and social policies 

3.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

construction, but continued to increase for services 
to  23.8%  (see  Graph  3.3.2).  Given  population 
ageing and structural changes, encouraging higher 
labour  market  participation  of  women,  migrants 
and older workers is necessary. 

Graph 3.3.2:  Vacancies per registered unemployed and 

labour shortage by sector 

3.3.1.  LABOUR MARKET 

The  labour  market  continues  to  improve,  but 
remain  pronounced. 
regional  differences 
Employment  and  activity  rates  (among  20-64 
year-olds) have risen steadily since 2015, to 76.8% 
and  80.5%  in  Q1  2019.  While  unemployment 
continued  to  drop  in  2018,  reaching  4.9%  (see 
Graph  3.3.1),  there  are  pronounced  disparities 
between  regions,  ranging  from  2.4%  in  Tyrol  and 
2.8% in Salzburg to 10.0% in Vienna. Differences 
also  apply 
for  youth  unemployment,  which 
reached  18.6%  in  Vienna,  13.4%  in  Burgenland 
and  12.2%  in  Carinthia,  but  was  significantly 
lower  in  other  regions,  so  that  the  national  figure 
was  9.4%.  Low  inter-regional  labour  mobility 
seems  to  be  an  important  factor  behind  the 
differences. 

Graph 3.3.1:  Rates of activity, unemployment and NEET (not 

in education, employment or training) 

[1] Vacancies/unemployed refer to the ratio of vacancies 
registered at the Hauptverband der österreichischen 
Sozialversicherungsträgerin to registered unemployed, 
respectively 
[2] Labour shortage is measured as percentage of firms 
reporting labour shortage as a factor limiting production 
(annual average of seasonally adjusted quarterly data for 
industry and services, and annual average of seasonally 
adjusted monthly data for construction) 
Source: European Commission, business surveys for Business 
Climate Indicators 

Source: European Commission, Labour Force Survey 

that 

The  growing  number  of  vacancies  points  to 
emerging  labour  shortages.  The  number  of 
vacancies increased by 17% between Q2 2018 and 
Q2  2019,  reaching  129,100.  Recent  survey  data 
show 
labour  shortages  affect  especially 
construction and services. In Q2 2019, the vacancy 
rate  reached  a  record  3%,  compared  to  EU  and 
euro  area  averages  of  2.3%.  In  2018,  the  share  of 
firms  reporting  lack  of  labour  as  a  limiting  factor 
jumped  from  24.9%  in  2017  to  38.6%  in  the 
construction  sector,  and  from  16.1%  to  20.8%  in 
the  service sector. In the first 10  months of 2019, 
this  figure  dropped  slightly  (to  37.3%)  for 

The  female  labour  market  potential  remains 
underutilised.  The  female  employment  rate  has 
been increasing continuously and is above the EU 
average  (71.7%  vs  67.4%).  However,  the  male 
employment  rate  has  grown  faster,  widening  the 
gender  employment  gap  (9.0 pps  in  2018  vs 
7.8 pps  in  2016).  Moreover,  47.6%  of  employed 
women  worked  part-time  in  2018,  one  of  the 
highest rates in the EU (EU average 30.8%). This 
is  linked  to  the  fact  that  nearly  two-thirds  of 
children  enrolled  in  childcare  attend  it  for  fewer 
than  30  hours  a  week.  In  2019,  addressing  these 
challenges and promoting a more equal division of 
caring  responsibilities  between  women  and  men, 
Austria  introduced  the  legal  right  to  a  1-month 
paternity 
and 
encourages  parents  to  share  their  right  to  parental 

(Familienzeit) 

scheme 

leave 

32 

7072747678808202468101200010203040506070809101112131415161718%%Activity rate 20-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-24 (lhs)0510152025303540450510152025303540450910111213141516171819% of firmsvacancies/registered unemployed (rhs)Construction (lhs)Industry (lhs)Service (lhs)% of registered unemployed 
   
  
3.3. Labour market, education and social policies 

older  workers.  Although  the  employment  rate  of 
older workers (aged 55+) increased from 46.3% in 
2015  to  54%  in  2018,  it  is  still  below  the  EU 
average  of  58.7%.  Long-term  unemployment  is 
relatively  low  (1.4%  in  2018),  but  older  workers 
are  disproportionately  affected.  The  number  of 
long-term  unemployed  aged  50+  more 
than 
quadrupled  between  2008  (10,562)  and  2018 
(44,045). Over the same period, the share of long-
term unemployed in that age group rose from 24% 
to  45%,  with  significant  regional  differences 
(AMS,  2019).  The  ‘20,000  plus’  pilot  initiative 
reduced  the  number  of  older  people  in  long-term 
unemployment  in  8  out  of  11  pilot  regions.  In 
response,  the  parliament  earmarked  a  further 
€50 million  for  continued  support  in  2019  and 
2020. Population ageing and  the  harmonisation of 
the retirement age of women with that of men are 
the main drivers of an expected rise in the share of 
people  aged  55+  in  the  workforce.  The  new 
government programme includes tailored measures 
to  increase  employment  opportunities  for  older 
workers. 

Upskilling  can  help  to  reduce  unemployment 
among  low-skilled  workers.  Around  50%  of  the 
unemployed  have  completed  lower  secondary 
school  (Pflichtschule)  at  most.  Unemployment 
among the low-skilled  has doubled since 2008, to 
over  20%.  14.7%  of  adults  have  less  than  an 
upper-secondary qualification, while the number of 
jobs requiring only elementary skills is limited and 
likely  to  decrease.  The  Adult  Education  Initiative 
(Initiative  Erwachsenenbildung)  provides 
free 
access 
socio-economically 
disadvantaged adults who lack basic skills or never 
graduated from lower secondary education. 

to  education 

for 

jobs 

science, 

technology, 

engineering 

The  skills  base  needs  to  adapt  to  technological 
change.  Specific  skill  gaps  are  prevalent  in  ICT 
and 
and 
mathematics  (STEM).  Of  10  Austrian  leading 
companies,  eight  report  recruitment  problems  in 
increasing 
STEM 
(IV,  2015).  Rapidly 
technological  change,  particularly 
to 
linked 
digitalisation,  artificial  intelligence  and  robotics, 
poses  a  challenge  to  the  economy  and  society  in 
general. 43% of firms report a lack of IT staff and 
74%  fear  that  the  situation  will  get  worse  (IV, 
2018).  Research  underlines  that  innovation  will 
change 
tasks, 
the  nature  and  distribution  of 
creating a challenge for the low-skilled and manual 
routine  workers  (BMVIT,  2017a;  OECD,  2018a). 

leave  (Elternkarenz).  The  gender  pay  gap  (32)  
remains above the EU average (19.9% vs 16.0% in 
2017) (33). 

The  labour  market  potential  of  people  with 
migrant background remains underutilised. The 
employment gap between non-EU born and native-
born  residents  narrowed  from  16.9 pps  in  2017  to 
13.6 pps  in  2018  (from  21.8 pps  to  18.9 pps  for 
non-EU  born  women),  but  it  remains  among  the 
highest in the EU. The labour market participation 
of  recent  migrants  (i.e.  non-EU  born  residents 
established for less than 5 years) is improving and 
50.4%  of  them  were  employed  in  2018,  a  5 pps 
increase 
the  other  hand, 
unemployment  was  still  high  among  nationals  of 
certain  countries  (50.9%,  39.2%  and  29.6% 
respectively  among  nationals  of  Syria,  Iraq  and 
Afghanistan),  despite  significant  drops  between 
2017  and  2018.  The  new  government  programme 
announces  a  common  federal  integration  strategy 
for recognised refugees through better cooperation 
between 
the 
Integration Fund Austria and civil society.  

the  public  employment  service, 

from  2016.  On 

Foreign-born  workers  are  disproportionately 
affected  by 
in-work  poverty  and  over-
qualification.  In-work  poverty  remains  much 
higher  among  foreign-born  workers  than  among 
native-born  residents  (16.9%  vs  5.5%  in  2018). 
This  suggests  that  the  former  occupy  jobs  below 
their  qualifications  and  are  concentrated  in  the 
low-wage  sector  (30%  of  non-EU  born  residents 
work for less than two thirds of the  median wage, 
compared to 12% of native-born workers (Statistik 
Austria,  2019a).  Despite  a  slight  improvement, 
over-qualification clearly remains an issue for non-
EU  born  workers  (43%  over-qualification  rate  for 
non-EU born vs 25.7% for native-born workers). 

Despite  positive  labour  market  developments, 
challenges  remain  in  terms  of  participation  by 

(32)  While  only  about  7%  of  men  working  full-time  earn  less 
than  €1,700  gross  a  month,  twice  as  many  women  (17%) 
work  for  such  a  low  wage.  4%  of  men  work  full-time  for 
the  low  wage  of  €1,500  a  month,  while  9%  of  women 
working full-time earn this.  

(33)  The  gender  pay  gap  is  one  of  the  reasons  for  the  high 
gender  pension  gap  (38.8% in  2018 vs  the  EU  average  of 
29.1%)  and  means  that  the  risk  of  poverty  and  social 
exclusion  among  older  women  (see  social  policy  section) 
keeps rising while that among older men is falling. Figures 
published  on  Austrian  Equal  Pension  Day  2019  (29  July) 
show  an  improvement  of  only  1  day  from  2018  (APA-
OTS, 2019).  

33 

 
                                                           
3.3. Labour market, education and social policies 

Rather than replacing jobs, the new world of work 
is expected to replace primarily individual tasks. A 
recent  OECD  study  estimates  that  16.6%  of  jobs 
are at high risk of automation and a further 29.7% 
at risk of significant change (OECD, 2019b).  

weakened  the  role  and  importance  of  the  social 
partners somewhat, by not involving them fully in 
the  design  and  implementation  of  reforms  in  the 
insurance  and  assistance  as 
areas  of  social 
stipulated  by 
legal  provisions  on  social 
dialogue. 

the 

skills 

The  increased  need  for  continued  learning 
requires  good  basic  digital  skills  and  better 
cooperation  between  actors  in  adult  learning. 
Better  framework  conditions  should  facilitate  the 
entry  of  new  players  including  higher  education 
institutions.  The  exact  nature  of  future  skills  is 
to  predict,  but  research  suggests  a 
difficult 
differentiation  between  digital/cognitive  and  non-
cognitive 
(Gonzalez  Vazquez  et  al., 
2019).While  cognitive  skills  have  been  at  the 
centre  of  formal  education,  Austria’s  curricula  do 
not yet focus enough on non-cognitive skills,. It is 
planned  within  the  ongoing  curricula  reform  to 
further  strengthen  these  elements.    Compared  to 
Innovation  Leaders  (34),  Austria  needs  to  further 
improve  digital  skills  in  the  workforce  (in  2017, 
only 39% of workers had above-basic digital skills, 
compared  to  53%  in  the  Netherlands)  (see  also 
initiatives 
Section  3.3.4). 
(e.g. ‘DigComp 2.2  AT’)  were pursued to address 
labour market needs linked to digitalisation. Under 
the  related  ‘fit4internet’  initiative,  launched  in 
2019,  anyone  can  assess  their  digital  skills  and 
receive  suggestions  for  training  as  a  basis  for 
further  personal  development.  Other  initiatives 
include 
train 
‘Digital  Pro  Bootcamps’ 
employees  who  already  have  IT  experience,    and 
the  ‘Work 
in  Austria’  programme  aimed  at 
attracting  foreign  skilled  labour,  incl.  IT  experts. 
An 
jobs 
platform 
(www.digitaleberufe.at)  was  set  up  in  September 
2019 jointly by the Ministry of Education, Science 
and  Research  and  the  digital  economy.  It  informs 
teachers,  pupils  and  parents  about  the  wide  range 
of digital jobs. 

In  2019,  several 

orientation 

digital 

on 

to 

legal  and 

Austria  has  an  overall  well-functioning  social 
dialogue  system.  The 
institutional 
framework  for  tripartite  social  dialogue  foresees 
the  involvement  of  the  social  partners  in  policy-
making  and  provides  them  with  feedback  from 
government.  However,  the  previous  government 

(34)  As  defined  by  the  European  innovation  scoreboard  2019 
(the  ‘innovation  leaders’  are  Sweden,  Finland,  Denmark 
and 
innovators’  are 
the 
Luxembourg, Belgium, the UK, Germany, Austria, Ireland, 
France and Estonia). 

the  Netherlands; 

‘strong 

3.3.2.  SOCIAL POLICY  

Graph 3.3.3:  Main indicators of poverty, 2005-2018 

Source: European Commission, Labour Force Survey 

The  overall  social  situation  has  improved.  In 
2018,  the  share  of  people  at  risk  of  poverty  or 
social  exclusion  fell  to  17.5%,  the  lowest  level 
since  2005.  This  improvement  was  driven  mainly 
by  a  significant  decline  in  the  severe  material 
deprivation  rate  (2017:  3.7%;  2018:  2.8%)  and  in 
the number of households with low work intensity 
transfers 
(2017:  8.3%;  2018:  7.3%).  Social 
effectively  reduce  poverty  (Graph  3.3.3),  moving 
Austria  forward  in  SDG 1  (no  poverty).  A  reform 
of the minimum income benefit (Neue Sozialhilfe) 
was planned to come into force as of January 2020, 
but  central  elements 
thereof  were  declared 
unconstitutional in December 2019. 

However,  some  vulnerable  groups  continue  to 
fall  behind.  Though  down  slightly,  the  risk  of 
poverty  or  social  exclusion  remains  high  for 
certain  vulnerable  groups:  foreign-born  residents 
aged  18+ 
(31.4%),  single-parent  households 
(46.4%) and households with two adults and three 
or  more  dependent  children  (27.9%).  Moreover, 
the  persistence  of  poverty  (the  share  of  people  at 

34 

05101520250506070809101112131415161718% of populationAt-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty rateSevere material deprivationPeople living in low work intensity households 
 
                                                           
   
3.3. Labour market, education and social policies 

However, only 11.4% do so, partly due to a lack of 
awareness (Riesenfelder et al., 2011). 

3.3.3.  AFFORDABLE HOUSING 

Austria  has  an  elaborate  system  of  limited-
profit  housing  associations  and  a  subsidy 
scheme  that  keeps  housing  costs  relatively  low. 
The housing and rental market is characterised by 
a low home ownership rate (48%), combined with 
a well-established system of social housing, which 
usually  provides  accommodation  at  prices  below 
market  rents.  Only  18%  of  households  live  in  a 
private  rented  property,  17%  in  Limited  Profit 
Housing Association (LPHA) properties and 7% in 
municipal  housing.  The  remaining  9%  live  in 
dwellings with other forms of housing contracts(36) 
(Amann and Mundt, 2019). Together with the legal 
framework,  the  building  and  loan  association  and 
housing  subsidies,  the  social  housing  scheme  is  a 
powerful  tool  to  increase  economic  and  social 
resilience  by 
and 
construction  sector.  It  also  enables  political 
the 
intervention,  e.g.  fostering 
energy  efficiency  of  buildings  (see  Section  3.5) 
(Mundt, 2018; IIBW, 2019). However, a dearth of 
available dwellings and long waiting lists, together 
with  often-substantial  entry  costs  in  the  case  of 
LPHAs,  may  de  facto  limit  access  for  people  at 
risk of poverty (Fink, 2019). 

the  housing 

investment 

stabilising 

in 

new 

government 

risk of monetary poverty currently and in at least 2 
of  the  preceding  3  years)  increased  (2008:  5.6%; 
2018: 10.2%), with an especially high increase for 
children (2008: 4.0%; 2018: 12.5%). Some 21.6% 
of  children  (aged  0-17)  are  at  risk  of  poverty  or 
social  exclusion,  a  higher  share  than  in  other  age 
groups.  The 
programme 
prioritises the fight against child poverty. In 2018, 
the ‘at risk of poverty or social exclusion’ rate for 
children of low-skilled parents was 45.1 pps higher 
than  for  children  of  high-skilled  parents.  For  the 
children  of  foreign  parents,  the  risk  was  also 
considerable  (22.4 pps  higher  than  the  average). 
The  latest  results  of  the  OECD  programme  for 
international student assessment (PISA) show that 
the 
students 
underperforming  in  reading  is  26.3 pps  higher  for 
those  with  a  lower  than  for  those  with  a  higher 
socio-economic background (see Section 3.3.4). 

15-year-old 

percentage 

of 

social 

situation 

continues 

to  vary 
The 
significantly  across  regions.  In  line  with  the 
overall trend, the share of people at risk of poverty 
or social exclusion decreased in cities (to 25.5% in 
2018  from  26.3%  in  2017)  and  even  more  so  in 
towns/suburbs  (to  13.5%  in  2018  from  16.4%  in 
2017).  However,  poverty  and  social  exclusion 
became  slightly  more  common  in  rural  areas 
(1.2 pps increase to 14.2%). Among the regions, in 
2017  the  risk  was  highest  in  Vienna  (26.7%)  and 
Vorarlberg (22.2%), and lowest in Lower (12.6%) 
and Upper (13.2%) Austria.  

Social  protection  for  employees  and  the  self-
employed  performs  comparably  well,  but  the 
uptake  of  voluntary  opt-ins  remains  low.  The 
self-employed  are  mandatorily  covered  by  all 
major  strands  of  social  protection,  except  for 
unemployment  benefits.  Relatively 
few  self-
employed  opt  into  unemployment  insurance  (35). 
One  reason  might  be  the  design  of  the  opt-in 
system,  which  binds  them  to  the  selected  level  of 
contributions  for  8  years.  Marginally  employed 
workers (Geringfügig Beschäftigte), most of whom 
are  women,  are  not  covered  by  unemployment 
insurance. They can opt into other strands of social 
insurance,  including  sickness,  maternity,  pension 
low  cost. 
and 

invalidity  schemes,  at  rather 

(35)  Between 2009 and 2018, 2,342 self-employed people opted 
into  unemployment  insurance  (of  a  total  of  465,100 
registered in Austria in 2018). 

Rising  rental  costs  make  it  more  difficult  to 
access  affordable  housing.  Rents  increased  by 
13%  between  2014  and  2018,  especially  on  the 
private  market  (see  also  Section  3.2).  While  the 
overall incidence of housing cost overburden (37) is 
relatively  low  (AT:  6.8%;  EU  average:  9.9%, 
2018),  there  are  substantial  regional  disparities. 
This affects mostly people living in cities (11.6%). 
The housing cost overburden rate for people at risk 
of poverty is 36.5% and even higher for those aged 
16  to  29  (AT:  44.8%;  EU:  40.4%).  Strong  house 
price rises in the past decade reduced affordability, 
in  spite  of  low  interest  rates  (see  Sections  1  and 
3.2).  Housing  cost  overburden  was  around  15.2% 
for  tenants  (2015-2018)  and  1.9%  for  owner-
occupied  dwellings  (EA19:  25.8%  and  5.3%;  EU 

(36)  e.g.  subleases,  rent-free  tied  accommodation  for  civil 

servants, etc. 

(37)  When  total  housing  costs  (net  of  housing  allowances) 
represent  more  than  40%  of  total  disposable  household 
income (net of housing allowances).  

35 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

(Oberwimmer 

2019c) (40).  In  Viennese  primary  schools,  45%  of 
the  pupils  have  a  migrant  background.  This 
compares to 40% in  areas with high, 20% in areas 
with medium and 6% in areas with low population 
density 
et  al.  2019).  The 
government therefore stresses the need to focus on 
language  learning  from  an  early  age  and  pupils 
from  non-German  speaking  families  are  given 
separate  German 
lessons.  However,  while 
government  expenditure  on  education  is  slightly 
above  the  EU  average  (4.8%  vs  4.6%  of  GDP  in 
2017),  the  system  for  allocating  resources  to 
schools  does  not  take  sufficient  account  of  the 
additional  complexity  linked  to  socio-economic 
background  and  teaching  non-native  and  non-
German-speaking 
2016; 
pupils 
Oberwimmer  et  al.,  2019).  The  latest  education 
reform  brought  some  progress  regarding  legally 
defined  criteria  for  the  allocation  of  resources 
including an opportunity index. 

(OECD, 

The  educational  attainment  of  15-year-olds  is 
still  influenced  by  socio-economic  background. 
PISA 2018 did not identify a major change in basic 
skills  in  Austria  compared  to  2015  and  2012: 
reading,  mathematics  and  science  remain  around 
the  EU  average. 
(OECD,  2019c;  European 
Commission, 2019d). Around a quarter of Austrian 
15-year-olds (23.6%) underperform in reading (EU 
average  21.7%),  which  continues  the  negative 
trend observed since 2012. Socio-economic and/or 
migrant  background  remain  key  determinants  of 
underperformance (41).  Some  37.2%  of  15-year-
olds  from  poor  socio-economic  backgrounds  and 
47.4%  of  foreign-born  pupils  underachieve  in 
reading. In mathematics and science, the shares are 
21.1%  and  21.9%  respectively.  The  difference 
between  advantaged  and  disadvantaged  schools 
(139 PISA points in reading) is about 3.5 years of 
schooling.  Students  from  a  poor  socio-economic 
background  receive 
in 
learning  than  their  peers  in  other  countries.  This 
seems  more  common 
than 
advantaged  schools.  In  addition,  pupils  with  a 
migrant  background  are  more  likely  to  leave 
school  early  without  a  valid  school-leaving 

less  specific  support 

in  disadvantaged 

27.1%  and  5.3%  vs  14.1%  and  2.3%  in  2011-
2014). 

Housing  subsidies  have  gradually  decreased. 
The  housing  subsidy  scheme  is  one  of  the  most 
effective  in  the  EU.  It  is  also  one  of  the  most 
efficient:  the  share  of  expenses  that  can  be 
attributed to housing subsidies is less than 0.5% of 
GDP,  far  less  than  in  other  EU  countries  (IIBW, 
2019;  Amann  and  Mundt,  2019).  It  is  mostly  a 
municipal  competence  (Amann  and  Mundt,  2012; 
Mundt, 2018) and mainly supply-side driven, with 
subsidies  for  (i)  renovation  (24%  of  total  housing 
subsidies),  (ii)  and  the  construction  new  of  flats 
(53%),  single  family-houses  (8%),  private  homes 
(roughly  30%)  and  municipal  and  non-profit 
housing  (70%).  There  is  also  a  demand-side 
subsidy (iii) in the form of housing allowances, but 
this is much lower (16%) (38) (IIBW, 2019; Amann 
and Mundt,  2019; Klien, 2019). However, despite 
rising house prices and rents (see also Section 3.2), 
there has been a clear drop in expenses for housing 
subsidies (-18% since 2014), which are now below 
the  10-year  average.  This  affected  all  areas (39) 
(IIBW, 2019). 

3.3.4.  EDUCATION AND SKILLS 

Preparations  for  the  future  skill  needs  of  the 
Austrian  economy  should  start with  a  focus  on 
basic  and  non-cognitive  skills.  Given  the  ageing 
population  and  structural  challenges,  a  pre-
condition  for successful change is a  good level of 
basic  skills  in  the  future  workforce  (see  Section 
3.3.1).  The  key  lever  is  the  quality  of  early 
lower 
childhood,  primary  and, 
2020 
secondary 
government 
the 
challenges. 

in  particular, 
January 

education.  The 

acknowledges 

programme 

The  increasingly  diverse  and  growing  school 
population  calls  for  more  targeted  funding. 
With  migration  the  main  driver  of  population 
growth, 
is  becoming 
(European  Commission, 
increasingly  diverse 

the  school  population 

(38)  This includes “Wohnungsunterstützung” in Styria, although 
it  traditionally  comes  under  the  social,  not  the  housing 
budget. 

(39)  Renovation  funding  decreased  by  24%,  subsidies  for  flats 
by 22%, new construction by 16% and housing allowances 
by 13%. 

(40)  In 2017, 22% of the population had a migrant background 
and  15.2%  were  foreign-born,  of  whom  about  half  were 
from  other  Member  States.  Eurostat  projects  that  the 
number  of  3-18  year-olds  will  increase  by  7.9%  between 
2020 and 2030 and by 8.6% by 2040. 

(41)  2012/2015/2018 absolute difference 51/64/63 with constant 

ECSC 31/41/37 (Bifie, 2019) 

36 

 
                                                           
                                                           
3.3. Labour market, education and social policies 

certificate.  Despite  a  1.4 pps  decrease,  the  rate 
among  foreign-born  young  adults  is  still  17%, 
three  times  higher  than  among  the  native-born 
pupils  (5.5%).  Regional  differences  are  evident. 
While  early  school  leaving  affects  4.4%  of  pupils 
in  rural  areas, 
in 
towns/suburbs and to 10.1% in cities. 

the  figure  rises 

to  7.7% 

Increasing  the  availability  and  quality  of  early 
childhood  education  and  care  could  help  to 
improve educational outcomes, in particular for 
children 
from  disadvantaged  backgrounds. 
Although there has been an increase in expenditure 
on early childhood education and care since 1980, 
it  is  less  than  the  average  increase  in  the  EU (42). 
Overall,  95.6%  of  children  between  the  age  of  4 
and  school  entry  age  attended  early  childhood 
education and care in 2017. The share of children 
up  to  the  age  of  3  attending  early  childhood 
education  and  care  rose  from  4%  in  2005  to 20% 
in 2018, but Austria lags well behind the reference 
group  of  Innovation  Leaders  (see  Graph  3.3.4). 
Most children attend only part-time care and those 
who  may  profit  the  most  (children  with  weak 
socio-economic  or  migrant  backgrounds)  attend 
less  often.  Competence 
for  early  childhood 
education  and  care  is  split  between  different 
government 
levels,  preventing  a  harmonised 
quality framework (European Commission, 2019a) 
and  leading  to  uneven  levels  of  quality  assurance 
(Breit  et  al.,  2019).  An  Article  15a  agreement 
addresses 
these  challenges  only  partly,  but 
contributes positively to SDG 4.  

than  doubled 

Teacher shortages are likely to become a major 
challenge.  The  number  of  teachers  older  than  60 
more 
in  2013-2017.  47%  of 
secondary teachers are 50 or older and 11% are 60 
or  older.  Hence,  there  is  a  need  to  attract  more 
students  to  initial  teacher  training  and  help  young 
teachers  to  start  out  (Oberwimmer,  2019).  The 
January  2020  government  programme  foresees 
measures  for  opening  the  teaching  profession  for 
career changers. 

training  offers 
Vocational  education  and 
excellent  employability.  The  share  of  students 
in  vocational  programmes  at  upper 
enrolled 

(42)  Although childcare expenditure has doubled since 1980, it 
rose  much  more  in  other  Member  States.  Germany 
increased  its  budget  4-fold,  France  5-fold  and  Italy  and 
Belgium 7-fold. 

a 

launched 

secondary  level  (68.6%)  remains  well  above  the 
EU  average  of  47.8%  (UOE).  The  employment 
rate among recent vocational graduates was 87.3%, 
compared  to  the  EU  average  of  79.5%  (Eurostat, 
LFS).  The  Federal  Ministry  for  Digital  and 
Economic  Affairs 
review  of 
apprenticeship  programmes  (Lehrberufsscreening) 
to  develop  updated  and  new  apprenticeship 
training  contents.  Guidelines  for  the  competence-
oriented 
apprenticeships 
(Leitlinien  zur  Lehrberufsentwicklung)  have  been 
developed  to  inform  all  those  responsible  for  the 
of 
design, 
competence-oriented  job  profiles,  training  and 
examination regulations. 

implementation 

development 

steering 

and 

of 

Graph 3.3.4:  Participation of children under 3 years of age 
in formal childcare, 2010-2017 

Source: European Commission, EU-SILC 

in 

Participation 
education  has 
tertiary 
increased  steadily,  but  regional  disparities 
persist. Tertiary attainment stood at 40.7% among 
30-34 year olds in 2018 and is generally higher in 
cities  than  in  rural  areas  (48.5%  vs  33.9%).  The 
highest  concentration  of  25-64  year-olds  with 
higher  education  is  in  Vienna  (42.3%)  and  the 
the 
lowest 
employment  rate  among  recent  tertiary  graduates 
was 88.6% (EU average: 84.9%), reflecting strong 
demand for highly skilled workers. 

in  Vorarlberg  (27.6%).  In  2018, 

While  digital  skills  have  improved  steadily, 
Austria  still  does  not  match  the  ‘innovation 
leaders’.  Austria  is  one  of  the  few  EU  countries 
that  have  introduced  a  digital  key  competence 
framework  for  all  school  levels,  including  the 
structured 
its 
concerted  effort  to  equip  teachers  with  relevant 

testing  of  pupils.  Moreover, 

37 

01020304050607080901011121314151617%EUDKDENLAT 
                                                           
  
3.3. Labour market, education and social policies 

digital  skills  has  allowed  it  to  catch  up  with  the 
leaders  (Denmark  and  Estonia) (43),  for  the  16-19 
age  group.  However,  digital  skills  in  the  adult 
the  EU  average 
population  remain  close 
(European  Commission,  2019e).  The  new 

to 

(43)  In  2017,  77%  of  16-19-year-olds  were  above  average 

(Denmark: 75%, Estonia: 77%) (Eurostat).  

government programme recognises the importance 
of  digital  skills  and  provides  for  numerous 
measures  to  teach  digital  competences  to  pupils 
and  teachers.  While  Austria  registered  slight 
improvements 
internet  users’  basic  skills 
compared to 2017, it is behind the top-performing 
countries 
(European 
Commission, 2019e). 

Section 

3.3.1) 

(see 

in 

38 

 
                                                           
3.3. Labour market, education and social policies 

Box 3.3.3: Monitoring performance in light of the European Pillar of Social Rights 

The European Pillar of Social Rights is a compass  for a renewed  process of upward convergence towards 
better working and living conditions in the European Union. It sets out twenty essential principles and rights 
in  the  areas  of  equal  opportunities  and  access  to  the  labour  market;  fair  working  conditions;  and  social 
protection and inclusion. 

Austria  performs  relatively  well  on  the  Social 
Scoreboard  supporting  the  European  Pillar  of 
Social  Rights,  but  some  challenges  remain. 
Despite a high employment rate of women (71.7% 
in  2018  against  an  EU  average  of  67.4%),  the 
gender employment gap increased from 7.8 pps in 
2016 to 9.0 pps in 2018. Many women work only 
part-time  (47.6%  in  2018,  well  above  the  EU 
average of 30.8%), which is linked to their caring 
responsibilities  and  lack  of  affordable  full-time 
childcare  facilities.  About  two  thirds  of  the 
employees  taking  leave  to  care  for  frail  or  sick 
dependants or family members (i.e. long-term care 
leave or family hospice leave) are women. 

Overall, long-term  unemployment is below the 
EU  average,  but  remains  a  challenge  among 
older  workers.  The  number  of  the  long-term 
unemployed  aged  50  and  over  has  more  than 
quadrupled  since  2008.  In  2018  the  long-term 
unemployed  constituted  45%  of  all  unemployed 
aged 50 and over, compared to 24% in 2008, with 
significant  regional  differences.  The  initiative 
’20,000  plus’  has  shown  positive  effects  in 
increasing  the  employment  for  the  long-term 
unemployed and public finances. 

Fair  working  conditions  and  social  protection 
to  good  social  outcomes.  The 
contribute 
incidence of severe material deprivation in Austria 
is  among  the  lowest  in  the  EU  and  falling  (2.8% 
in 2018, compared to 3.7% in 2017). Additionally, 
the  net  earnings  of  a  single  worker  earning  the 
average  wage  in  Austria  remain  among  the 
highest in the EU. Compared to 2017, net earnings 
also grew faster than in comparable countries with 
high  productivity  levels.  This  good  performance  can  also  be  attributed  to  the  country’s  well-established 
collective bargaining system and its high coverage rate. 

In order to improve gender balance in care over children and professional activity, the Government 
adopted the one-month paternity leave scheme (Familienzeit). Since September 2019 all fathers have a 
legal right to care leave, accompanied by protection against dismissal after return to work. The introduction 
of the paid parental leave showed that the sole legal entitlement was insufficient to increase the involvement 
of fathers. The measure is expected to effectively increase the uptake of paid parental leave by men.  

39 

 
3.4. Competitiveness, Reforms and investment 

3.4. COMPETITIVENESS, REFORMS AND INVESTMENT 

3.4.1.  INVESTMENT AND PRODUCTIVITY TRENDS 

Productivity growth and investment needs 

Since  2009, 
labour  productivity  growth  in 
Austria  has  fallen  below  the  EU  average. 
Despite  relatively  robust  GDP  growth,  aggregate 
labour productivity growth (value added per hours 
worked)  dropped  to  0.6%  in  2018  (from  1.5%  in 
2017).  While  productivity  is  still  relatively  high, 
its  growth  has  been  below  the  EU  average  since 
2009.  The  decline  can  be  attributed  to  various 
factors,  including  the  net  migration  uptake  of 
2015-2017 and a job rich recovery after the crisis. 
While  Austria’s  employment  measures  helped  to 
mitigate  the  impact  of  the  crisis,  they  also  led  to 
labour hoarding and fewer hours worked (Böheim, 
2017). On the positive side, regional differences in 
real gross  value added per  worker have decreased 
and are less pronounced than in peer countries (see 
Section 1).  

Productivity  growth  has  been  slowing  for 
several  decades.  Overall,  Austria  performs 
relatively  well in achieving economic  growth  in a 
sustainable  and  inclusive  manner.  However,  as  in 
most  EU  countries,  productivity  growth  has 
gradually  slowed  in  recent  decades  (European 
term, 
In 
Commission,  2019a). 
population ageing will increase the need for higher 
capital  and  total  factor  productivity  growth  to 
sustain  high  standards  of  living  and  wages  (see 
Section 1).  Nevertheless,  in  contrast  to  most  EU 
countries,  Austria  has  not  yet  appointed  a 
productivity board. 

the  medium 

Structural  change  explains  part  of 
the 
growth.  The 
of  productivity 
slowdown 
agricultural  and  manufacturing  sectors  saw  their 
economic  weight shrink  substantially by 82% and 
30% respectively from 1970 to 2016. On the other 
hand, as in most EU countries, the service  sectors 
(including 
regulated  professions,  non-market 
services  and  tourism-related  services),  which  are 
characterised by lower productivity, have gained in 
importance. These shifts explain a 0.3 pp. decrease 
in  average  labour  productivity  growth  between 
1970 and 2016 (Bauer et al., 2020). In recent years 
(2009-2018), there has also been a shift to services 
in relative shares of employment (see Graph 3.4.1). 
However, labour productivity growth in the service 
subsectors  has  fared  comparatively  better  than  in 
other Member States (Bauer et al., 2020). 

Recent  dynamics  show  only  a  gradual  shift  to 
more productive sectors. Austria’s ambition is to 
become  an  Innovation  Leader (44).  However,  its 
and 
share  of  high-tech,  medium-high-tech 
knowledge intensive services is lower than the EU 
average  and  that  of  most  Innovation  Leaders  and 
Strong  Innovators.  More  recently  (2007-2016), 
there has been a slow structural shift towards more 
productive  sectors.  However,  even  these  show 
relatively  low productivity  growth in international 
comparison (Schuch and Testa, 2020).  

Graph 3.4.1:  Productivity levels and change in the share of 

employment for aggregated sectors 2009 - 
2018 

[1] The size of the circles is proportional to the share of GVA 
in 2018. 
[2] Blue balloons indicate where productivity has decreased 
in this period. Gold balloons show sectors in which labour 
productivity has increased 
Source: European Commission 

in 

in 

sector 

services 

business 

dynamics 

Low 
services, 
size-distribution  aspects  and  a  lack  of  digital 
skills  have  also  restricted  productivity  growth. 
In  contrast  to  generally  rising  numbers  for  new 
the 
firms  (see  Section 3.4.3),  entry  rates 
business 
sole 
(without 
proprietorships)  are  below  the  EU  average  and 
declined  steadily  between  2008  (8.3%)  and  2016 
(6.3%) 
labour 
(Bauer  et  al.,  2020).  The 
productivity  gap  between  small  (0-9  employees) 
and  large  firms  (>250)  is  greater  than  in  peer 
countries. In particular, looking at the information 
and  communication  sector,  only  a  few  large 
companies perform  well. Given that smaller  firms 
account for a greater share of employment than in 

(44)  As defined by the European Innovation Scoreboard 2019 – 
Innovation leader: SE, FI, DK, NL, Strong innovator: LU, 
BE, UK, DE, AT, IE, FR, EE. 

40 

ManufacturingPublic administrationWholesale & RetailConstructionTransportation & StorageProfessional, Scientific & Technical ActivitiesAccommodation & Food ServicesAdministrative & support servicesFinance & InsuranceInformation & CommunicationMining, Energy & Water-2-1-100112201020304050607080%, Change in share of Employment between 2009 and 2018Labour productivity (average between 2016 and 2018 ) 
  
                                                           
3.4. Competitiveness, Reforms and investment 

the  EU  as  a  whole,  such  firm-size  distribution 
effects  may also explain the  negative productivity 
gap  in  this  sector  relative  to  the  EU  (Bauer  et  al, 
skills 
2020). 
shortages,  and  a  lack  of  digital  skills  also  hamper 
productivity  growth  (see  Section 3.3.1  and  3.4.3) 
(Vandeplas  and  Thum-Thysen,  2019;  OECD, 
2019d). 

skills  mismatches, 

Increasing 

is  also 

Total factor productivity (TFP) growth remains 
insufficient to catch up with innovation leaders. 
After nearly a decade of TFP stagnation, the trend 
has  been  more  positive  in  recent  years  (+1%  in 
2018).  However,  TFP  growth  is  not  sufficient  to 
catch up with peer countries (e.g. Germany), where 
the  post-crisis  TFP  growth  came  sooner  and  was 
more  pronounced.  As  in  most  EU  countries,  the 
growth 
in  past  decades 
(European  Commission,  2019a).  Investment,  inter 
alia into intangible assets, is an important lever for 
(Weyerstrass,  2018). 
improving  TFP  growth 
However,  while  Austria  is  investing  strongly  in 
R&D and brands,  its performance is only average 
in 
investment-to-capital 
ratio (45)  (see  below).  This  means  that  intangible 
investment  makes only an average contribution to 
productivity growth (Bauer et al., 2020). 

terms  of 

intangible 

lower 

than 

levers 

to  support  digitalisation  and 
Investments 
innovation,  coupled  with  improved  business 
regulation,  are  Austria’s  main 
for 
boosting  productivity  growth.  Austria  invests 
heavily in R&D but has so far not managed to turn 
these  investments  into  proportional  innovation 
outcomes,  as  also  reflected  by  SDG 9.  Its  overall 
innovation  performance  has  been  stagnating  and, 
thus, 
is  not 
closing (46).  A  further  bottleneck  for  productivity 
growth 
the  weak  diffusion  of  digital 
technologies  and  business  models  among  smaller 
companies,  coupled  with  average  digital  skills  in 
the  adult  population  (see  Section 3.3.4).  Firms’ 
innovation  capacity  and  digitalisation  are  tightly 
linked  to  business  dynamics,  not  least  as  regards 

to  Innovation  Leaders 

the  gap 

is 

(45)  Though especially cross-country comparison on investment 
in  intangibles  have  to  be  analysed  with  care,  as  data 
in  early  stages.  Amongst  others, 
collection 
companies 
investments  as 
expenditure  instead.  Also,  in  Austria,  ICT  output  may  be 
underestimated  as  Statistik  Austria  does  not  yet  use 
hedonistic price indices (Streissler, 2016). 

sometimes  book 

is  still 

these 

(46)  In the European Innovation Scoreboard, Austria ranked 7th 
for 2016, 10th for 2017 and 9th for 2018. Only the four best 
ranked countries were considered as Innovation Leaders 

to 

starting  up  and  scaling  up.  High  administrative 
burden  and  restrictive  regulation  in  some  areas 
also  have  a  dampening  effect  on  the  business 
environment.  Overall,  there  seems  to  be  some 
room 
improve  productivity  growth  by 
stimulating  business  entry  and  dynamism,  which 
could  also  lead  to  better  resource  allocation  and 
allow  unproductive  firms  to  leave  the  market. 
Investment  in  the  ecological  transition  could  also 
offer 
improve 
productivity and competitiveness (see Section 3.5). 

opportunities 

significant 

to 

Research and innovation 

for 

supporting 

productivity 

Austria  is  second  in  the  EU  in  terms  of  R&D 
intensity  and  continues  to  increase  its  R&D 
investments.  R&D  investment  is  an  important 
lever 
growth 
(Weyerstrass,  2018).  Austria  has  set  itself  an 
ambitious  national  R&D  expenditure  target  of 
3.76%  of  GDP  by  2020  and  wants  to  be  an 
Innovation Leader (European Commission, 2019f). 
Although  it  may  not  reach  its  target,  R&D 
expenditure increased further in 2018 to 3.17% of 
GDP (EU: 2.11%). The private sector has been the 
main  driver,  with  Business  Expenditure  on  R&D 
(BERD)  rising  faster  than  public  expenditure (47). 
The  government  supports  BERD  mainly  through 
R&D tax incentives (56% of total support in 2016) 
(OECD,  2018b),  while  direct  support  (e.g.  via 
grants)  has  decreased 
since  2015. 
However, there are big regional disparities in R&D 
expenditure  (European  Commission,  2019a).  On 
NUTS-1  level,  all  three  Austrian  regions  fare 
among  the  top  Strong  Innovators,  with  West 
Austria  performing  better  on 
‘Regional 
Innovation  Index’  (119.9)  than  South  (116.2)  and 
East  Austria  (114.8).  Of  the  three,  West  Austria 
also  saw  the  biggest  improvement  from  2011 
(European Commission, 2019g). 

slightly 

the 

Scientific  impact  indicators  show  potential  for 
increasing  the  effectiveness  of  the  R&I  system. 
Although  its  overall  scientific  performance  is 
above the EU average(48), it remains below that of 
other  EU  countries  with  similar  public  R&D 
intensities(49)  (Schuch  and  Testa,  2020).  Austria 
excels  in  fewer  scientific  fields  and  performs 

(47)  Business  R&D  intensity  2.22%;  annual  growth  rate  2.5%; 
public R&D intensity 0.93%; annual growth rate 1.3%. 
(48)  Austria ranked 8th in the EU for top 10% publications and 

4th for international co-publications. 
(49)  Finland, Sweden, Netherlands, Belgium.  

41 

 
                                                           
                                                           
3.4. Competitiveness, Reforms and investment 

considerably below the EU average in engineering 
and  medical  sciences  (European  Commission, 
2018d).  There  was  an  overall  increase  in  public 
R&D  investment  over  the  last  decade,  mainly  for 
applied  research  although  public  competitive 
funding  for  basic  research  has  also  increased  in 
recent  years.  The  current  Research  Technology 
and  Innovation  (RTI)  strategy  acknowledges  the 
need  to  improve  framework  conditions  for  basic 
research.  In  early  2019,  the  federal  government 
new 
announced 
(the 
measure 
‘Exzellenzinitiative’) 
to  promote  cutting-edge 
research.  This  is  included  in  the  new  government 
programme  and  will  be  managed  by  the  Austrian 
Science  Fund  (FWF)  over  the  next  legislative 
period. 

a 

Graph 3.4.2:  Austria’s innovation strengths and weaknesses 

‘Länderdialog’ (a policy platform for national and 
regional governments and agencies in science and 
R&I).  The  new  government  plans  to  adopt  it  in 
2020. It is important that all actors, including SME 
representatives,  are  actively  involved  also  in  the 
implementation of the strategy. 

R&I  priorities  are  well  aligned  with  EU 
priorities  on  sustainable  development.  Austria's 
energy  and  climate  strategy  ‘#mission  2030’ 
stresses the importance of R&I for achieving long 
term  climate  and  energy  targets  (BMNT/BMVIT, 
2018).  In  May  2018,  Austria  joined  the  global 
research  initiative  ‘Mission  Innovation’  (BMVIT, 
2018)  in  order  to  accelerate  its  clean  energy 
transition  (see  also  Section 3.5). This  includes  the 
commitment to double public R&D investments in 
clean  energy  by  2020/2021  in  selected  priority 
areas. 

in 

in 

and 

science 

technology, 

science  and 

Although Austria has a strong human resource 
base 
female 
researchers are still underrepresented. In 2017, 
Austria  ranked  fourth  in  the  EU  in  terms  of  new 
engineering (50). 
graduates 
However,  the  underrepresentation  of  women  in 
research may signal that the economy is not using 
its  human  resource  potential  to  the  full  (OECD, 
2018c).  The  proportion  of  female  researchers, 
including in the business sector, remains below the 
EU  average  (European  Commission,  2019h) (51). 
As  the  result  of  measures  to  achieve  gender 
balance  (e.g.  individual  support  for  early-stage 
researchers),  the  proportion  of  women  among 
professors 
in  public  universities  has  grown 
significantly  and  progress  was  made  on  ensuring 
gender 
committees 
parity 
(BMBWF/BMVIT/BMDW, 2019). 

in 

in 

assets 

intangible 

Austria’s  economy  could  benefit  from  more 
investments 
that 
complement  R&D  activities.  In  the  last  two 
decades,  intangible  assets  complementing  R&D 
(e.g.  software,  databases,  copyrights,  training, 
design etc.) have grown in importance as drivers of 
innovation  and  growth.  Investments  in  intangible 
assets could reverse the  slowdown in productivity 
growth (see above). However, Austria’s public and 

(50)  Per 

thousand  population  aged  25-34, 

significantly 

increasing in the last decade 

(51)  Average  29%  women  researchers  in  AT  vs.  33 %  in  the 

EU.  

Source: European Commission, European Innovation 
Scoreboard 

Smart  specialisation  has  helped  to  strengthen 
cooperation  and  public-private  dialogue  on 
innovation,  but  regional  disparities  persist. 
Austria’s approach to smart specialisation is based 
on the national RTI strategy and regional strategies 
at the level of the nine Länder. Regional priorities 
are  aligned  with  and  complement  the  thematic 
priorities  in  the  federal  strategy  (OECD,  2018c). 
However,  R&D  expenditure  varies  significantly 
across  regions,  which  could  be  addressed  by 
strengthening  cooperation  between  the  Austrian 
Länder  and  with  regions 
in  other  countries 
(OECD,  2018c).  The  national  RTI  strategy 
2021-2030  is  currently  being  finalised  in  close 
consultation  with  a  wide  range  of  stakeholders, 
including  the  nine  Länder,  via  the  twice-yearly 

42 

0510152025300102030ATGap to top performerEU average 
  
                                                           
private  sector  invests  less  into  intangible  assets 
than  those  in  Innovation  Leaders  or  other  Strong 
Innovators (52) (Bauer et al., 2020). 

Digital transformation 

for 

lever 

firms 

productivity 

Small firms are lagging behind in the adoption 
of new digital technologies and business models. 
Companies’  take-up  of  digital  technologies  is  an 
growth 
important 
(Weyerstrass, 
rank 
2018).  Austrian 
particularly  low  in  cloud  computing  services,  a 
technology which is especially relevant for smaller 
businesses,  and  the  use  of  big  data  (European 
Commission, 2019e). After a call for tenders, three 
Digital 
in 
September/October  2019  (see  also  Box  3.4.1). 
Each relies on a network of partners and provides 
mainly  SME  with  digital  knowhow  (BMDW, 
2019b).  Austria  plans  to  establish  2-3  additional 
Digital  Innovation  Hubs  in  2020.  The  ‘SME 
Digital’ programme, which offers support to SMEs 
for  digitalisation,  ended  in  March  2019,  and  was 
relaunched  in  October  (BMDW,  2019a).  It  can 
now  support  also  the  actual  implementation  of 
digitalisation projects in SMEs.  

Innovation  Hubs  were 

set  up 

strategy 

Digitalisation  remains  a  priority  for  Austria, 
but the coherence and effectiveness of its efforts 
would  benefit  from  overall  monitoring  and 
benchmarking.  Austria  adopted  an  overall 
digitalisation 
in  2017,  which  was 
comprehensive  but  lacked  relevant  benchmarks 
and  progress  monitoring.  Important  digitalisations 
projects  were  implemented  since  then  and  the 
development  of  a  new  strategy  started  in  2019. 
This  includes  work  on  thematic  actions  plans  and 
government 
possible 
programme confirms Austria’s ambition to become 
one of the digital leaders in the EU. Among many 
digitalisation projects, it announces a new artificial 
intelligence strategy with a strong focus on ethical 
aspects. 

indicators.  The 

new 

(52)  SPINTAN and INTAN data 

3.4. Competitiveness, Reforms and investment 

3.4.2.  NETWORK INDUSTRIES 

Broadband 

Broadband  connectivity  is  improving,  but  the 
take-up  of  mobile  broadband  and  fixed  (ultra) 
fast  broadband  is  low.  Austria  ranks  at  the  top 
when  it  comes  to  mobile  coverage,  but  is  below 
average  regarding  mobile  uptake.  Fixed  ultrafast 
broadband  coverage  (58%)  is  also  below  the  EU 
average  (60%),  mainly  due  to  the  high  costs  of 
fibre  rollout  (lack  of  ducts),  low  retail  prices  and 
unwillingness  to  pay  for  higher  bandwidths.  Fast 
next  generation  access  broadband  coverage  is 
91%,  which  places  Austria  in  the  top  third  in  the 
EU and 8 percentage points above the EU average. 
However,  Austria  lags  significantly  behind  its 
peers  in  terms  of  ‘fibre  to  the  premises’  (FTTP) 
coverage,  achieving  a  modest  13%  in  2018  (EU: 
30%), with marked differences between urban and 
rural areas (see Box 3.4.4).  

to 

Austria  is  implementing  ambitious  broadband 
strategies. By the end of 2018, more than 800,000 
improve 
people  benefited  from  measures 
connectivity  under  Austria’s  Broadband  Strategy 
2020  (BMVIT,  2019a).  As 
is 
approaching  its  end,  Austria  adopted  a  new 
strategy for the period up to 2030 in August 2019 
(BMVIT,  2019b)  (see  more  details  in  Box 3.4.4). 
Austria’s  ambition  to  become  a  leader  in  the 
rollout  of  5G  appears  to  be  on  track  after  a 
in 
successful  3.4-3.8 GHz 
March 2019. 

frequency  auction 

this  strategy 

Energy and rail 

Improvements  to  the  gas  infrastructure  could 
strengthen  Austria’s  role  as  a  regional  hub. 
Austria is well positioned as a regional hub for gas, 
ensuring  supply  for  neighbouring  markets.  While 
gas flow volumes have increased steadily in recent 
years,  improvements  in  gas  infrastructure  could 
further  strengthen  this  position.  A  number  of 
ongoing  projects  are  aimed  at  establishing  new 
connections  with  neighbouring 
routes 
countries, and potential new gas fields in the Black 
Sea. 

and 

43 

 
                                                           
 
3.4. Competitiveness, Reforms and investment 

Box 3.4.4: Digitalisation as an opportunity for rural Austria 

Realising the opportunities that digitalisation can offer to its rural areas is of particular importance 
for  Austria.  Around  40%  of  the  population  lives  in  predominantly  rural  regions (1)  and  there  are  many 
‘hidden champions’ among the businesses based there. Rural regions contribute considerably to  GDP, not 
least  as  regards  agriculture  and  nature  tourism.  However,  commuting  into  cities  is  a  major  source  of 
emissions (see Section 3.5.1) (Dijkstra and Poelman, 2014). Digitalisation reduces the costs of overcoming 
geographical distances, e.g. by teleworking.  Additionally, it increases the availability of services that were 
previously  limited  to  cities,  and  allows  businesses  to  acquire  new  customers  further  away.  There  is  still 
scope  to  improve  digitalisation  in  rural  areas  in  Austria  and  this  is  one  of  the  priorities  on  the  political 
agenda. Key levers in this regard are:  

1. Filling gaps in rural digital infrastructure 

Filling the remaining gaps in connectivity is key to ensure that rural areas can fully benefit from the 
opportunities  of  digitalisation.  Austria  is  lagging  behind  in  the  provision  of  fast  and  ultrafast  fixed 
broadband access in rural areas, as compared with both its own urban areas and rural areas in other Member 
States. As part of the initiative ‘Broadband Austria 2020’, Austria provisioned €1 billion for the deployment 
of  faster  broadband  networks  from  2015.  Consequently,  from  2016,  rural  fast  broadband  (next  generation 
access) coverage has more than doubled, from 28% of households (EU: 36%) to 57% (EU: 52%) (European 
Commission,  2019e).  Hence,  Austria  moved  from  8 pps  below  the  EU  average  to  5 pps  above.  However, 
companies and individuals do need even faster broadband networks to take full  advantage of digitalisation. 
Ultrafast  broadband  coverage  (defined  as  100 Mbps  downstream)  in  rural  areas  is  below  the  EU  average 
(24%  vs  29%).  Among  broadband  technologies,  fibre  is  currently  the  fastest  and  most  future-proof 
technology, but in 2018 rural fibre-based broadband coverage was significantly below the EU average (6% 
vs 14%). The gap has widened since 2016, when it stood at 2 pps, as other Member States built rural fibre-
based broadband at a much quicker pace. However, rural mobile ‘4G’ broadband coverage is high (99% of 
households), relatively affordable (European Commission, 2018e) and might be used by many citizens as a 
substitute to rural fixed broadband connectivity. 

Austria  has  set  itself  ambitious  targets  to  close  connectivity  gaps  in  rural  areas.  The  current  2030 
broadband  strategy  (see  also  Section 3.4.2)  aims  to  provide  full  coverage  of  gigabit-capable  connections 
throughout  the  country  by  2030.  It  sets  specific  intermediate  targets,  such  as  providing  country-wide 
availability  of  5G  by  2025.  Despite  the  current  low  levels,  it  also  envisages  to  provide  full  coverage  of 
ultrafast  broadband  connections  by  the  end  of  2020.  At  the  Länder  level,  Lower  Austria  provides  an 
example of best practice: it created a company to provide fibre-to-the-home infrastructure and offers open 
access to service providers (nöGIG). The approach has been very successful and is currently being replicated 
in other regions. 

2. Ensuring opportunities for digital skills acquisition in rural areas 

Promoting  digital  skills  in  rural  areas  could  help  people  to  take  full  advantage  of  improved 
broadband  connections.  Rural  areas  offer  fewer  opportunities  for  digital  skills  training,  making  it  more 
difficult and costly. In 2018, only 34% of the population from 30 to 34 years in rural areas had  a tertiary 
educational level, compared with 49% in cities and only 16% of 18 to 64 year olds participated in education 
and  training  (last  four  weeks,  formal  and  non-formal  education  and  training),  compared  with  27%  in 
cities (2).  Often,  there  is  also  less  on-the-job  digital  skills  training  in  rural  areas,  due  to  lower  business 
density and the lower average ICT intensity of employers. Overall, only 15% of people employed in rural 
areas  work  in  ICT-intense  companies,  compared  with  25%  in  urban  areas  (Firgo  et  al.,  2018,  p. 106). 
However, rural areas vary widely; in some, only 2-3% of employees work in ICT-intense companies. It is 
therefore vital to provide additional support for digital skills in these areas, as reflected in the 2017 strategy 
for rural areas (Masterplan Ländlicher Raum). A government commissioned study also shows ways to create 
more jobs for women in rural areas (ABZ Austria/prospect Research & Solution, 2019). The subject ‘Digital 
Basic  Education’  has  been  made  compulsory  as  of  2018-2019  and  will  be  introduced  at  lower  secondary 
level in all schools, for all pupils, to acquire digital skills. The new government programme also provides for 
numerous measures to digitalise school education and promote digital skills. 

44 

 
3.4. Competitiveness, Reforms and investment 

3. Providing business support for digitalisation in rural areas  

Targeted  support  for  firms  in  rural  areas  could  improve  the  use  of  digital  business  models.  Most 
Austrian  SMEs  are  aware  of  digital  challenges  and  opportunities,  but  struggle  to  grasp  sufficiently  the 
underlying  technology,  in  particular  where  ICT  is  not  their  core business.  The  39%  of  SMEs  that  did not 
improve their understanding of digitalisation between 2018 and 2019 is a sign of these difficulties. About 
22% of SMEs see digitalisation as an opportunity to increase their staff, while 9% expect a decline (Arthur 
D. Little, 2019). It is very important that these firms receive support, but SMEs in rural areas typically have 
fewer  support  structures  nearby  than  those  in  agglomerations.  To  address  this  challenge,  Austria  created 
three  digital  innovation  hubs  (DIHs).  The  DIHs  are  located  in  East  and  West  Austria,  making  them  more 
accessible  by  rural  SMEs.  The  ‘SME  Digital’  initiative  (see  Section 3.4.1)  advises  SMEs  (including  those 
located  in  rural  areas)  on  digitalisation.  Since  2019,  it  has  also  provided  follow-up  support  for  the  actual 
implementation of digitalisation projects. 

(1)  According  to  the  urban-rural  typology  applied  to  NUTS  level  3  regions  (https://ec.europa.eu/eurostat/statistics-

explained/index.php?title=Glossary:Urban-rural_typology ) 

(2)  Rural  areas  and  cities  classified  by  local  administrative  units  (LAUs)  according  to  the  degree  of  urbanisation 
Eurostat. 
urbanisation 

(Eurostat, 
is 
https://ec.europa.eu/eurostat/cache/RCI/#?vis=degurb.gen&lang=en. 

defined 

degree 

2018). 

with 

The 

line 

of 

in 

capacity  will 

Internal electricity connections are increasingly 
becoming  bottlenecks.  The  planned  increases  in 
renewable  generation 
further 
heighten  the  need  for  network  enhancement  (see 
Section 3.5).  Wind  power  and  hydropower  sites, 
which  have  the  highest  potential  for  expanding 
renewables,  are  not  always  in  the  vicinity  of 
energy-intensive  industry.  Network  enhancements 
have been slow due to lengthy permit procedures.  

transport, 

There  is  scope  to  improve  competition  in  the 
rail  sector.  In  passenger  rail 
the 
incumbent ÖBB maintains its overwhelming share 
of  the  market  for  public  service  contracts.  The 
remainder  (around  10%  in  2016)  is  split  between 
ten companies. This situation is partly the result of 
such contracts being attributed by direct award. In 
total,  there  have  been  16  companies  active  in 
passenger  rail  transport  in  the  year  2018.  Rail 
freight  has  seen  greater  market  opening  but  the 
outcome  is  modest  compared  to  some  other  EU 
countries.  ÖBB’s  competitors  had  reached  a 
market share of 26% in 2016, compared to up 63% 
for  non-incumbents 
in  other  Member  States 
(European  Commission,  2019a).  Their  share 
increased  to  33%  in  2018  (Schienen-Control, 
2019). 

3.4.3.  MARKET FUNCTIONING, GOODS AND 

SERVICES SECTOR 

Business dynamics 

in 

start-up 

companies 

them  active 

With  overall  framework  conditions  favourable 
for  businesses,  Austria  performs  well  in  terms 
of start-ups. Austria has seen the emergence of a 
dynamic  start-up  eco-system.  The  growth  in  the 
number of start-ups (20% a year between 2004 and 
2016)  continuous  steadily.  Start-ups  are  prevalent 
in  the  knowledge-intensive  service  sector,  with 
most  of 
IT  and  software 
development  (AustrianStartups,  2018).  Vienna  is 
the  start-up  hub,  hosting  more  than  half  of  all 
(European 
registered 
three 
Commission,  2019i).  Although  almost 
quarters 
operate 
internationally,  access  to  markets  is  one  of  the 
biggest hurdles for scale-up and growth (European 
Commission, 2019i). Survival rates remain high. A 
third  of  Austrian  SMEs  are  facing  ownership 
transfers,  which  will  in  many  cases  present  a 
particular  challenge  in  their  lifecycle  (OECD, 
2019a). The new government programme includes 
measures  to  facilitate  such  transfers.  In  2019, 
Austria launched several initiatives to improve the 
business  environment  for  start-ups,  including  on 
access  to  finance  and  training  for  employees. 

start-ups 

already 

of 

45 

 
  
 
 
3.4. Competitiveness, Reforms and investment 

effective  entry  barrier.  While  the  retail  sector  has 
seen  relatively  stable  growth,  store-based  retail 
experienced slightly slower growth in 2018 than in 
2017 and a noticeable drop in overall selling space. 
The  high  costs  for  operating  retail  stores  together 
with  regulatory  barriers,  such  as  restrictive  and 
inflexible  opening  hours,  contributed  to  this.  The 
growing trend towards online retail, in response to 
growing consumer demand for 24/7 shopping, puts 
pressure  on  stationary  retailers.  Retail  prices 
remain high compared to neighbouring countries’, 
with food prices now the second highest in the EU 
(up  from  third  in  2017).  Only  13%  of  SMEs  are 
selling  online,  which  is  low  in  European  terms. 
However,  most  of  those  are  also  selling  abroad, 
unlike in other Member States.  

in 

less 

including 

regions  with 

The  tourism  sector  continues  to  perform 
strongly,  but  with  underlying  structural  risks. 
The  tourism  and  leisure  sector  contributes  15.3% 
of  GDP  and  provides  employment  for  275,000 
people, 
job 
opportunities  (BMNT,  2019).  The  90,000+  firms 
in  the  sector  are  benefiting  from  continued  strong 
demand  in  all  regions  (+4.1%  guests  and  +3.7% 
overnight stays in 2018; Statistik  Austria, 2019b). 
Growth  rates  range  between  6.2%  in  Vienna  and 
5.9% in Upper Austria to 0.3% in Burgenland (the 
national  average  was  4.1%).  This  boom,  coupled 
with  a  generally  tight  labour  market,  has  resulted 
in  tourism-related  skill  and  labour  shortages. 
Online  business  models 
least  online 
accommodation  platforms)  provide  opportunities, 
but  put  also  pressure  on  traditional  tourism. 
Administrative  burden  remains  a  key  concern  in 
the  sector  (WKÖ,  2019a).  In  March  2019,  the 
government presented the masterplan ‘Plan T’ (see 
to 
Section 3.5.2),  which 
monitor the overall health and value creation of the 
tourism  sector.  Implementation  of 
the  2017 
tourism digitalisation strategy is ongoing. 

indicators 

foresees 

(not 

Industry and manufacturing 

The  manufacturing  sector  has  seen  decent 
growth,  but  would  benefit  from  a  stronger 
application of Single Market rules. Employment 
in the manufacturing sector grew by 1.5% in 2017. 
Most  manufacturing  jobs  are  in  the  production  of 
food,  metal  products,  machinery,  and  equipment. 
Styria  focuses  inter  alia  on  the  manufacturing  of 
motor  vehicles  and  (semi-)  trailers  and  is  more 
likely  than  other  regions  to  be  affected  by  the 

These  measures  were  bundled 
initiative presented in May 2019.  

in  a  start-up 

proportion 

companies.  The 

However,  scaling-up  remains  a  problem  for 
Austrian 
of 
high-growth firms is below the EU average: 6.8% 
vs 9.9% (OeNB, 2018; Flachenecker et al., 2020). 
High-growth firms are particularly prevalent in the 
services  sector  and  especially  for  ICT  (European 
Commission, 2019i). Austria has one of the lowest 
proportions in the EU of high-growth firms active 
in 
innovative  sectors  (European  Commission, 
2019f). Its economic structure is characterised by a 
large  manufacturing  sector  and  firms  focusing  on 
incremental  innovation  may  account  for  this. 
Another key factor influencing the scaling-up rate 
of  smaller  firms  is  access  to  finance,  in  particular 
risk  capital  (see  Section 3.2.3).  More  support  for 
innovative firms in high-tech sectors, such as ICT, 
could  provide  growth  opportunities 
(OECD, 
2018c). 

Service sector  

than 

intra-EEA 

Restrictive  regulation  remains  a  problem, 
particularly  in  the  area  of  business  services, 
trades, professions, and retail. The regulation of 
professionals,  such  as  accountants,  architects, 
engineers and real estate agents, is more restrictive 
than  the  EU  average  (European  Commission, 
2016a,  2016b,  and  recently  confirmed  in  OECD, 
2019e).  Higher 
average 
restrictiveness  has  also  been  demonstrated  by  the 
OECD for construction services and wholesale and 
retail  services  (OECD,  2019g).  In  2017,  the 
Commission  identified  specific  restrictions  on 
seven  key  professions; 
largely 
unaddressed.  The  2017  revision  of  the  Trade 
Licence  Act  (Gewerbeordnung)  brought  benefits 
but  overall  restrictiveness  of  trades  regulation 
remains  high.  The  new  government  programme 
does  not  announce  further  reforms  in  this  area. 
Regulatory 
investment, 
productivity  enhancing  allocative  efficiency,  job 
creation and innovation in the services sector (see 
also  Section 3.4.1  and  European  Commission, 
2019a).  They  also  affect  other  parts  of  the 
economy  that  rely  on  competitive  and  innovative 
services. 

these  remain 

restrictions 

limit 

Retail  trade  continues  to  be  highly  regulated. 
The high number of licences and permits needed to 
in  commercial  activity  represents  an 
engage 

46 

 
3.4. Competitiveness, Reforms and investment 

good user centricity. The biggest progress is found 
in  Tyrol  (20 pps),  Salzburg  and  Burgenland 
(16 pps  each).  Businesses  profit  from  a  one-stop 
online  tool  for  the  creation  of  one-man  business 
(BMBWF/BMVIT/BMDW,  2019).  Only  10%  of 
practitioners  use  e-prescriptions,  which  makes 
Austria  one  of  the  Member  States  with  the  most 
to  do  on  e-health.  The  new 
catching  up 
government 
further 
programme 
measures to improve digital public services. 

announces 

Public procurement 

There  is  scope  to  improve  public  procurement. 
The 2018 Federal Act on Public Procurement laid 
down  new  rules  for  e-procurement  and  the  open 
data  source.  However,  the  authorities  and  entities 
under EU procurement legislation still publish only 
a  small  proportion  of  works,  goods  and  services 
contracts on EU level. At a value of only 2.1% of 
GDP,  this  is  around  half  the  EU  average  (4.1%). 
As  a  result,  a  lot  of  the  potential  offered  by  the 
2014  Public  Procurement  Directives 
remain 
untapped. Especially in the health sector, Austria is 
among  the  six  Member  States  with  the  lowest 
publication  rate  (contracts  worth  0.2%  of  GDP  in 
2017). It has not yet adopted a professionalisation 
strategy for tendering authorities. Such as strategy 
would  be  helpful,  particularly  in  light  of  the  very 
heterogeneous  and  decentralised 
landscape  of 
public buyers.  

Austria  has  started  to  use  public  procurement 
to  promote  the  ecological  transition.  Austrian 
public procurement amounts to around €40 billion 
a  year  (roughly  13.3%  of  GDP)  (IÖB,  2019). 
Recognising its potential to promote the ecological 
transition,  Austria  developed  a  tool  box  for  green 
public  procurement.  The  National  Action  Plan  on 
Sustainable Public Procurement sets criteria for 17 
procurement 
Federal 
groups,  which 
Procurement Agency has adopted as requirements. 
The  new  government  programme  announces 
further  measures 
to  strengthen  green  public 
procurement,  including  a  revision  of  the  action 
plan  on  sustainable  public  procurement.  While 
federal  authorities  have 
the  Federal 
Procurement  Agency  for the  purchase of products 
and services, Länder and municipalities do so on a 
voluntary basis. 

to  use 

the 

in 

the  automotive 
current  structural  changes 
industry.  The  numbers  of 
incompletely  or 
incorrectly transposed EU directives and of delays 
in  the  transposition  of  directives  in  Austria  are 
above  the  EU  average.  Delays  in  complying  with 
Court rulings are also particularly long. Ineffective 
enforcement  of  Single  Market  rules  increases 
firms, 
uncertainty 
foreign 
reducing 
to  make  additional 
investments.  The  correct  and  timely  transposition 
of  Single  Market  rules  could  thus  boost  Austria’s 
productivity  and  welfare  in  the  long  run  (see 
rights  of 
Section 3.4.1).  The  Single  Market 
Austrian businesses and citizens would also benefit 
from adequate resources for the Austrian SOLVIT 
centre. 

for  domestic  and 
incentives 

their 

3.4.4.  INSTITUTIONAL QUALITY AND 

GOVERNANCE 

Administrative burden and e-government 

(WKÖ, 

2019b). 

High administrative burden remains a problem. 
The  comparatively  high  density  of  regulation  and 
the  resulting  burden  remain  a  major  concern  for 
businesses 
Reducing 
administrative burden has therefore been a priority 
for  some  time  now.  The  2018  ‘Clearing  Law’ 
(Zweites Bundesrechtsbereinigungsgesetz) resulted 
in  the  repeal  of  around  2,500  outdated  legal  acts. 
As  most  of  these  had  limited  prior  applicability, 
businesses  did  not  feel  direct  burden  reduction. 
They  benefited  however  from  the  reduced  overall 
complexity.  Austria  adopted  a  first  law  to  abolish 
instances of over-fulfilment of EU requirements in 
May  2019.  Further  efforts  in  this  regard  are  in 
preparation  and  have  been  confirmed  in  the  new 
government programme. 

above 

scores 

Austria  is  traditionally  a  front-runner  in  e-
government  services,  but  has  still  room  for 
improvement.  Austria 
the 
EU-average in providing digital public services to 
its  citizens.  It  was  ranked  12th  among  Member 
States  for  2018,  one  place  down  from  2017 
(European Commission, 2019j). The percentage of 
individuals  who  had 
interacted  with  public 
authorities  by  internet  was  66%  in  2018,  an 
increase  of  13 pps  since  2012.  This  is  also  due  to 

47 

 
3.4. Competitiveness, Reforms and investment 

Box 3.4.5: Investment challenges and reforms in Austria 

Section 1. Macroeconomic perspective  

Since  2015,  business  investment  has  picked  up  significantly  across  all  areas,  thanks  to  high  capacity 
utilisation,  strong  housing  demand  and  overall  low  financing  costs.  The  investment  ratio,  which  has 
consistently  been  above  euro  area  average,  has  also  improved,  mainly  due  to  the  increase  in  business 
investment, while household and public investment have remained broadly stable (see Section 1). However, 
bank  loans  are  still  the  main  source  of  external  funding  for  SMEs  and  equity  capital  is  generally  hard  to 
access (see Section 3.2.3).  

Section 2. Assessment of barriers to investment and ongoing reforms 

There are barriers to investment, but they are relatively modest overall. Continued efforts to reduce the tax wedge 
(see  Section 3.1.2),  improve  the  business  environment,  make  more  equity  capital  available  and  reduce  regulatory 
barriers will help strengthen overall investment and boost productivity (see Sections 3.2, 3.4.1 and 3.4.3). 

Selected barriers to investment and priority actions underway: 

1. Austria’s tax mix relies heavily on labour taxation, which creates disincentives for labour demand and supply. At 
the  same  time,  the  revenue  potential  of  environmental  and  wealth-related  taxes  remains  significantly  underused. 
While  recent  measures  reduce  the  tax  wedge  on  labour  and  incentivise  environmentally  beneficial  consumption, 
they are not part of a comprehensive future-oriented reform strategy  to foster fairness and inclusive growth while 
combating climate change (see Section 3.1.2).  

2. The high administrative burden in Austria discourages investment, in particular among SMEs. Restrictive 
regulation  in  the  services  sector  dampens  investment  and  competition  among  service  providers,  which  in 
turn increases input costs for manufacturing firms. Austria has adopted a ‘clearing’ law and got rid of some 
instances of gold-plating, with further initiatives pending. The small and volatile market for equity capital 
(notably risk capital) is a barrier to the scaling-up of innovative, growth-oriented firms (see Sections 3.2.3, 
3.4.1 and 3.4.3).  

48 

Regulatory / administrative burdenCSRTaxationCSRPublic administrationAccess to financeCSRPublic procurement /PPPsCSRCooperation between 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, skills, lifelong learning EnergyTransportLegend:No barrier to investment identifiedSome progressCSRInvestment barriers that are also subject to a CSRSubstantial progressNo progressFully addressedLimited progressNot assessed yetPublic administration / business environmentFinancial sector / taxationR&D&ISector specific regulationLabour market / education 
 
3.5. ENVIRONMENTAL SUSTAINABILITY 

Austria  faces  increasing  economic  and  health 
costs  from  climate  change  and  environmental 
degradation. The proportion of people who report 
exposure  to  pollution  and  other  environmental 
problems  has  not  diminished  in  recent  years 
(European  Commission,  2019k).  Temperature 
increases in the last few years have been more than 
twice  the  global  average.  As  an  Alpine  country, 
Austria is prone to prolonged dry periods and heat 
waves.  The  risk  of  forest  fires  is  expected  to 
increase,  along  with  outbreaks  of  heat-tolerant 
pests.  These  and  other  effects  of  climate  change 
will  necessitate  adaptation  measures  to  prevent 
adverse  macroeconomic  developments,  mitigate 
increasing  health  costs  and  maintain  or  restore 
ecosystem health. 

More  efforts  are  also  needed  to  meet  the 
renewable  energy  targets.  The  use  of  energy 
from renewable resources (as reflected by SDG 7) 
has  stagnated  at  33.4%  of  gross  final  energy 
consumption, though only 0.6 pps below the 2020 
target.  Additional  efforts  in  the  deployment  of 
renewable  energy  would  not  only  help  Austria  to 
make its contribution to the 2030 EU-wide goal of 
32%,  but  also  on 
increase  of 
the 
renewables in its electricity consumption to 100% 
(in  2017  the  share  of  renewables  in  electricity 
generation was at 77%, one of the highest levels in 
the EU. To that effect, Austria seeks to step up its 
already  significant  production  of  hydroelectricity. 
This will also put pressure on the need for internal 
network enhancements (see Section 3.4.2). 

intended 

targets.  While 

(GHG)  emission 

Austria is at risk of missing its 2020 greenhouse 
gas 
total 
emissions  decreased  by  3.7%  in  2018,  with  the 
emissions  from  industrial  processes  declining  by 
close  to  10%.  However,  the  transport  sector 
witnessed  a  further  increase.  From  1990  to  2017, 
GHG emissions have slightly increased in Austria, 
while they  have  significantly  decreased in the EU 
as  a  whole  (see  Graph 3.5.1),  as  also  reflected  by 
SDG 13.  Overall,  in  2017,  the  main  sources  of 
GHG  emissions  (including  ETS)  were  the  energy 
and  industry  sectors  (44.9%),  transport  (28.8%), 
buildings  (10.1%)  and  agriculture  (10.0%)  (UBA, 
2019).  Per  capita  GHG  emissions  (9.35 t  CO2eq) 
were above the EU average (8.45 t) (EEA, 2019).  

Graph 3.5.1:  Change in total GHG emissions 1990-2017 

The  national  energy  and  climate  plan  (NECP) 
lacks  detail  on  implementation  and  costing. 
Austria  published  the  latest  version  of  the  NECP 
on 18 December 2019. It foresees to meet its 2030 
renewables 
the  energy 
target  (46-50%)  and 
efficiency target (25-30%) with existing measures. 
At  the  same  time,  the  NECP  acknowledges  that 
Austria  requires  additional  measures  to  reach  the 
national  GHG  emissions  reduction  target  of  36% 
and therefore includes several options for measures 
for the new government to evaluate and implement 
to  meet  the  2030  goals.  The  new  government 
commits  to  adjust  the  NECP  to  ensure  the 
attainment  of  the  2030  GHG  emissions  goal  and 
seeks to achieve carbon neutrality by 2040. (53) In 
the course of 2020, the Commission will assess the 
final NECPs submitted by Member States. 

to 

Nature-based 

complements 

Nature-based  solutions  have  great  climate 
mitigation  potential  and  are  vital  and  cost-
sector-specific 
effective 
decarbonisation. 
solutions 
complement  decarbonisation  measures  in  various 
sectors.  They  focus  on  reducing  emissions  from 
the  land  sector  (including  agriculture,  forests  and 
land  use)  and  protecting  and  enhancing  natural 
carbon sinks (54). Overall, they could deliver over a 
third  of  the  emissions  reductions  needed  by  2030 

Source: European Commission 

(53)  In  particular,  the  new  government  supports  the  upwards 
revision of the EU 2030-2050 climate and energy goals, the 
provision of sufficient financial means in the EU budget to 
fight  for  the  ecological  transition,  an  EU  Carbon  Border 
Tax  Adjustment  or  border  tariffs,  and  an  EU-wide  carbon 
floor price. 

(54)  A carbon sink is any system that absorbs more carbon than 

it emits. 

49 

707580859095100105110115120EUAustriaIndex, 1990= 100Green house gas emissions(in CO2 equivalent) 
 
  
                                                           
3.5. Environmental sustainability 

to  keep  global  warming  well  below  2 °C  (IPBES, 
2019). In Austria, forests play a key role in climate 
mitigation,  accounting  for  58%  of  natural  carbon 
climate-change-induced 
storage. 
extreme  weather  events  and  pest  infection,  which 
particularly 
ecosystems, 
affect  monoculture 
threaten their resilience. 

However, 

Investment  in  the  ecological  transition  could 
boost  the  economy  and  create  jobs.  Overall, 
Austria’s  environmental  goods  sector  has  been 
growing  strongly,  providing  41,400  jobs  in  2015, 
three  times  as  many  as  in  1993,  while  turnover  is 
more  than  six  times  higher.  It  has  been  estimated 
that for each new job in that sector, two additional 
jobs  are  created  in  related  sectors  (BMVIT, 
2017b). Austria is already strong in some eco-tech 
industries,  such  as  water  management  and  waste 
treatment,  which  is  reflected  in  SDG 6.  Investing 
in  the  eco-tech  sector,  green  skills  and  eco-
innovation  could  bring  further  positive  economic 
and  employment  effects.  It  could  help  Austria 
achieve its climate  and environmental goals  while 
helping  firms  compete  on  the  world  market. 
Although public investment in climate, energy and 
the  environment  decreased  in  2018,  there  is  a 
growing  number  of  initiatives  to  facilitate  green 
private 
the  new 
government programme. 

investments, 

including 

in 

3.5.1.  TRANSPORT-RELATED EMISSIONS 

the 

emission 

for  GHG 

Reducing transport-related emissions is key for 
Austria’s  shift  to  carbon  neutrality,  and  for 
meeting  air  quality  standards.  According  to  the 
the  greatest 
NECP, 
transport  sector  has 
(-
reduction 
potential 
7.2 million t  CO2eq  by  2030  compared  to  2016). 
Between  1990  and  2017,  CO2  emissions  from 
transport  increased  by  79.6%,  while  overall  CO2 
(excluding 
by 
emissions 
land-use-change 
including 
emissions, 
international aviation and indirect CO2) (European 
Commission, 2019k). 

14.2% 
but 

increased 

More  and  more  transalpine  traffic  is  using 
Austrian  crossings.  In  2018,  Austria’s  share  of 
total  transalpine  traffic  reached  a  record  (62%), 
while France’s (20.3%) and Switzerland’s (17.7%) 
fell  slightly.  Between  2017  and  2018,  almost  all 
growth  (95%)  in  Austria’s  transalpine  freight 
traffic was in road transport, the remainder in rail. 

by 

4.7%, 

volumes 

Road 
to 
increased 
153.7 million tonnes,  while  rail  volumes  grew  by 
only  0.6%,  to  69.8 million tonnes.  In  2018,  the 
share of rail in Austria’s transalpine freight traffic 
was the lowest ever recorded (27.8%); it was much 
higher  in Switzerland (70.5%)  and  much lower in 
France (7.4%). 

Austria  has  taken  some  steps  to  shift  traffic 
from  road  to  rail.  Austria’s  transport  policy 
incentivises  a  shift  to  rail,  in  particular  for 
transalpine traffic. Transiting road freight transport 
is being made expensive through road tolls and, at 
least in Tyrol, subject to sectoral driving bans and 
quantitative  restrictions  (Blockabfertigung)  on  the 
access  highway  to  the  Brenner  Pass.  In  contrast, 
rail  freight  benefits  from  various  subsidies  and 
favourable  regulation,  e.g. making  rail  transport 
more 
supporting 
unaccompanied  combined  transport,  the  transport 
of trucks on rail (Rollende Landstraße) and single 
wagonload traffic. 

financially 

attractive 

by 

Transport  imposes  significant  external  costs. 
The  total  annual  external  costs  of  transport  by 
road,  rail  and  inland  waterways  are  estimated  at 
€19 billion,  i.e.  5.9%  of  Austria’s  GDP  in  2016 
(EU:  5.7%)  (Schroten  et  al.,  2019).  Road  users 
generate  almost  all  (95%)  of  the  costs,  while  the 
rail 
for  only  4%. 
responsible 
Environmental costs (air pollution, climate change, 
costs  of  energy  production,  i.e. the  well-to-tank 
emissions, noise, habitat damage) account for 33% 
of  the  external  costs  of  transport.  Congestion 
(19%)  and  accident  costs  (47%)  make  up  the 
remainder (55). 

sector 

is 

Air  pollution  continues  to  be  a  concern  and 
additional  measures  are  needed  to  ensure 
compliance  with  EU  air  quality  standards.  Air 
pollution  (as  reflected  by  SDG 11)  gives  rise  to 
health  care  costs,  productivity  losses  and  lower 
agricultural yields. In 2018, the EU limit value for 
nitrogen  dioxide  was  exceeded  in  5  out  of  11  air 
quality  zones.  Overall,  since  1990,  nitrogen  oxide 
(NOx)  emissions  from  traffic  fell  by  43%,  but 
emissions  from  passenger  cars  had  risen  six  fold 
(UBA,  2019).  This  is  a  result  of  more  cars 
powered by diesel (56% of the car fleet), which is 
taxed  lower  than  petrol  (see  Section 3.1.2).  In 
addition, a large majority of vehicles still give off 

(55)  Infrastructure costs are not included in these figures. 

50 

 
                                                           
very  high  NOx  emissions  in  real-world  driving 
conditions  and  do  not  comply  with  emissions 
standards.  Ammonia  emissions  are  also  rising. 
Measures  in  the  national  air  pollution  control 
programme  do  not  seem  sufficient  to  reverse  that 
trend.  Introducing  or  expanding  the  use  of  low-
emission  agricultural  techniques  would  help.  The 
new  government  programme  announces  measures 
to reduce (in particular, traffic-related) emissions.  

Land-use  and  urban  sprawl  developments  are 
also  problematic.  Land-take  increased  by  26% 
between 2001 and 2018, while the population grew 
by  only  9.9%  (Statistik  Austria,  2019b).  Low-
density  developments  have  sprung  up  around 
towns  and  cities  more 
in  comparable 
countries, resulting in soil sealing, congestion and 
air  pollution,  due  to  an  increased  reliance  on 
private vehicles for transport and commuting. This 
loss  of  agricultural  soils  and 
also  entails  a 
multi-level 
biodiversity.  More 
governance  on  planning,  mobility  and  housing 
development could help tackle these problems. 

effective 

than 

3.5.2.  SUSTAINABLE BUILDINGS AND TOURISM 

improved 

Several  measures  have  been  taken  to  improve 
energy  efficiency  across  sectors,  in  particular 
for  buildings.  Implementation  of  the  Ecodesign 
Directive 
the  energy  efficiency  of 
household appliances. The Energy Efficiency Law 
requires  energy  suppliers  to  achieve  savings  of 
0.7% of the previous  year’s consumption, 40% of 
which  must  come  directly  from  households. 
Energy-consuming  companies  (apart  from  SMEs) 
have  to  monitor  or  manage  consumption,  e.g. 
through  energy  audits.  Strict  requirements  for 
building  regulations  and  thermal  renovation  of 
buildings  have  already  led  to  almost  50%  more 
energy  savings.  Heat  supply  systems  such  as 
boilers,  district  heating,  solar  systems  and  heat 
pumps  also  contribute.  Additional  regulatory 
measures  to  phase  out  oil  heating  (ban  for  new 
buildings  as  of  2020)  and  renovation  subsidies 
may  improve  efficiency  further.  The  government 
aims to double the current building renovation rate 
through  priority  measures  such  as  replacing  fossil 
fuels for heating with renewables. The objective is 
backed  by  financial  measures  (see  Section 3.3.3) 
and administrative rules.  

3.5. Environmental sustainability 

in 

overall 

a  decrease 

Despite 
energy 
consumption in 2018, the 2020 target might not 
be met. Energy saving measures have contributed 
to  a  steady  fall-off  of  energy  intensity  in  the  last 
decade.  This  also  led  to  a  decrease  in  the  overall 
energy  consumption  in  2018.  However,  they  are 
not  enough  to  offset  the  increases  in  2016-2017. 
Therefore, Austria is currently not on track to meet 
its 2020 energy efficiency target. 

Austria’s  booming  tourism  sector  faces  costs 
from  climate  change  and  the  challenge  of 
footprint. 
its  own  environmental 
reducing 
Austria  benefits  from  strong  tourist  influx  in  the 
summer  and  winter  months.  Rising  average 
temperatures extend the summer season, but create 
risks for the economically important winter season, 
with  high  financial  and  ecological  costs  of 
compensating  for  a  lack  of  naturally  occurring 
snow  (Klima-  und  Energiefonds,  2017).  The 
tourism  sector  will  need  to  diversify  if  winter 
tourism  is  to  be  ecologically  sustainable  and 
profitable 
term.  Tourism-related 
emissions  stem  primarily  from  travel,  which  links 
to the need for cleaner transport. There is scope to 
improve the energy efficiency of tourism premises 
(WKÖ, 2019). On the positive side, ecotourism has 
growing  development  potential.  The  number  of 
eco-certified  tourism  businesses  nearly  doubled 
from  199  in  2005  to  343  in  2015.  The  tourism 
strategy  (Plan  T)  puts  sustainability  at  its  centre 
and  contains  specific  sustainability  indicators,  in 
particular the proportion of renewable energy used 
in  restaurants  and  accommodations  (see  also 
Section 3.4.3) (BMNT, 2019).  

long 

the 

in 

3.5.3.  CIRCULAR ECONOMY, RESOURCE 

EFFICIENCY AND ECO-INNOVATION 

efficiently 

Austria  has  achieved  a  relative  decoupling  of 
GDP growth and resource use, but its resource 
productivity  is  below  EU  average.  Resource 
the 
productivity  measures  how 
economy  uses  material  resources 
to  produce 
wealth. Until 2016, Austria’s resource productivity 
grew  more  slowly  than  the  EU  average.  In 
contrast, domestic material consumption started to 
increase  (UBA,  2019).  Moving  to  a  more  circular 
economy,  e.g.  by  promoting  reuse,  recyclability 
and secondary raw  materials  markets, could boost 
resource  productivity  and  the  efficient  use  of 
natural  resources,  as  reflected  in  SDG 12.  Using 

51 

 
3.5. Environmental sustainability 

regional 
innovation  and  economic  strategies 
already  acknowledge  this,  e.g. Styria  and  Upper 
Austria  aim  for  a  more  sustainable  and  energy-
efficient  industry.  The  transition  will  also  affect 
the labour market; in particular, employment shifts 
to  alternative  technologies  and  activities  will 
require re- and upskilling. The EU Just Transition 
Fund  2021-27  aims  at  alleviating  the  social  and 
economic impacts of the transition towards climate 
neutrality, and can help to deal with the challenges 
in Austria’s most affected regions. 

At  Länder  level,  the  highest  carbon-intensities 
can  be  found  in  Styria  and  Upper  Austria.  In 
2016,  the  Östliche  Obersteiermark  (in  Styria) 
district  had  the  highest  carbon  intensity  (in  terms 
of GHG emissions of main industrial facilities per 
gross  value  added  generated),  mostly  due  to  the 
manufacturing of basic iron and steel (EEA, 2016). 
Another carbon-intensive  sub-region is the district 
of Traunviertel (Upper Austria), where almost half 
the  emissions  from  large  industrial  facilities  are 
from the chemical industry. However, some of the 
industrial  GHG  emissions  in  that  region  are  from 
renewable energy. 

The 

large 

carbon-intensive. 

The  manufacturing  of  refined  petroleum 
products  in  the  south  of  the  Vienna  region  is 
Wiener 
highly 
Umland/Südteil  is  the  sub-region  with  the  second 
highest  carbon 
industrial 
intensity  of 
facilities  in  Austria.  Refined  petroleum  products 
are  derived  from  both  locally  extracted  and 
imported  oil.  In  2016,  the  manufacturing  of  coke 
and refined petroleum products was the sector with 
the  highest  carbon  intensity  in  Austria.  However,  
this  sub-region  has  a  strong  economic  structure 
and  may have less  need for additional support for 
the transition to a climate-neutral economy. 

Overall,  Austria  is  not  yet  accessing  the  socio-
economic  benefits  that  a  forceful  ecological 
transition  and 
low-carbon  pathway  offers. 
Austria’s  lead  in  environment-related  innovation 
has  narrowed  in  recent  years.  Consistent  and 
generally  higher  pricing  of  carbon  emissions 
would  boost 
innovation 
(OECD,  2019a,  p. 46).  A  more  ambitious  NECP 
and  accompanying  environmental  policies  could 
open the way to ecological modernisation that goes 
hand  in  hand  with  positive  macroeconomic  and 
labour market effects and other benefits in relation 
to health and well-being. 

environment-related 

the full potential of the circular economy will also 
help  Austria  reach  its  climate  targets.  As  material 
and  energy  intensity  are  still  relatively  high  and 
falling  more  gradually  than  in  other  Member 
States,  an  overhaul  of  environmental  taxation 
(especially  energy  taxes)  could  also  help  to  bring 
about 
(see 
Section 3.1.2). 

steering 

desired 

effects 

the 

new 

strategy.  The 

So  far,  there  is  no  overarching  strategy  on  the 
circular economy. There are a number of sectoral 
strategies  and  programmes,  including  the  new  bio 
government 
economy 
programme  announces  a  comprehensive  cross-
sectoral  climate  and  circular  economy  strategy, 
with  a  focus  on  energy-  and  emission-intensive 
sectors.  This  could  build  on  a  good  starting 
position  to  develop  the  regulatory  framework, 
making  use  of  synergies  with  digitalisation,  while 
mobilising  appropriate  funding 
the 
circularity of the economy and lead to progress on 
SDG 12. 

to  boost 

While  Austria  meets  all  current  recycling 
targets,  additional  efforts  are  needed  to  meet 
the  post-2020  plastic  packaging  recycling 
targets. Austria meets all current recycling targets, 
but  its  plastic  packaging  recycling  rate  is  33.6%, 
over  20 pps  below  the  2030  target.  The  rate  of 
separate  packaging  and  paper  collection  has 
stagnated 
2017: 
1.07 million t).  Currently,  71%  of  plastic  waste 
and over 90% of mixed plastic waste is incinerated 
(UBA, 2019). In order to foster a more circular use 
of  material,  the  entire  product  lifecycle  (from 
design and production to consumption) needs to be 
addressed in addition to the waste phase, including 
through  more  separate  collection.  Overall,  waste 
generation is increasing and above EU average.  

1.06 million t, 

(2014: 

3.5.4.  JUST TRANSITION TO A CLIMATE-NEUTRAL 

ECONOMY 

A  just  transition  to  a  climate-neutral  economy 
may need to involve support to the regions most 
affected.  There  are  no  coal  mines  in  Austria  and 
the  only  remaining  active  coal  power  plant  (in 
Styria) is due to be shut down in 2020. Support for 
a  transition  to  climate-neutral  industry  in  high 
carbon  intensity  regions  could  help  reduce  GHG 
emissions, 
industrial 
competitiveness and technological leadership. The 

maintaining 

while 

52 

 
ANNEX A: OVERVIEW TABLE 

2019 country-specific recommendations (CSRs)  

Summary assessment (1)  

CSR 1: Ensure the sustainability of the health, long-
term  care,  and  pension  systems, 
including  by 
adjusting  the  statutory  retirement  age  in  view  of 
expected  gains  in  life  expectancy.  Simplify  and 
rationalise  fiscal relations and responsibilities across 
layers  of  government  and  align  financing  and 
spending responsibilities.  

Austria  has  made  Limited  progress  in  addressing 
CSR 1  

Ensure the sustainability of the health,  

long-term care,  

Some  progress  Important  reform  measures 
to 
address  the  CSR,  such  as  the  introduction  of  the 
'target-based  governance'  system  and,  the  2017 
Primary  Healthcare  Act,  and  a  reform  to  merge  the 
21  social  health  insurance  funds  have  been  adopted 
in  recent  years  and  are  now  currently  being 
implemented.  The  reform  to  merge  the  21  social 
health  insurance  funds  to  5  is  also  expected  to 
is  progress,  but 
improve 
implementation is not fully on track for every reform 
and  the  savings  potential  of  each  of  the  reforms  is 
still  unclear.  The  overutilization  of  hospital  and 
the  general  overlap  of 
pharmaceutical  care, 
competencies  in  the  health  care  sector,  and  the  role 
of prevention  remains to be addressed. According to 
the  second  comprehensive  monitoring  report  for  the 
period  2017-2021,  the  expenditure  remains  still 
beneath the ceilings in the years 2017 to 2019. 

efficiency.  There 

Limited  progress  Despite  recent  measures,  public 
expenditure  for  long-term  care  is  still  a  problem  for 
fiscal  sustainability.  There  have  been  no  substantial 
changes  in  the  system  of  service  delivery.  The 
abolition of the recourse to assets (Pflegeregress) has 
led to increased public spending.  

and  pension  systems,  including  by  adjusting  the 
statutory retirement age in view of expected gains in 
life expectancy.  

Limited progress Past reform efforts were aimed at 
strengthening 
the  pension 
the  sustainability  of 
system, while recent measures partly do the opposite. 
The  2020  Pension  Adjustment  Act  (adopted  in  the 
run-up to the snap elections at the end of September 
to  address  sustainability 
2019)  not  only  fails 
challenges  but 
that  actually 
includes  measures 
undermine previous reform efforts. While a targeted 
increase of low pension incomes may be justified by 
the objective of pension adequacy, the undiscounted 
pension after 45 contribution years  thwarts previous 
efforts to increase the effective  pensionable age and 
also  raises  fairness  issues.  Neither  does  is  make 
sense in the light of recently observed labour market 

53 

 
 
 
A. Overview Table 

shortages.  

rationalise 

Simplify  and 
relations  and 
responsibilities across layers of government and align 
financing and spending responsibilities.  

fiscal 

to 

Limited  progress  The  2017  Intergovernmental 
Fiscal  Relations  Act  introduced  numerous  changes, 
but cannot be considered a major step to greater tax 
autonomy  or  a  more  transparent  assignment  of 
competence.  Work  in  these  areas  is  still  ongoing. 
Implementation  of  several  initiatives  introduced  by 
the Act paints a mixed picture. While measures have 
been taken to simplify the allocation of funds in the 
the 
fiscal  equalisation,  measures 
improve 
efficiency  of  public  spending  have  been 
less 
successful.  The  plan  to  introduce  a  task-oriented 
allocation  of  shared  taxes  to  municipalities  in  the 
fields  of  elementary  education  and  compulsory 
schools  was  suspended  having  failed  to  produce 
results. It is expected that the first spending reviews 
to  assess 
the  effectiveness  and  efficiency  of 
subnational  public  spending  in  the  areas  of  health 
care  in  schools  and  municipal  water  management 
will  be  finalised  in  early  2020.  The  benchmarking 
model was established for a comparative assessment 
of  the  efficiency  and  effectiveness  of  subnational 
spending and is being extended to other policy areas. 
The  Kompetenzbereinigungspaket  can  be  seen  as  a 
first step in the right direction, but more needs to be 
done. 

CSR 2: Shift taxes away from labour to sources less 
detrimental  to  inclusive  and  sustainable  growth. 
Support 
full-time  employment  among  women, 
including by improving childcare services, and boost 
labour  market  outcomes  for  the  low  skilled  in 
continued cooperation with the social partners. Raise 
the  levels  of  basic  skills  for  disadvantaged  groups, 
including people with a migrant background.  

Austria  has  made  limited  progress  in  addressing 
CSR 2  

Shift  taxes  away  from 
detrimental to inclusive and sustainable growth.  

labour 

to  sources  less 

of 

accident 

employer’s 

Some Progress Austria’s still high labour tax burden 
creates  significant  disincentives  for  labour  demand 
and  supply.  However,  the  labour  tax  wedge  is 
reduced  by  recent  measures:  Family  Bonus  plus, 
insurance 
reduction 
contribution,  lower  health  contributions  for  the 
self-employed  and  farmers,  increase  of  pensioner’s 
tax  credit, 
increased 
reimbursement  of  social  security  contributions  for 
employees and pensioners. A future-oriented strategy 
to support environmental  sustainability,  fairness and 
inclusiveness  would  require  a  more  comprehensive 
reform  of  the  tax  mix.  Several  measures  go  in  this 
direction,  but  more  needs  to  be  done  to  secure 
efficiency  gains.  The  following  measures  have  been 

tax  credit  and 

traffic 

54 

 
A. Overview Table 

implemented: greening of the tax system, digital tax 
package.  

Support 
including by improving childcare services,  

full-time  employment  among  women, 

Some  progress  Increased  support  for  childcare 
facilities and the expansion of all-day schools created 
more  opportunities  for  parents  of  young  children. 
The government adopted the Educational Investment 
Act (Bildungsinvestitionsgesetz).  

and boost labour market outcomes for the low skilled 
in continued cooperation with the social partners.  

No  progress  No  specific  measures  have  been  taken 
so far.  

Raise  the  levels  of  basic  skills  for  disadvantaged 
groups, including people with a migrant background.  

Limited progress  Austria has taken some  measures 
to  improve  the  basic  skills  of  disadvantaged  young 
people  and  people  with  a  migrant  background.  The 
‘pedagogical  package’  concentrates  on  introducing 
repetition.  The 
and  grade 
numerical  marks 
non-academic  lower  secondary  school  reintroduces 
streaming,  while  as  of  2022  new  methods  to 
determine  school  readiness  should  be  available. 
While  the  numbers  of  places  in  early  childhood 
education  and  care  and  all-day  schools  have  been 
increased, their quality needs to be assured to have a 
positive  impact  on  basic  skills.  International  and 
testing  has  not  detected  particular 
national 
improvements  among  disadvantaged  young  people, 
including those with a migrant background.  

and 

research 

development, 

CSR  3:  Focus  investment-related  economic  policy 
on 
innovation, 
digitalisation,  and  sustainability,  taking  into  account 
regional  disparities.  Support  productivity  growth  by 
stimulating digitalisation of businesses and company 
growth  and  by  reducing  regulatory  barriers  in  the 
service sector.  

Austria has made some progress in addressing CSR 
3  

investment-related  economic  policy  on 

Focus 
research and development, innovation,  

Some progress In order to direct R&I investments to 
more  innovation  output,  the  previous  government 
proposed  an  ‘excellence  initiative’  to  strengthen 
competitive  basic  research.  Strategic  planning  has 
been completed and it is  for the  new  government to 
decide  on  its  implementation.  Progess  will  be 
assessed again in 2020, when the new government is 
in place.  

digitalisation,  

Some  progress  Digitalisation  has  been  a  political 
priority  in  Austria  for  some  time.  The  caretaker 
government continued to implement useful initiatives 
in all areas of digitalisation, but it did not provide the 
major  political  impetus  expected  for  2019  (year  of 
digitalisation). Overall coherence and thus the actual 
impact  of  digitalisation  policy  efforts  would  benefit 

55 

 
A. Overview Table 

from 

in  particular 
the  adoption  of  specific, 
measurable  targets.  Gaps  also  remain  in  digital 
infrastructure.  

and  sustainability, 
disparities.  

taking 

into  account  regional 

fund  decreased 

Limited  progress  Public  investments  from  the 
climate  and  energy 
in  2018, 
compared  to  the  previous  year.  Comparing  the  two 
latest  available  federal  subsidies  reports  (2018  and 
2017), disbursements went down in all three relevant 
sub-items  of  subsidy  category  43  (environment, 
energy and climate):  

climate and energy fund: 

2018: €39.8 million;  

2017: €42.12 million;  

thermal insulation:  

2018: €37.12 million;  

2017: €39.67 million; and 

environmental subsidies:  

2018: €49.89 million;  

2017: €56.73 million.  

However,  private  investments  in  the  ecological 
transition  have  gained  in  significance  due  to  public 
and private investors’ growing interest in sustainable 
financing  and  a  wider  range  of  green  finance 
opportunities.  A  recent  country  report  by 
the 
environmental,  social  and  corporate  governance 
(ESG) 
rating  agency  Sustainalytics 
considered  Austria  a  leader  on  ESG,  ranking  it  4th 
out of 172 in 2018.   

investment 

Support 
digitalisation of businesses and company growth  

productivity 

growth 

by 

stimulating 

Some  progress  The  KMU  Digital  programme  has 
been  prolonged  and  expanded.  It  now  also  supports 
SMEs’  digitalisation  projects.  The  Digitalisation 
Agency has launched many initiatives and projects to 
facilitate  business  digitalisation.  Three  digital 
innovation  hubs  have  been  created  to  support  SME 
digitalisation.  No  major  new  policy  initiatives  have 
been taken on business digitalisation.  

and  by  reducing  regulatory  barriers  in  the  service 
sector.  

Limited  progress  Services  sector  firms  profited 
from 
e.g. the 
Rechtsbereinigungsgesetz  and  the  anti-gold-plating 

reduction  measures, 

burden 

56 

 
A. Overview Table 

law.  However,  no  progress  was  made  in  2019  as 
regards  restrictions  on  retail  and 
the  specific 
restrictions of professions identified  in 2017. Recent 
changes of professional regulation for civil engineers 
and  patent  attorneys  did  not  remove  restrictions 
identified by the Commission. Regulatory density for 
key professions and trades remains high. 

Europe 2020 (national targets and progress)  

Employment rate target set in the NRP: 77% 

76.2% in 2018 

R&D target set in the NRP: 3.76% of GDP  

3.17%  of  GDP  in  2018;  3.19%  expected  for  2019, 
but not yet confirmed by Eurostat 

National  greenhouse  gas  (GHG)  emissions  target:  
-  16%  in  2020  compared  with  2005  (in  sectors  not 
included in the EU emissions trading scheme)  

Under  the  EU  Effort  Sharing  Decision,  Austria’s 
GHG  emissions  outside  EU  emissions  trading  in 
2020  are  not  to  exceed  47.8 million t CO2eq.  In 
2017, they stood at 51.7 million t CO2eq. In October 
2019,  the  Austrian  Environment  Agency  stated  that 
the achievement of Austria’s climate  targets in 2020 
is  ‘feasible  but  not  definite’.  There  is  a  clear  sense 
that  climate  mitigation  measures  have  to  be  stepped 
up on the basis of the new government programme of 
January 2020. 

2020 renewable energy target: 34%  

32.6% in 2017 

Energy efficiency, 2020 energy consumption targets:  

Primary energy consumption in 2017: 32.55 Mtoe 

31.5 Mtoe in primary energy consumption; 

Final  energy  consumption  in  2017:  28.42  Mtoe 

25.1 Mtoe in final energy consumption 

Early school/training leaving target: 9.5% 

7.3% in 2018 

Tertiary  education  target:  38%  of  population  aged 
30-34 

40.7% in 2018 

Target  for  reducing  the  number  of  people  at  risk  of 
poverty or social exclusion, expressed as an absolute 
number of people: -235 000 (base year 2008).  

In  the  baseline  year  2008,  the  number  of  people  at 
risk  of  poverty  and  social  exclusion  was  1  699  000. 
The respective  number  for 2018  was 1 512 000, i.e. 
187 000 less, therefore requiring additional efforts to 
meet the target. 

57 

 
 
 
 
 
 
 
A. Overview Table 

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

No  progress:  The  Member  State  has  not  credibly  announced  nor  adopted  any  measures  to  address  the 
CSR. This category covers a number of typical situations to be interpreted on a case by case basis taking 
into account country-specific conditions. They include the following:  

no legal, administrative, or budgetary measures have been announced  

in the national reform programme, 

in any other official communication to the national Parliament/relevant parliamentary committees or the 
European Commission, 

publicly (e.g. in a press statement or on the government's website); 

no non-legislative acts have been presented by the governing or legislative 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 to be taken (unless the CSR explicitly asks for orientations 
or  exploratory  actions).  However,  it  has  not  proposed  any  clearly-specified  measure(s)  to  address  the 
CSR. 

Limited progress: The Member State has:  

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

presented  legislative  acts  in  the  governing  or  legislative  body  but  these  have  not  been  adopted  yet  and 
substantial further, non-legislative work is needed before the CSR is implemented; 

presented non-legislative acts, but has not followed these up with the implementation needed to address 
the CSR. 

Some progress: The Member State has adopted measures  

that partly address the CSR; and/or  

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

Substantial progress: The Member State has adopted measures that go a long way towards addressing 
the CSR and most of them have been implemented.  

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

58 

 
 
 
ANNEX B: DSA STATISTICAL ANNEX 

B. DSA statistical annex 

59 

General government debt projections under baseline, alternative scenarios and sensitivity tests2018201920202021202220232024202520262027202820292030Gross debt ratio74,069,967,264,661,959,356,653,951,349,046,844,843,1Changes in the ratio (-1+2+3)-4,3-4,0-2,7-2,7-2,6-2,7-2,7-2,7-2,6-2,4-2,2-2,0-1,7of which(1) Primary balance (1.1+1.2+1.3)1,81,91,61,61,61,61,51,51,41,31,21,00,7(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)1,31,51,41,61,61,61,51,51,41,31,21,00,7(1.1.1) Structural primary balance (bef. CoA)1,31,51,41,61,61,61,61,61,61,61,61,61,6(1.1.2) Cost of ageing0,00,00,10,20,30,50,60,91,1(1.1.3) Others (taxes and property incomes)0,00,10,10,20,20,20,30,30,3(1.2) Cyclical component0,50,40,20,10,00,00,00,00,00,00,00,00,0(1.3) One-off and other temporary measures0,00,00,00,00,00,00,00,00,00,00,00,00,0(2) Snowball effect (2.1+2.2+2.3)-1,5-1,0-0,7-0,8-1,0-1,1-1,2-1,2-1,1-1,1-1,0-1,0-1,0(2.1) Interest expenditure1,61,51,41,21,11,00,90,80,70,60,60,50,5(2.2) Growth effect-1,8-1,1-0,9-0,9-1,0-0,9-0,9-0,8-0,8-0,7-0,6-0,6-0,6(2.3) Inflation effect-1,3-1,3-1,1-1,1-1,1-1,1-1,2-1,1-1,1-1,0-1,0-0,9-0,9(3) Stock-flow adjustments-1,0-1,1-0,4-0,30,00,00,00,00,00,00,00,00,0Note: For further information, see the European Commission Debt Sustainability Monitor (DSM) 2019. c. For the long term, the risk category (low/medium/high) is based on the joint use of the S2 indicator and the DSA results. The S2 indicator measures the upfront and permanent fiscal adjustment required to stabilise the debt-to-GDP ratio over the infinite horizon, including the costs of ageing. The critical values used are 2 and 6 pps of GDP. The DSA results are used to further qualify the long term risk classification, in particular in cases when debt vulnerabilities are identified (a medium / high DSA risk category). AT - Debt projections baseline scenario[1]Thefirsttablepresentsthebaselineno-fiscalpolicychangescenarioprojections.Itshowstheprojectedgovernmentdebtdynamicsanditsdecompositionbetweentheprimarybalance,snowballeffectsandstock-flowadjustments.Snowballeffectsmeasurethenetimpactofthecounteractingeffectsofinterestrates,inflation,realGDPgrowth(andexchangerates in some countries). Stock-flow adjustments include differences in cash and accrual accounting, net accumulation of assets, as well as valuation and other residual effects.[2]Thechartspresentaseriesofsensitivitytestsaroundthebaselinescenario,aswellasalternativepolicyscenarios,inparticular:thehistoricalstructuralprimarybalance(SPB)scenario(wheretheSPBissetatitshistoricalaverage),theStabilityandGrowthPact(SGP)scenario(wherefiscalpolicyisassumedtoevolveinlinewiththemainprovisionsoftheSGP),ahigherinterestratescenario(+1pp.comparedtothebaseline),alowerGDPgrowthscenario(-0.5pp.comparedtothebaseline)andanegativeshockontheSPB(calibratedonthebasisoftheforecastedchange).Anadversecombinedscenarioandenhancedsensitivitytests(ontheinterestrateandgrowth)arealsoincluded,aswellasstochasticprojections. Detailed information on the design of these projections can be found in the FSR 2018 and the DSM 2019.[3] The second table presents the overall fiscal risk classification over the short, medium and long term. a. For the short-term, the risk category (low/high) is based on the S0 indicator. S0 is an early-detection indicator of fiscal stress in the upcoming year, based on 25 fiscal and financial-competitiveness variables that have proven in the past to be leading indicators of fiscal stress. The critical threshold beyond which fiscal distress is signalled is 0.46. b. For the medium term, the risk category (low/medium/high) is based on the joint use of the S1 indicator and of the DSA results. The S1 indicator measures the fiscal adjustment required (cumulated over the 5 years following the forecast horizon and sustained after that) to bring the debt-to-GDP ratio to 60 % by 2034. The critical values used are 0 and 2.5 pps of GDP. The DSA classification is based on the results of five deterministic scenarios (baseline, historical SPB, higher interest rate, lower GDP growth and negative shock on the SPB scenarios) and the stochastic projections. Different criteria are used such as the projected debt level, the debt path, the realism of fiscal assumptions, the probability of debt stabilisation, and the size of uncertainties. 3040506070809020172018201920202021202220232024202520262027202820292030Debt as % of GDP -ATBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario3040506070809020172018201920202021202220232024(% of GDP)Stochastic debt projections 2020-2024 -ATp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline3040506070809020172018201920202021202220232024202520262027202820292030Debt as % of GDP -ATBaselineHistorical SPB scenarioSGP scenario3040506070809020172018201920202021202220232024202520262027202820292030Debt as % of GDP -ATBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryLOWLOWLOWLOWLOWLOWDebt level (2030)43.147.445.945.343.3Debt peak year20192019201920192019Percentile rank30.0%38.0%Probability debt higher9.5%Dif. between percentiles24.9MEDIUMLong termMEDIUM(S2 = 2.3)S1S2Short termLOW(S0 = 0.1)DSALOWDebt sustainability analysis (detail)Medium termLOWLOW(S1 = -2.3) 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

C. Standard Tables 

(1) Latest data Q3 2019. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 2019. 
(3) Quarterly values are annualized. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators) 

60 

201420152016201720182019Total assets of the banking sector (% of GDP)(1)263,0248,1235,1218,9217,1218,7Share of assets of the five largest banks (% of total assets)36,835,834,536,136,0-Foreign ownership of banking system (% of total assets)(2)30,431,923,923,722,622,1Financial soundness indicators:(2)              - non-performing loans (% of total loans)7,56,55,13,52,62,3              - capital adequacy ratio (%)15,616,218,218,918,618,7              - return on equity (%)(3)1,17,67,18,78,68,5Bank loans to the private sector (year-on-year % change)(1)0,50,62,14,16,15,6Lending for house purchase (year-on-year % change)(1)3,04,34,44,74,65,2Loan-to-deposit ratio(2)105,1102,098,797,898,8100,1Central bank liquidity as % of liabilities(1)1,82,11,93,13,02,9Private debt (% of GDP)124,8124,0123,5121,8121,0-Gross external debt (% of GDP)(2) - public74,169,265,760,055,656,2    - private34,836,437,638,237,137,2Long-term interest rate spread versus Bund (basis points)*32,425,028,726,529,132,1Credit default swap spreads for sovereign securities (5-year)*20,116,418,011,67,56,7 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
C. Standard Tables 

Table C.2: 

Headline Social Scoreboard indicators 

(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation (SMD) and/or living in households with zero or very low work intensity (LWI). 
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks. 
(3) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2019. 
(4) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation). 
(5) Average of first three quarters of 2019 for the employment rate, unemployment rate and gender employment gap. 
Source: Eurostat 

61 

201420152016201720182019 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)7,07,36,97,47,3:Gender employment gap (pps)8,28,27,88,09,08,8Income inequality, measured as quintile share ratio (S80/S20)4,14,04,14,34,0:At-risk-of-poverty or social exclusion rate(1) (AROPE)19,218,318,018,117,5:Young people neither in employment nor in education and training (% of population aged 15-24)7,77,57,76,56,8:Dynamic labour markets and fair working conditionsEmployment rate (20-64 years)74,274,374,875,476,276,7Unemployment rate(2) (15-74 years)5,65,76,05,54,94,6Long-term unemployment rate (as % of active population)1,51,71,91,81,41,2Gross disposable income of households in real terms per capita(3) (Index 2008=100) 96,495,296,497,198,0:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)253792603926859:::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)-0,070,522,13:::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction(4)44,545,746,442,243,3:Children aged less than 3 years in formal childcare16,022,320,618,220,0:Self-reported unmet need for medical care0,10,10,20,20,1:Individuals who have basic or above basic overall digital skills (% of population aged 16-74):64,065,067,0:: 
 
 
 
 
 
 
 
   
 
C. Standard Tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator 
(1)  Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as ‘unadjusted’, as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with ten or more employees, without restrictions for age and hours worked, are included. 
(2)  PISA (OECD) results for low achievement in mathematics for 15 year-olds. 
(3)  Impact of socio-economic and cultural status on PISA (OECD) scores.  
(4)  Average of first three quarters of 2018 for the activity rate, employment growth, employment rate, part-time employment, 
fixed-term employment. Data for youth unemployment rate is annual (except for DK, EE, EL, HU, IT and UK data based on first 
three quarters of 2018). 
Source:  Eurostat, OECD 

62 

Labour market indicators201420152016201720182019 5Activity rate (15-64)75.475.576.276.476.877.0Employment in current job by durationFrom 0 to 11 months13.414.014.314.814.9:From 12 to 23 months9.39.09.59.69.8:From 24 to 59 months16.616.916.616.216.3:60 months or over60.760.159.659.459.0:Employment growth* (% change from previous year)1.00.61.31.71.71.2Employment rate of women(% of female population aged 20-64)70.170.270.971.471.772.3Employment rate of men (% of male population aged 20-64)78.378.478.779.480.781.1Employment rate of older workers* (% of population aged 55-64)45.146.349.251.354.054.4Part-time employment* (% of total employment, aged 15-64)26.927.327.827.927.327.0Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)9.29.19.09.29.18.9Transition rate from temporary to permanent employment(3-year average)47.945.946.943.342.8:Youth unemployment rate (% active population aged 15-24)10.310.611.29.89.48.7Gender gap in part-time employment37.838.137.437.437.738.1Gender pay gap(2) (in undadjusted form)22.221.720.119.9::Education and training indicators201420152016201720182019Adult participation in learning(% of people aged 25-64 participating in education and  training)14.314.414.915.815.1:Underachievement in education(3):21.8::21.1:Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)40.038.740.140.840.7:Variation in performance explained by students' socio-economic status(4):15.9::13.0: 
 
 
 
 
 
 
 
 
 
   
 
C. Standard Tables 

Table C.4: 

Social inclusion and health indicators 

* Non-scoreboard indicator 
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income. 
(2) 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. 
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation. 
(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) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59. 
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard. 
Source: Eurostat, OECD 

63 

201320142015201620172018Expenditure on social protection benefits* (% of GDP)Sickness/healthcare7,37,37,47,37,4:Disability2,12,01,91,81,8:Old age and survivors14,514,714,714,514,3:Family/children2,82,72,82,82,7:Unemployment1,61,61,61,71,6:Housing0,10,10,10,10,1:Social exclusion n.e.c.0,40,50,60,70,6:Total28,829,029,129,028,6:of which: means-tested benefits2,42,52,62,82,7:General government expenditure by function (% of GDP)Social protection21,321,521,221,020,520,1Health7,87,98,28,28,28,2Education5,04,94,94,94,84,8Out-of-pocket expenditure on healthcare19,219,119,119,319,2:Children at risk of poverty or social exclusion (% of people aged 0-17)*22,923,322,320,023,021,6At-risk-of-poverty  rate(1) (% of total population)14,414,113,914,114,414,3In-work at-risk-of-poverty rate (% of persons employed)7,97,27,98,37,78,0Severe material deprivation rate(2)  (% of total population)4,24,03,63,03,72,8Severe housing deprivation rate(3), by tenure statusOwner, with mortgage or loan1,41,20,70,60,71,4Tenant, rent at market price9,510,010,09,310,88,4Proportion of people living in low work intensity households(4) (% of people aged 0-59)7,89,18,28,18,37,3Poverty thresholds, expressed in national currency at constant prices*115761192011774118981230912247Healthy life yearsFemales8,87,77,77,47,5:Males8,98,47,98,27,6:Aggregate replacement ratio for pensions(5)0,60,60,60,60,60,6Connectivity dimension of the Digital Economy and Society Index (DESI)(6):50,857,961,463,5:GINI coefficient before taxes and transfers*49,549,949,849,950,4:GINI coefficient after taxes and transfers*27,027,627,227,227,9: 
 
 
 
 
 
 
 
   
 
C. Standard Tables 

Table C.5: 

Product market performance and policy indicators 

* While the indicator values from 2003 to 2013 are comparable, the methodology has considerably changed in 2018. As a 
result, past vintages cannot be compared with the 2018 PMR indicators. 
(1) Value added in constant prices divided by the number of persons employed. 
(2) Compensation of employees in current prices divided by value added in constant prices. 
(3) The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology. 
(4) 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?".  
(5) Percentage population aged 15-64 having completed tertiary education. 
(6) Percentage population aged 20-24 having attained at least upper secondary education. 
(7) Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm 
(8) Simple average of the indicators of regulation for lawyers, accountants, architects and engineers. 
(9) Aggregate OECD indicators of regulation in energy, transport and communications (ETCR). 
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). 

64 

Performance indicators201320142015201620172018Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry1.320.770.353.613.552.33Labour productivity growth in construction-0.04-3.53-2.20-0.821.801.32Labour productivity growth in market services-0.710.190.690.170.000.06Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry1.311.591.10-0.81-2.580.99ULC growth in construction3.456.565.193.160.731.57ULC growth in market services3.731.861.532.502.073.40Business environment201320142015201620172018Time needed to enforce contracts3 (days)397397397397397397Time needed to start a business3 (days)25.022.022.021.021.021.0Outcome of applications by SMEs for bank loans40.350.410.490.310.350.22Research and innovation201320142015201620172018R&D intensity2.953.083.053.123.053.17General government expenditure on education as % of GDP5.004.904.904.904.804.80Employed people with tertiary education and/or people employed in S&T as % of total employment414647484848Population having completed tertiary education5182728293030Young people with upper secondary education6879089908788Trade balance of high technology products as % of GDP0.190.500.10-0.26-0.18-0.29Product and service markets and competition2003200820132018*OECD product market regulation (PMR)7, overall1.611.371.191.44OECD PMR7, retail3.503.302.402.01OECD PMR7, professional services83.213.082.712.54OECD PMR7, network industries92.471.841.551.30 
 
 
 
 
 
 
 
 
 
   
 
C. Standard Tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices) 
Energy intensity: gross inland energy consumption (Europe 2020-2030)(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 % of total value added for the economy 
Industry energy intensity: final energy use in industry (in kgoe) divided by gross value added of industry, including construction 
(in 2010 EUR)  
Real unit energy costs for manufacturing industry excluding refining : real costs as % 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 GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions (excl 
land use, land use change and forestry) as reported by Member States to the European Environment Agency. 
Transport energy intensity: final energy use in transport sector including international aviation, (in kgoe) divided by transport 
industry gross value added (in 2010 EUR) 
Transport carbon intensity: GHG emissions in transport sector divided by gross value added of the transport activities   
Energy import dependency: net energy imports divided by gross inland energy consumption plus consumption of 
international maritime bunkers    
Aggregated supplier concentration index:  Herfindahl-Hirschman index for net imports of crude oil and NGL, natural gas and 
hard coal. Smaller values indicate larger diversification and hence lower risk. 
Diversification of the energy mix: Herfindahl-Hirschman index of the main energy products in the gross inland consumption of 
energy 
* European Commission and European Environment Agency 
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes); Eurostat (all other indicators) 

65 

Green growth performance201320142015201620172018MacroeconomicEnergy intensity kgoe / €0,110,110,110,110,10-Carbon intensity kg / €0,260,250,250,250,25-Resource intensity (reciprocal of resource productivity)kg / €0,520,510,510,520,540,54Waste intensity kg / €-0,18-0,19--Energy balance of trade % GDP-3,5-3,0-2,3-1,9-2,1-2,5Weighting of energy in HICP%9,419,758,868,428,037,72Difference between energy price change and inflation p.p.-0,1-1,8-3,0-2,8-2,80,5Real unit of energy cost% of value added13,912,312,713,2--Ratio of environmental taxes to labour taxesratio0,100,100,100,100,10-Environmental taxes% GDP2,42,42,42,42,42,3Sectoral ------Industry energy intensity kgoe / € 0,100,100,090,090,09-Real unit energy cost for manufacturing industry excl. refining% of value added13,612,713,213,7--Share of energy-intensive industries in the economy% GDP10,3410,2810,2110,4510,5510,76Electricity prices for medium-sized industrial users€ / kWh0,110,110,100,100,100,10Gas prices for medium-sized industrial users€ / kWh0,040,040,040,030,030,03Public R&D for energy % GDP0,020,020,030,030,020,02Public R&D for environmental protection% GDP0,020,010,010,010,010,01Municipal waste recycling rate%57,756,356,957,657,7-Share of GHG emissions covered by ETS*%37,336,837,436,437,235,9Transport energy intensitykgoe / €0,590,580,600,600,58-Transport carbon intensitykg / €0,430,410,380,360,390,39Security of energy supplyEnergy import dependency%61,565,760,662,564,4-Aggregated supplier concentration indexHHI25,137,723,330,435,7-Diversification of energy mixHHI27,027,126,627,327,1- 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX D: INVESTMENT GUIDANCE ON JUST TRANSITION FUND 

2021-2027 FOR AUSTRIA 

D. Investment guidance on Just Transition Fund 2021-2027 for Austria 

Building on the Commission proposal, this Annex56 presents the preliminary Commission services’ views 
on  priority  investment  areas  and  framework  conditions  for  effective  delivery  for  the  2021-2027  Just 
Transition  Fund  investments  in  Austria.  These  priority  investment  areas  are  derived  from  the  broader 
analysis  of  territories  facing  serious  socio-economic  challenges  deriving  from  the  transition  process 
towards a climate-neutral economy of the Union by 2050 in Austria, assessed in the report. This Annex 
provides  the  basis  for  a  dialogue  between  Austria  and  the  Commission  services  as  well  as  the  relevant 
guidance  for  the  Member  States  in  preparing  their  territorial  just  transition  plans,  which  will  form  the 
basis for programming the Just Transition Fund. The Just Transition Fund investments complement those 
under  Cohesion  Policy  funding  for  which  guidance  in  the  form  of  Annex  D  was  given  in  the  2019 
Country Report for Austria 57. 

In Austria, most of the regions with the highest greenhouse gas (GHG) emissions of the main industrial 
facilities  per  gross  value  added  generated,  are  situated  in  Styria  and  Upper  Austria.  Carbon-intensive 
industries play an important role in employment in these regions. For example, the manufacture of basic 
metals, paper and paper products as well as chemicals and chemical products employed together almost 
40 000 persons in Styria and Upper Austria in 2017. The high carbon intensities  of the industries in the 
Styrian region of Östliche Obersteiermark as well as the Upper Austrian region of Traunviertel58 highlight 
the  scale  of  the  decarbonisation  challenge.  Based  on  this  preliminary  assessment,  it  appears  warranted 
that the Just Transition Fund concentrates its intervention on these regions. 

In  order  to  tackle  these  transition  challenges,  investment  needs  have  been  identified  for  supporting 
innovation  for  reducing  greenhouse  gas  emissions,  developing  alternative  economic  activities  and 
cushioning related employment shifts. Key actions of the Just Transition Fund could target in particular: 

• 

• 

• 

• 

• 

• 

productive  investments  in  SMEs,  including  start-ups,  leading  to  economic  diversification  and 
reconversion; 
investments in the creation of new firms, including through business incubators and consulting 
services; 
investments  in  research  and  innovation  activities  and  fostering  the  transfer  of  advanced 
technologies; 
investments in the deployment of technology and infrastructures for affordable clean energy,  in 
greenhouse gas emission reduction, energy efficiency and renewable energy; 
investments in enhancing the circular economy, including through waste prevention, reduction, 
resource efficiency, reuse, repair and recycling; 
upskilling and reskilling of workers. 

The smart specialisation strategies of Styria and Upper Austria59 provide an important framework to set 
priorities for innovation in support of economic transformation when implementing Just Transition Fund 
investments. 

Carbon-intensive  industrial  sites  in  Styria  and  Upper  Austria  performing  activities  listed  in  Annex  I  to 
Directive  2003/87/EC  employ  a  substantial  number  of  workers  and  their  activity  is  at  risk  due  to  their 
high  greenhouse  gas  emissions.  Support  to  investments  to  reduce  the  emissions  could  be  considered, 
provided  that  they  achieve  a  substantial  reduction  of  emissions  (going  substantially  below  the  relevant 
benchmarks used  for  free  allocation  under  Directive  2003/87/EC)  and  on  the  condition  that  the 
investments are compatible with the European Green Deal. 

56  This  Annex  is  to  be  considered  in  conjunction  with  the  EC  proposal  for  a  Regulation  of  the  European  Parliament  and  of  the 
Council  on  the  Just  Transition  Fund  2021-2027  (COM(2020)22)  and  the  EC  proposal  for  a  Regulation  of  the  European 
Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European 
Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the 
Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument (COM(2020)23) 

57 SWD(2019) 1019 final 
58 The identified regions are at NUTS 3 level. 
59 As defined in Article 2(3) of Regulation (EU) No 1303/2013 (CPR) 

66 

 
                                                           
ANNEX E: PROGRESS TOWARDS THE SUSTAINABLE 

DEVELOPMENT GOALS (SDGS) 

References 

Assessment of Austria’s short-term progress towards the SDGs (60) 

Table E.1 shows the data for Austria and the EU-28 for the indicators included in the EU SDG indicator 
set used by Eurostat for  monitoring progress towards the SDGs in an EU context (61). As the short-term 
trend at EU-level is assessed over a 5-year period, both the value at the beginning of the period and the 
latest available value is presented. The indicators are regularly updated on the  SDI dedicated section of 
the Eurostat website. 

Table E.1: 

Indicators measuring Austria’s progress towards the SDGs 

 (60) Data  extracted  on  9  February  2020 

from 

the  Eurostat  database 

(official  EU  SDG 

indicator 

set; 

see 

https://ec.europa.eu/eurostat/web/sdi/main-tables).  

(61)  The EU SDG indicator set is aligned as far as appropriate with the UN list of global indicators, noting that the UN indicators are 
selected for global level reporting and are therefore not always relevant in an EU context. The EU SDG indicators have strong 
links with EU policy initiatives. 

(Continued on the next page) 

67 

 
 
 
                                                           
 
  
 
References 

Table (continued) 

(Continued on the next page) 

68 

 
 
 
 
 
   
 
References 

Table (continued) 

(Continued on the next page) 

69 

 
 
 
 
 
   
 
References 

Table (continued) 

(Continued on the next page) 

70 

 
 
 
 
 
   
 
References 

Table (continued) 

Source: Eurostat 

71 

 
 
 
 
   
 
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