The Austrian economy has weathered the crisis well on the back of an export-led recovery. The authorities should seize the opportunity to strengthen reforms and maintain high growth, which in the past has been considerably boosted by European integration effects which are likely to fade out in the future. In this context recommendations from earlier OECD Economic Surveys remain relevant...

The Austrian economy continues to impress with very good economic performance while maintaining a high degree of social cohesion. This strength rests on three pillars...

Performance of fiscal policy, while good in international comparison, is not sufficient to prepare for future ageing related spending increases. Given favourable macroeconomic conditions, the pace of consolidation could be more ambitious than currently planned, with a view to reducing the debt burden below 60% of GDP by 2020. Austrian fiscal policies have tended to be pro-cyclical in upturns, mainly because spending was not adequately kept in check. Stronger fiscal rules and a reform of inter-governmental fiscal relations could help contain expenditure dynamics. Efficiency-raising reforms in key spending areas such as pensions and other social expenditures, health, and education are also highly needed to reduce spending and ensure the provision of high-quality public services at lower cost. In this regard, Austria should make full use of the performance budgeting framework it plans to introduce from 2013. Higher potential growth could also take off some of the pressure on public finances. There remains significant room to rebalance the tax structure towards less distortive sources of revenue, thus supporting employment and growth.

The highly regarded Austrian health system delivers good quality and easily accessible services, but is costly. Its governance and funding structure is highly fragmented and it makes too much use of inpatient care in hospitals. Entry and competition opportunities are de facto limited in most health markets. The system operates therefore on a supply-driven basis, and does not have clear mechanisms to optimize spending on a cost-benefit basis. Population lifestyles are also not supportive of good health outcomes and suffer important differences between social groups, raising risks for the future. This Chapter reviews Austrian authorities’ responses to these challenges, and makes recommendations based on OECD countries’ experiences. The suggested priorities are: i) more clearly assigning the performance, financing and spending responsibilities in the system, ii) enforcing a national capacity plan for publicly-funded inpatient and outpatient care, iii) introducing performance-based payment mechanisms in all services, iv) promoting the transition to “integrated care” by better balancing preventive, outpatient, inpatient, rehabilitation and long-term care, and v) better clarifying the medium-term fiscal outlook and scenarios of the system.