Austria's Challenges and Successes in the OECD Report
The OECD has presented its latest country report for Austria. Every two years or so, the Organization for Economic Cooperation and Development analyses each member country as a whole and summarizes the findings of this analysis in a comprehensive report. Austrian policymakers have now taken up this report and are hotly debating it.
Magnus Brunner, Austria's Finance Minister, at a press conference about the OECD Country Report. / Picture: © BKA / Wenzel / Flickr Attribution 2.0 Generic (CC BY 2.0 DEED)
The recently published OECD Country Report 2024 highlights Austria's current challenges and progress in various areas such as the economy, education, and environmental protection. The central themes of the report, presented by Finance Minister Magnus Brunner, Climate Protection Minister Leonore Gewessler, and Economics Minister Martin Kocher, include improving competitiveness and the transformation to a more sustainable economy.
Economic forecasts and the need for reform
According to the OECD, economic growth of 1.5 percent is expected for Austria in 2025. The report recommends numerous reforms, including ensuring the long-term sustainability of the pension system, expanding green budgeting, and promoting productivity. Particular emphasis is placed on reducing dependence on Russian gas and accelerating digitalization.
Finance Minister Magnus Brunner emphasized that many of the OECD recommendations have already been implemented. For example, the national carbon management strategy has been adopted and the eco-social tax reform has been introduced to relieve the burden on working people, families, and pensioners. Brunner pointed out that despite recent tax cuts, Austria is still one of the high-tax countries and that the tax screw must not be tightened any further. "It is important that the bottom 50% of the income distribution pay hardly any income tax," said Brunner.
Social aspects and education
The OECD emphasizes the need to improve social mobility, especially for women, socio-economically disadvantaged children, and migrants. State Secretary Claudia Plakolm highlighted the progress made in financial education, which is further promoted through learning materials on the eduthek.at platform. These materials cover topics ranging from economic policy, the financial market, and monetary policy to digital finance and retirement planning.
"Since the start of 2021, we in Austria have been striving to significantly improve financial education across the entire population with the National Financial Education Strategy. Our first-time participation in PISA 2022 Financial Literacy shows that we are on the right track, but at the same time there is a need for further action so that we can move even further up the international rankings," explained Brunner.
Plakolm added: "Young people are very confident with their smartphones: they know exactly where to tap, but also who or where to ask if they don't know what to do themselves. It is precisely this self-confidence and knowledge that young people need when it comes to financial education, i.e. managing their own money. Handling their own money correctly must therefore be just as natural for young people as using their smartphone."
Labor market and income development
The OECD report shows that the labor markets in industrialized countries have remained robust, with historically low unemployment rates. Female employment in particular has improved compared to the time before the COVID-19 pandemic. Real wages are also rising again, but remain below the 2019 level.
The plans for climate neutrality by 2050 will affect the labor market by eliminating jobs in CO2-intensive industries and creating new jobs in climate-friendly industries. In the short term, however, the impact will be limited. Real wages are rising again in most OECD countries because inflation has normalized, but is still below the 2019 level.
Political reactions and criticism
The OECD report provoked different reactions from the political parties. While the governing parties emphasize progress, the opposition, and the trade association are critical.
SPÖ economic spokesperson Christoph Matznetter sharply criticized the government and demanded that the finance minister disclose all figures. He emphasized that Austria had lost economic power since the ÖVP came to power and that the tax and contribution ratio had risen. "The truth is, Austria was always among the best and after seven years of the ÖVP it is among the worst in Europe in terms of growth, inflation, and prosperity," said Matznetter. He calls for a "cash crash" and emphasizes that the election is a decision on the direction to take.
The NEOS is calling for long-term reforms and criticizes the high tax burden. "Inflation remains high, the tax burden in the country is at a record level, while growth is modest," said Gerald Loacker, economic and social spokesperson for the NEOS. NEOS is also in favor of linking the retirement age to life expectancy, as recommended by the OECD, as well as expanding childcare.
The trade association supports the OECD's demands for a reduction in non-wage labor costs and an expansion of childcare. Rainer Will, Managing Director of the German Retail Association, calls for incentives for older people to remain in employment for longer and emphasizes that performance must be rewarded more for younger employees. "If we manage to turn more part-time employees into full-time employees, this will also help the pension system and our entire social security system," says Will.
Environmental protection and sustainable development
Climate Protection Minister Leonore Gewessler highlighted the progress made in climate policy, including the ecological tax reform and the expansion of renewable energies. "With the eco-social tax reform or the record expansion of renewable energies, investments in public transport, and the transformation of industry, we are on the right track," said Gewessler. The OECD emphasizes the importance of a soil protection strategy to reduce the high level of soil consumption in Austria. Green politician Uli Böker appeals to municipalities and federal states to give up their blockade attitude and limit soil consumption to a maximum of 2.5 hectares per day.
"We need every square meter of healthy soil for biodiversity and the development of nature, for climate protection and protection against flooding," said Böker. She called on the Association of Municipalities and some federal states, in particular Upper Austria, to give up their blockade attitude and take real measures to protect the soil.
The OECD report shows that Austria is on the right track, but that considerable efforts are still needed to maintain competitiveness and achieve a more sustainable economy. The government and all political actors are called upon to take the OECD's recommendations seriously and implement appropriate measures. Given the many challenges in the areas of the economy, education, and environmental protection, it remains to be seen how Austria will tackle the necessary reforms to ensure resilient and sustainable development in the long term.