Marvelous manners!

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OECD
ECONOMIC SURVEYS
AUSTRIA
ORGANISATION FORECONOMIC CO-OPERATION ANDDEVELOPMENT
Pursuant toArticle 1 oftheConventionsigned inParison 14th
December1960,andwhichcameintoforceon30thSeptember1961,the
Organisation for Economic Co-operation and Development (OECD)
shallpromotepoliciesdesigned:
to achieve the highest sustainable economic growth and
employment and a rising standard of living in Member
countries,whilemaintainingfinancialstability,and thusto
contributetothedevelopmentoftheworldeconomy;
to contribute to sound economic expansion in Member as
well as non-membercountries in theprocess ofeconomic
development;and
to contribute to the expansion of world trade on a
multilateral, non-discriminatory basis in accordance with
internationalobligations.
The original Member countries of the OECD are Austria,
Belgium,Canada,Denmark,France,Germany,Greece,Iceland,Ireland,
Italy,Luxembourg,theNetherlands,Norway,Portugal,Spain,Sweden,
Switzerland,Turkey,theUnitedKingdomandtheUnited States. The
followingcountriesbecameMemberssubsequentlythroughaccessionat
the dates indicated hereafter: Japan (28thApril 1964), Finland (28th
January 1969),Australia(7thJune 1971)andNewZealand(29thMay
1973). TheCommissionoftheEuropeanCommunitiestakespartinthe
workofthe OECD(Article 13 oftheOECD Convention). Yugoslavia
takespartinsomeoftheworkoftheOECD(agreementof28thOctober
1961).
Publiéégalementen français.
©OECD 1991
Applicationsforpermissiontoreproduceortranslate
allorpartofthispublicationshouldbemadeto:
HeadofPublicationsService,OECD
2,rueAndré-Pascal,75775 PARISCEDEX16,France
Contents
Introduction 9
I. The economic policy environment 1 1
Achievements and outstanding tasks from previous legislature 1 1
Fiscal consolidation 12
Monetary and exchange-rate policies and developments 18
Structural reform: a summary review 21
New policy settings 25
II. Economic performance and the short-term outlook 27
Recent developments 27
The short-term outlook 41
III. Savings-investment behaviour and related policies with special
reference to the housing sector 46
Salient features of aggregate and sectoral saving-investment
ratios 47
Saving and investment policies 56
Policy inefficiencies: some fragmentary evidence 67
IV. Conclusions 82
Notes and references 88
Annex
I. Chronology of main economic events 95
Statistical annex 100
Structural annex 110
Tables
Text
1. Policy performance indicators 12
2. The stance of fiscal policy 13
3. The Federal budget 15
4. Money and credit growth 20
5. Asset sales 23
6. Business subsidies 24
7. Projections and outcome for 1990 28
8. Demand and output 31
9. Household appropriation account 31
10. Sectoral wage developments 36
1 1. Costs and prices 37
12. The current external balance 38
13. Trade with eastern Europe, 1989 40
14. The external environment and policies 42
15. Projections for 1991 and 1992 43
16. The history of savings promotion 57
17. Targets and policy instruments 59
18. Taxation of company income 60
19. Sources and uses of housing subsidies 63
20. The taxation of housing 64
21. Savings schemes and the structure of private financial wealth
(1986) 66
22. Taxation of household capital income 70
23. Effective returns on real and financial investment before and after
the tax reform 71
24. Productivity and factor substitution in the business sector 74
25. Subsidised loans and new constructions 81
Statistical annex
A. Gross domestic product 100
B. General government income and expenditure 101
C. Output, employment and productivity in industry 102
D. Retail sales and prices 103
E. Money and banking 104
F. The Federal budget 105
G. Balance of payments 106
H. Merchandise trade by commodity group and area 107
Structural annex
I. Labour-market indicators 110
J. Public sector 1 1 1
K. Production structure and performance indicators 1 12
Diagrams
Text
1. General government net lending 14
2. Federal debt: 1985-90 and scenarios to 2000 17
3. Short- and long-term interest rates 19
4. Contributions to GDP growth 29
5. Shares in GDP: 1982-1992 30
6. Employment growth by province, 1990 33
7. Foreigners in the labour force and total unemployment 34
8. Gross domestic product per head 47
9. Savings and investment ratios 48
10. Net savings and investment in international comparison 49
1 1. Investment performance 50
12. The structure of investment 52
13. Housing investment 53
14. Sectoral saving and investment balances 54
15. Financing of net capital accumulation 55
16. Subsidised new housing 62
17. Household saving rate and saving promotion 68
18. The 'return' on investment 73
19. The age and ownership structure of the housing stock 75
20. Housing stock per capita and construction costs 77
21. Relative price of housing in the consumer price index 78
22. Mortgage interest rates less government bond yields 80
23. Regional differences in subsidisation 81
BASICSTATISTICSOFAUSTRIA
THELAND
Area(thousandsq.km) 84 Majorcities,1981census(thousandsof
Agriculturalarea(thousandsq.km),1989 33 inhabitants);
Exploitedforestarea(thousandsq.km) 32 Vienna 1531
Graz 243
Linz 200
Salzburg 139
Innsbruck 117
THEPEOPLE
Population,1-1-90,thousands 7624 Netmigration,1989 17000
Numberofinhabitantspersq.km 91 Totalemployment1,monthlyaverage
Netnaturalincreaseinpopulation,1989 5352 1989 2862290
Netnaturalincreaseper1000inhabitants,]989 0.7 ofwhich:
inindustry2 536344
PRODUCTION
Grossdomesticproduct,1989(Sch.billion) 1673 IndustrialoriginofGDPatmarket
perhead(USJ) 16603 prices,1989(percent):
Grossfixedinvestment,1989 Agriculture 3
percentofGDP 24 Industry 27
perhead(US$) 3987 Construction 7
Other 63
THEGOVERNMENT
Publicconsumption,in1989 CompositionofFederalParliament:
(percentofGDP) 18 SocialistParty 80
Generalgovernmentcurrentrevenuein1989 AustrianPeople'sParty 60
(percentofGDP) 45 LiberalParty 33
FederalGovernmentdebt,end1989 Greens 10
(percentofGDP) 47.8 Lastelection:October1990
FOREIGNTRADE
Exports: Imports:
Exportsofgoodsandservices,1989 Importsofgoodsandservices,1989
(percentofGDP) 40 (percentofGDP) 39
Exports1989(percentoftotalmerchandise Imports,1989(percentoftotalmerchandise
exports): imports):
Food,tobacco,beverage 4 Food,tobacco,beverages 5
Rawmaterialandenergy 7 Rawmaterialsandenergy 11
Chemicals 9 Chemicals 10
Machineryandtransportequipment 34 Machineryandtransportequipment 37
Otherfinishedandsemi-manufactured Otherfinishedandsemi-manufactured
products 46 products 36
THECURRENCY
Monetaryunit:Schilling CurrencyunitsperUSdollar,averageof
dailyfigures:
Year1990 11.37
January1991 10.63
1.Wageandsalaryearners.
2.Includingadministrativepersonnel.
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
ThisSurveyisbasedontheSecretariat'sstudyprepared
for the annual review ofAustria by the Economic and
DevelopmentReviewCommitteeon5thFebruary1991.
After revisions in the light of discussions during the
review, finalapprovaloftheSurveyforpublicationwasgiven
bytheCommitteeon22thFebruary1991.
The previous Survey of Austria was issued in
March1990.
Introduction
With the upswing entering its eighth year and with internal as well as
external financial stability being maintained, the performance ofthe Austrian
economy has remained impressive in 1990. Economic growth has even picked
up, becoming more broadly-based as domestic demand gathered strength. At
the same time, the economy displayed only few tensions. Though on an
uptrend, inflation was relatively moderate until the Gulf crisis, and the exter¬
nal current account was in broad balance. The only black spot was some rise
in unemployment, which occurred despite relatively strong employment
growth. While Austria may find itselfin a "free-rider" position on the back of
high German import demand, the stage nevertheless seems set for a slowing of
economic growth over the next two years as the expansionary impulse embed¬
ded in the 1989 tax cut ceases to fuel consumption and continuing high real
interest rates bear down on construction activity.
Despite above-average growth performance over the past three years and
relatively high savings and investment ratios, the 1980s as a whole saw a loss
ofmomentum in the process ofcatching-up in terms ofpercapita income with
a number of high-income European countries. This in part reflects a decline in
capital productivity relative to the OECD average and may, among other
things, reflect distortions in the incentive structure facing private savers and
investors. The new Government, formed in December 1990 after the general
election in early October, has placed particular emphasis in its policy pro¬
gramme on further limiting the public sector's claims on resources and its
influence on economic decision-making. By ensuring greater tax-neutrality an
important step was taken in this direction with the 1989 Tax Reform. How¬
ever, as pointed out in last year's Survey, the potential for market deregula-