OECD Economic Surveys : Austria 1978.

63 Pages·3.721 MB·English

by  OECD

ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION DE COOPERATION ET OE D E V E I 0 P P E M E N T ECONOMIQUES
BASIC STATISTICS OF AUSTRIA
THE LAND
Area (thousand km2) 84 Major cities, May 1971 census
Agricultural area (thousand km2) 38 (thousands of inhabitants):
Exploited forest area (thousand km1) 32 Vienna 1615
Graz 249
Linz 203
Sai/burg 129
Innsbruck 115
THE PEOPLE
Population, 31.12.77 (thousands) 7522 Net migration, 1976 5000
per km- 90 Total employment', monthly
Net natural increase in population, average 1977 2737100
1976 -8000 of which:
Natural increase rate in industry2 633970
per 1000 habitants, 1976 1.1
PRODUCTION
Gross National Product, 1977 Industrial origin of GNP at market
(Sch. billion) 791 prices, 1977 (per cent):
per head (US $) 6360 Agriculture 5
Gross fixed investment, Industry 31
average 1975-1977: Construction 10
per cent of GNP 27 Other 54
per head (US $) 1485
THE GOVERNMENT
Public consumption, 1977 Composition of Federal Parliament,
(per cent of GNP) 16 October 1975:
General government current revenue, Socialist Party 93
1977 (per cent of GNP) 40 Austrian People's Party 80
Federal Government debt, end 1977 Liberal Party 10
(per cent of GNP) 21 Last election: 1975
Next election: 1979
FOREIGN TRADE
Exports: Imports:
Exports of goods and services, Imports of goods and services.
1975-1977 1975-1977
(per cent of GNP) average 34 (per cent of GNP) average 36
Exports, 1977 (per cent of total Imports, 1977 (per cent oftotal
merchandise exports): merchandise imports):
Food, tobacco, beverages 4 Food, tobacco, beverages 7
Raw materials and energy 10 Raw materials and energy 17
Chemicals 8 Chemicals 9
Machinery and Machinery and
transport equipment 28 transport equipment 34
Other finished and Other finished and
semi-manufactured products 50 semi-manufactured products 33
THE CURRENCY
Monetary unit: Schilling Currency units per US dollar,
averages of daily figures:
Year 1977 16.52
October 1978 13.49
1 Wage and salary earners.
2 Including administrative personnel.
Note An international comparison of certain basic statistics is given in an annex table.
OECD ECONOMIC SURVEYS
AUSTRIA
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The Organisation for Economic Co-operation and Development
(OECD) was set up under a Convention signed in Paris on 14th
December 1960, which provides that the OECD shall promote policies
designed:
toachieve the highestsustainableeconomicgrowth andemploy¬
ment and a rising standard ofliving inMembercountries, while
maintainingfinancialstability,andthustocontributetothedeve¬
lopment ofthe world economy;
tocontributetosoundeconomicexpansioninMemberaswellas
non-membercountriesin the processofeconomic development;
to contribute to the expansion ofworld trade on a multilateral,
non-discriminatory basis in accordance with international
obligations.
The Members ofOECD are Australia, Austria, Belgium, Canada,
Denmark, Finland, France, the Federal Republic ofGermany, Greece,
Iceland, Ireland, Italy,Japan, Luxembourg, the Netherlands, NewZea¬
land,Norway,Portugal,Spain,Sweden,Switzerland,Turkey,theUnited
Kingdom and the United States.
TheSocialistFederalRepublicofYugoslaviaisassociatedincertain
work oftheOECD,particularlythatoftheEconomicandDevelopment
Review Committee.
The annual review ofAustria
by the OECD Economic andDevelopmentReview Committee
tookplace on 14th November 1978.
©OECD, 1978
Queriesconcerningpermissionsortranslationrightsshouldbeaddressed
to:
Director ofInformation, OECD
2, rue André-Pascal, 75775 PARIS CEDEX 16, France.
CONTENTS
Introduction 5
I Recenttrendsanddevelopments 6
Demand and output 6
Incomes, costs andprices
Exchangeratedevelopments andrelativecompetitiveposition 10
Labourmarketdevelopments 15
Foreigntradeand payments 17
II Theroleofstabilisationpolicies 24
a) Fiscal policy, budgetary developments, and the development of the
Federal debt 25
b) Monetarypolicy, moneyand credit 29
c) Positiveadjustmentpolicies 36
III Short-termprospects
Theinternationalbackground and exports 37
Economicpolicyimpact 39
The 1979 outlook 39
IV Conclusions 42
Annex Chronologyofmain economicpolicy measures 45
Statisticalannex 49
TABLES
Text
1 Demand and output 8
2 Incomes,costs andprices 10
3 Regional and commoditydistribution ofexports 23
4 TheFederalbudget 27
5 FinancialdebtoftheFederalgovernment 28
6 Bankliquidity 31
7 Commercialbanks: structureofselected assets 33
8 Money supply andits sources 34
9 Demand andoutputprospects 37
10 ProspectsforAustria'sexportmarkets 38
11 Currentbalanceforecast 41
OECD Economic Surveys
StatisticalAnnex
A National product 49
B Output, employment, wages andproductivityin industry 50
C Retail sales and prices 51
D Money and banking 52
E TheFederal budget 53
F Balanceofpayments 54
G Merchandisetradeby commodity group and area 56
DIAGRAMS
1 Economicperformanceindicators 7
2 Growth offactorincome and factor shares 1 1
3 Exchangeratedevelopments 12
4 Internationalcomparison ofunitlabourcostsin manufacturing 13
5 Relativecompetitiveness and profitability 14
6 Thelabourmarket 16
7 Balanceofpaymentsdevelopments ]8
8 Shareofimportsintotal demand 19
9 Relativedemand pressure and exportperformance 21
10 Export orders, deliveries, unit values and unit labour cost in manu¬
facturing . 22
11 Effectiveness ofdomestic credit control 30
12 Changes in money supply, velocity of circulation and the money mul¬
tiplier 32
13 Interestrates 35
14 Indicatorsofcyclicalpositioninindustry 40
INTRODUCTION
The most remarkable feature ofthe Austrian economy over the last few years
has beenthesimultaneous achievementofaprogressivereduction ofinflation and con¬
tinued growth ofemployment. Indeed,by 1978 inflationhadbeen reducedtothefairly
low average level ofthe 1960s, while at the same time unemployment has been kept
even below the rate ofthe previous decade. As noted in last year's Survey, mainte¬
nance ofvirtually full employment conditions was achieved by policy-induced domes¬
tic demand in the face ofweak external demand, while the pegging ofthe schilling to
the appreciatingDeutschemark helpedtoslowdowntheprice-wage spiralA necessary
condition for the success ofthis policy mix has been the willingness ofthetwo sidesof
industry to accept a gradual reduction in nominal wage claims and profit margins
without having to be subjected to a prolonged period of slack.
However, the maintenance ofhigh levels ofdomestic demand and employment
has entailed public and external sector deficits considered unsustainable by the
authorities. In the autumn of 1977 the authorities therefore announced fiscal and
monetary measures designed to increase government revenues and to reduce demand
for imports. The ensuing reduction ofdomestic demand was rather stronger than ex¬
pected, entailing significant tax revenue shortfalls. At the same time, Federal expen¬
diture exceeded original estimates sothatthebudgetdeficit showed anincreaseinstead
ofthe desired reduction. The strengthening ofthe current balance exceeded initial ex¬
pectations, though the major improvement originated from significant export market
gains, while import propensities (adjusted for temporary advancement effects)
remained high. In real terms the improvement ofthe external balance amounted to as
much as 3Vi per cent ofGNP but as domestic demand declined total output showed
only a modest advance of some 1 V2 per cent entailing some rise in unemployment.
The 1979 outlook is for a moderate pick-up of economic growth with some
further easing of labour market pressure. Investment promotion schemes, primarily
consisting ofinterestsubsidised andstate-guaranteedloanstobusiness, should provide
some stimulus to investment, and exports should benefit from the expected accelera¬
tion of economic activity in certain major trading partner countries. On the other
hand, overall fiscal support to demand is likely to diminish in line with medium-term
plans to reduce the Federal deficit. The prospective resumption offasterdomestic de¬
mand growth isboundtolead to arenewed deterioration oftheforeign balanceeven if
the rather spectacular export market share gains achieved in 1978 were maintained.
The inflation outlook remains favourable as recent wage settlements have been lower
than a year earlier and productivity growth should recover.
Part I of the present Survey reviews recent economic developments, paying
particularattentiontothesurprisinglygoodexportperformance and continuinglabour
market strength. Economic policies pursued since mid-1977 are discussed in Part II,
including a review of latest policy measures which will have a bearing on 1979
developments. The short-term outlook for demand, output, prices and the balance of
paymentsisdiscussed inPartIII,whilePartIV summarisesthemajor conclusions and
implications for economic policy.
OECD Economic Surveys
I RECENT TRENDS AND DEVELOPMENTS
The track record ofmajoreconomicperformanceindicatorsdepicted inDiagram
1 highlights the main achievements attained by the Austrian economy in 1977 and
1978 but also reveals someoftheunresolved problems. The reorientation ofeconomic
policy in the course of 1977 has as expected led to a slowdown of economic
growth in 1978 without, however, entailing a corresponding increase in unemploy¬
ment. Further progress has been madetowards reducing inflation and the current ex¬
ternal deficit improved sharply in 1978 following a spectacular rise a year earlier. As
will be explained below, the large positive swing in the current balance recorded bet¬
ween 1977 and 1978 doesnotreflect, however,theunderlyingimprovementwhich has
been less marked.
Demand and output
In the course of 1977 and 1978 demand developments were dominated by un¬
usually large policy-induced fluctuations (Table 1). The prior announcement of
selectiveVAT increases and modifications in depreciation rules1 in the second halfof
1977 led to large advance purchases of both consumer durables and investment
goods. Some speculation about a possible downward adjustment ofthe schilling ex¬
changerate may also haveplayed arole2. Private consumption (volume) increased by
closeto 7 per cent on ayear-to-year averagein 1977, reaching agrowth rateofover5
per cent, seasonally adjusted (s.a.) in the fourth quarter. Private consumption increa¬
sed approximately 23A percentage points fasterthan disposable income, implyingthat
a large part of consumers' advance purchases has been financed out of previous
savings or through consumer credit. The deblocking of sizeable premium savings
accounts in the course of 1977 may indeed have encouraged purchases ofbig con¬
sumer items. The steepest demand growth during 1977 was recorded for equipment
and machineryinvestmentwith an impressiveyear-on-yearincreaseof12.4 percentin
real terms. Construction outputgrewby5 percent, stimulated byaspecial50 percent
depreciation allowance which was reduced to 30 per cent atthe end of 1977. Mostof
the buoyancy was concentrated in business construction investment, though the
quarterly growth pattern was less volatile than for equipment investment and con¬
sumption. Growth ofreal government consumption displayed a fairly smooth pattern,
below the medium-term trend. This reflected government effortsto curtail theFederal
deficit through reduced growth in public employment and other economies.
All in all, final domestic demand increased by 63/4 per cent in 1977, pulled up
strongly by the acceleration in the second halfoftheyear. Part ofthe anticipatoryde¬
mand for consumer durables and machinery investment was satisfied out ofexisting
stocks, sothattheincreaseintotaldomesticdemand(5 percent)waslesspronounced.
Since the selective VAT increase was concentrated on goods not produced
domestically, the advance purchases pushed up imports considerably, leading to a
large negative contribution to output growth from the foreign balance. As a result,
GNP increased by no more than 3Vi per cent or only slightly morethan halfthe rate
for final domestic demand.
The advance purchases in late 1977 were expected to entail a decline in demand
in early 1978. However, the decline in domestic expenditure recorded in the first
1 Thepolicymeasurestakeninthesecondhalfof1977 aredetailedintheAnnexanddiscussedin
Part II ofthis Survey.
2 Theexistenceofsuchspeculationwasmanifestbythesizeableprivatecapitaloutflowsrecorded
in the autumn of 1977, when the current balance was in large deficit.
Austria
Diagram 1 Economie performance rorHcaton
%
«FULL EMPLOYMENT'
4 Unemploymentinpercentofdependentlabourforce 4
3
Avrooo1960.1976 2
1
0
VolumegrowtholGNP 8
6
4 Av.ro,.1960-1976 4
2 2
0 0
-2 -2
8' iPRICE STABILITY' 8
Percentincreaseinimplicitdeflatorforprivateconsumption
6 e
4 4
2 2
0 0
EXTERNAL BALANCE»
2 CurrentbalanceofrayaentsinpercentofGNP 2
1 A Currentbalancepluserrorsandomissions 1
0 0
-1 Current/balance \ -1
-2 -2
-3 -3
-4 -4
-5 -5
-I -»
-'.
5 BUDGET' 5
FederalbudgetdeficitinpetcentofGNP
4 4
3 h 3
2 - 2
1
0 L
1X0 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 1978*
1. Net lending excluding debt repayment; administrative basis.
* Preliminary estimates
Sources: Osterreichisches Institut fur Wirtschaftsforschung; Ministry ofFinance; OECD.
Table 1 Demand and output
Per cent
of GNP Constant 1964 prices: seasonally adjusted percentage changes, at annual rates
prices 1976 1977 1978 I 1978" 1977 1978
(1977) 1977 I Qi Q2 Q3 Q4 Qi Q2
Private consumption 58.4 4.0 6.9 -1.5 -13 7.1 8.5 2.3 21.1 -27.5 1.4
Government consumption 16.2 2.5 2.0 2.0 2 2.2 2.4 0.4 2.9 2.3 2.2
Gross fixed capital formation 27.1 5.7 8.2 -0.2 -1 -5.6 9.0 22.2 8.3 -31.8 15.3
Construction 15.9 2.0 5.1 4.0 3 4.6 8.9 6.0 2.3 -0.4 8.6
Machinery and equipment 11.1 10.9 12.4 -4.6 -6 -16.8 9.1 45.6 15.7 -57.9 25.5
Final domestic demand 101.6 4.3 6.7 -0.8 -1 2.7 8.0 7.5 15.2 -26.0 5.3
Stockholding* 1.7 3.4 -1.6 -1.4 -i -3.2 -3.3 0.0 -7.1 -2.4 10.3
Total domestic demand 103.4 7.6 4.9 -2.1 -13 -0.6 4.3 7.4 7.4 -27.7 16.9 !
Foreign balance1 -3.4 -2.4 -1.5 3.3 3i -4.4 -3.3 -8.5 -2.2 30.1 -9.7
Exports of goods and services 34.5 11.3 5.0 8.7 7i 6.8 -8.0 3.0 9.1 28.7 1.0
Hi
Imports of goods and services 37.9 17.9 8.5 0.4 -3 -4.1 0.1 25.3 13.4 -36.9 28.0 8
a
GNP 100.0 5.2 3.5 1.2 14 3.9 1.0 -1.1 5.5 -2.7 5.8 o3
Memorandum items: Co
GNP deflator 5.8 4.9 4.8 5 3.8 9.4 1.3 1.6 7.3 9.3 c
Industrial production 6.3 3.4 0.7 24 2.5 -2.1 -1.8 1.2 1.2 6.6
1 Changes in stockbuilding and the foreign balance are expressed in per cent of GNP of the previous period, at annual rates.
2 Secretariat estimate.
Sources: Osterreichisches Institut fiirWirtschaftsforschung; OECD.