Urgent reforms

OECD warns of an explosion in our national debt

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09.07.2024 06:00

Without sustainable structural reforms to pensions, the healthcare system and nursing care, Austria's national debt could double to a good 171% of GDP by 2060, the Organization for Economic Cooperation and Development (OECD) has sounded the alarm. Weakening growth also needs to be stimulated.

In its latest country report, the OECD, as an organization of 38 industrialized countries, packaged clear warnings for Austria in friendly words. OECD Secretary-General Mathias Cormann is particularly concerned about the impending explosion in national debt. From 76.7 percent of economic output GDP this year, this would more than double to 171.3 percent by 2060 if there are no structural reforms to care, pensions and the healthcare system.

"Fiscal policy must address this. In the case of pensions, for example, an increase in line with rising life expectancy; in the case of healthcare, a shift from hospitals to non-hospital care and more prevention." According to the OECD experts' calculations, with strong countermeasures it would still be possible to reduce the debt ratio to around 68% in this period, which would still be above the Maastricht limit of 60%.

(Bild: Krone KREATIV)

The findings are also mixed in other respects. In terms of taxes, the OECD points out that the burden on labor is too high and urges a shift in revenue to a faster increase in the CO2 levy and an increase in property taxes. The corresponding standardized property values have not been adjusted since the 1980s, while other countries do this regularly (e.g. Holland, Hungary and Korea annually, Japan and Portugal every three years). The OECD recommends that the value should be brought closer to the real market value at least every six years.

OECD Secretary-General Mathias Cormann: "Long-term burdens." (Bild: APA/Jakob Langwieser)
OECD Secretary-General Mathias Cormann: "Long-term burdens."

Cormann also identifies weaknesses in the persistently above-average inflation and moderate economic growth in Austria. After decades of strong growth, Austria has recently fallen behind significantly. Specifically, the OECD suggests making access to services easier, as the hurdles are often too high. Furthermore, the participation of women and migrants in the workforce urgently needs to be improved, for example through more childcare places and intensive language courses. "Problem schools" need additional money.

All of these measures would drive growth. In total, GDP could be almost 13 percent higher by 2050 than currently assumed, the experts calculate.

This article has been automatically translated,
read the original article here.

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