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The Austrian Agenda, an economic liberal think tank, points out that “Austria has lost five years”. Since 2019, real gross domestic product (GDP) per capita has fallen by 1.7%. This puts Austria at the bottom of the EU comparison, even behind Germany (-1.3%). The “growth turbine” is necessary to maintain prosperity and living standards.
Introducing a “flat tax”
An important reason for the weak economic growth is the low labor productivity. Nearly one-third of employed people in Austria are already working part-time. Since 2000, Austria’s per capita productivity has barely increased and is at the low end among EU countries.
To increase productivity per person, we just need to work more. One reason for the high part-time rate is the huge tax burden. “We have to get it right on the tax side so that it’s worth working again,” said Jan Kluge, an economist at Agenda Austria. He suggested a flat tax, a uniform tax rate on income, at least on a large scale. Because if you work 40 hours today instead of 20, you only have 68% more money in your pocket. According to economists, it should actually be more than 100%.
There is also a need for an “Austrian Growth Opportunities Act” that goes further than the German model, for example by introducing a “super-sterilization” for investments in air conditioning technology and digitalization.
Providing more venture capital to companies
Another problem is the small and isolated Austrian capital market. Due to the lack of venture capital, companies finance themselves mainly through bank loans, i.e. debt capital. Among other things, the Austrian Agenda recommends setting up sufficiently high funds of funds to allow for more investments in start-ups.
Agenda Austrian economist Jan Kluge
© KLZ / Kk
Economist Kluge considers Austria’s rejection of trade agreements with South America (Mercosur) or India problematic. “Austria must make a voice that wants to move forward” and such a blockade would have long-term and expensive consequences, Kluge warns. It is also important for economic growth to control the sharp rise in unit labor costs. Therefore, collective bargaining mechanisms should be more flexible, as cost or price developments vary within sectors. Specifically, Agenda Austria economist Kluge recommends conducting KV negotiations at company level.
More growth for the long-time favorite
Part of the growth plan also includes long-standing popular measures such as debureaucratization and deregulation. “It is worth looking at what other countries are doing better than us,” Krueger suggested. The role model is again Scandinavia, where the tax burden is just as high but the quality of public services is significantly better than here. Even much-maligned Hungary benefits from a flat tax and falling unemployment benefits.
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