A Report on Austria

AUSTRIA
Economic Freedom Score
25

World Rank:

24

Regional Rank:

14

Least free 0

economic score is 72.4,
A ustria’s24th freestfreedom2014 Index. Itsmakingisits economy the in the score 0.6 point better than last year due to improved scores for investment

50

75
Most

100 free

72.4

Freedom Trend
74

freedom, business freedom, and trade freedom. Austria is ranked 14th out of 43 countries in the Europe region, and its overall score is well above the regional and world averages.

73

Over the 20-year history of the Index, Austria has advanced its economic freedom score by 2.4 points. Recording score improvements of 10 points or more in six of the 10 economic freedoms, including business freedom, investment freedom, and the management of government spending, Austria has gradually become a “mostly free” economy. It has achieved its highest economic freedom score ever in the 2014 Index.
Continuing to sustain Austria’s strong tradition of effective property protection, the legal system is transparent and efficiently maintained. The country’s international orientation and vibrant banking sector have been the backbone of economic expansion. The corporate tax rate is comparatively low, but individuals still face an income tax rate of 50 percent and various other indirect taxes.
BACKGROUND: After the 2008 parliamentary elections, the center-left Social Democrats formed a governing coalition with the center-right Austrian People’s Party. Social Democrat Werner Faymann is chancellor. GDP growth has slowed as a result of the eurozone crisis, yet Austria’s economy is still stronger than those of many other EU nations, and unemployment is comparatively low. The government has gradually relinquished control of formerly nationalized oil, gas, steel, and engineering companies and has deregulated telecommunications and electricity. There are large service and industrial sectors and a small, highly developed agricultural industry. The economic impact of record flooding in the past year is expected to be limited and temporary. In 1995, Austria joined the European Union, which is the destination for 70 percent of its exports.

How Do We Measure Economic Freedom?

See page 471 for an explanation of the methodology or visit the Index Web site at heritage.org/index.

72
71
70
69

2010

2011

2012

2013

2014

Country Comparisons
72.4

Country
World
Average

60.3

Regional
Average

67.1

Free
Economies

84.1
0

20

40

60

80

100

Quick Facts
Population: 8.5 million
GDP (PPP): $359.0 billion
0.8% growth in 2012
5-year compound annual growth 0.6%
$42,409 per capita
Unemployment: 4.4%
Inflation (CPI): 2.6%
FDI Inflow: $6.3 billion
Public Debt: 73.7% of GDP
2012 data unless otherwise noted.
Data compiled as of September 2013.

105

AUSTRIA (continued)
THE TEN ECONOMIC FREEDOMS
RULE OF
LAW

Country

Rank

World Average

Property Rights 90.0
Freedom from Corruption 75.5
0

20

40

60

80

1–Year
Change

2nd
18th

Score

0
–2.5

100

Instances of corruption are rare, although several prominent new cases involving government and business corruption were made public and investigated in the past year. The rule of law is respected, and the judiciary is independent. Contractual agreements are enforced effectively, and the protection of intellectual property is strong. The land registry was overhauled in 2012 to speed up registration procedures and reduce costs.
Fiscal Freedom 51.0
GOVERNMENT
Government Spending 23.5
SIZE

176th
168th
0

20

40

60

80

–0.1
0

100

The top individual tax rate is 50 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax (VAT) and a tax on real estate transfers. The overall tax burden is 42.1 percent of total domestic income. Total government spending accounts for just over half of the size of the domestic economy, and public debt is equivalent to about 74 percent of GDP.
Bank bailouts put unexpected pressure on the 2012 budget balance.

REGULATORY
EFFICIENCY

Business Freedom 76.3
Labor Freedom 80.5
Monetary Freedom 79.5

41st
26th
40th
0

20

40

60

80

+2.7
+0.1
+0.2

100

The regulatory framework generally facilitates entrepreneurial activity. Launching a business takes eight procedures, but obtaining necessary permits remains time-consuming. Hiring and dismissal regulations are not burdensome, but generous fringe benefits are among the costliest in the world. There is no statutory minimum wage.

OPEN
MARKETS

Trade Freedom 87.8
Investment Freedom 90.0
Financial Freedom 70.0

11th
2nd
19th
0

20

40

60

80

+1.0
+5.0
0

100

EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers to trade. Foreign investment in certain industries, including education and telecommunications, may be screened by the government. Offering a wide range of financial services, the banking sector continues to be competitive and is relatively well-capitalized. The country’s five largest banking groups account for over 50 percent of total assets.

Long-Term Score Change (since 1995)
RULE OF LAW
Property Rights
Freedom from
Corruption

106

0
–14.5

GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending

+4.7
+13.9

REGULATORY
EFFICIENCY
Business Freedom
Labor Freedom
Monetary Freedom

2014 Index of Economic Freedom

OPEN MARKETS
+6.3
+6.8
–3.3

Trade Freedom
+6.8
Investment Freedom +20.0
Financial Freedom
–20.0