OECD considers higher retirement age in Austria to be “most socially viable”

But Cormann warned of external shocks. “Prolonged conflict in the Middle East poses significant downside risk,” he said. Higher energy prices and new inflationary impulses could quickly dampen growth.

Strengthen economic resilience

Austria is facing a phase of far-reaching economic decisions. The recent crises have revealed structural weaknesses. “The energy price shocks resulting from Russia’s war of aggression against Ukraine led to the longest recession since 1945,” said Cormann.

GDP per capita is 21 percent above the OECD average. At the same time, however, the gross domestic product fell in 2023 and 2024 and was “still below the level of three years ago at the end of 2025”. It underlines the need for ambitious reforms to strengthen growth and economic resilience. “It is all the more important to consistently use those political levers that are a direct national responsibility,” emphasized Cormann. The budget deficit “expanded significantly to 4.7 percent of GDP” in 2024.

The seven-year consolidation plan presented by the government is an important step. The goal is to reduce the deficit to “below three percent of GDP” by 2028. Nevertheless, the OECD expects the debt ratio to continue to rise – driven by demographic change, higher defense spending and higher interest costs.

Increasing life expectancy

“Additional consolidation efforts and better prioritization of expenses and revenues will be necessary,” said Cormann. Fiscal leeway could be gained through greater efficiency. The public service is “severely outdated”. The upcoming wave of retirements opens up “the opportunity to modernize administrative structures, make greater use of digital solutions and gradually adjust the workforce.”

The OECD is also critical of the design of family-related benefits. “A greater focus on lower-income households could enable significant savings,” says Cormann. Increasing life expectancy and low birth rates caused the dependency rate for the elderly to “increase significantly”. Austria’s public pension spending was “among the highest in the OECD” and would continue to grow.

Increase retirement age

Essentially there are three options: “higher contributions, lower pensions or a longer period of employment”. From the perspective of the OECD, the latter is “most socially viable”. Cormann therefore advocated stronger incentives to work longer and to further reduce early retirement. In order to stabilize the labor supply, Austria must also make better use of the potential of women. “Austria has the highest proportion of part-time working mothers in the EU,” said Cormann. The expansion of affordable childcare, more parental leave and the abolition of the tax credit for single earners could counteract this towards full-time employment.

There is also potential for savings in the healthcare sector. This spending was “among the highest in the OECD.” They could decrease through a greater focus on primary care, fewer hospitalizations and the use of generic drugs.