Austria's GDP is set to grow by 2.6 percent in 2006 and 2.1 percent in 2007. Exports, but also investment in machinery and equipment are stimulating business activity this year. The front-loading of purchases in Germany will have positive spill-over effects also in Austria in 2006. However, in 2007 the rise in the German VAT rate will have a dampening impact. Despite the jump in oil prices, headline inflation will remain moderate in 2006 and 2007. Employment is rising markedly, even the number of full-time jobs. Unemployment is declining in 2006, helped by a reinforcement of labour market policy measures; in 2007 it is set to rebound with the expected cuts in training measures.