"If we are unable to show soon -- by which I mean in the coming months -- that we are willing and able to govern, then it makes little sense to keep messing about," Deputy Chancellor Reinhold Mitterlehner said in a newspaper interview.
"I say quite openly that after the Upper Austria state election (last weekend) I am not prepared to be an idle passenger," he said.
Mitterlehner's People's Party (ÖVP) is junior partner to the centre-left Social Democrats (SPÖ) of Chancellor Werner Faymann in an unloved "grand coalition" which is due to remain in office until 2018.
Last weekend however, both parties suffered disastrous losses in local elections in Upper Austria where the far-right Freedom Party (FPÖ) finished second after its share of the vote soared 15 percentage points.
On October 11, elections are scheduled to take place in the city state of Vienna that could produce a political earthquake. Polls put the FPÖ only a few points shy of the SPÖ, which has governed the Austrian capital uninterrupted since 1945.
Surveys show that a major reason for the populist FPÖ's surge in popularity -- nationally it tops opinion polls, scoring more than 30 percent -- is the influx of tens of thousands of migrants in recent months.
Last month, almost 170,000 people entered Austria, most of whom travelled onwards to Germany and beyond, but the Alpine country still expects a record 80,000 asylum requests this year.
Speaking to the Oberösterreichische Nachrichten daily, Mitterlehner said the government's answer to the crisis should be to finally get to grips with deep structural reforms to boost the economy.
But he also said Austria had to "sharpen" its immigration policy: "Refugees who need protection should get it. But the state's sovereignty to decide who immigrates should remain in place."