It's Still The Economy, Stupid
Inflation and the cost-of-living crisis remain the most important political issues to Austrian voters
Servus!
This week, I want to come back to an issue I began talking about in last week’s newsletter: the cost-of-living crisis and the coming round of negotiations between labor and industry over wages. According to voters, there is no more important issue in Austria right now than inflation and the cost of living. A new Profil poll published this weekend showed that 59 percent of Austrians believe inflation is an issue politicians should be especially concerned about, way ahead of healthcare (27 percent), energy (21 percent), and asylum and immigration (20 percent).
How voters perceive the state of the Austrian economy has a lot to do with party affiliation. Supporters of the two governing parties, the People’s Party (ÖVP) and the Greens, are far more likely than Social Democratic Party (SPÖ), Freedom Party (FPÖ), and NEOS backers to say the economy is in good shape. Politically, the cost-of-living crisis has clearly been to the benefit of the FPÖ, for not only are they first in the polls (see below), but their voters are the least likely to feel positively both about the country’s finances and their own. Only 6 percent of FPÖ voters said they felt ‘very good’ about their personal economic situation.
The year-on-year rate of inflation, statisticians confirmed this week, hit 7.4 percent in August, bumped up by the rising cost of fuel. Over the past twelve months, federal and state governments in Austria have undoubtedly succeeded in putting money in people’s pockets: the Klimabonus, the Anti-Teuerungs-Bonus, an end to bracket creep, inflation-linked entitlement increases, and so on. The coalition also brought in an electricity price cap, but where authorities have arguably failed is in treating inflation where people see and feel it, namely at the source in terms of food and fuel prices. This, perhaps, helps explain the disconnect between the taps being turned on to the benefit of voters and the government’s low popularity figures.
Inflation and the cost of living will provide the framework of battle for this year’s negotiations between labor and industry over wages. By way of background: In the absence of a national minimum wage, salaries in Austria are set down in collective bargaining agreements negotiated on a sector-by-sector basis within the framework of the social partnership. 98 percent of salaries in Austria are covered by collective bargaining agreements, and renegotiations take place annually. Those talks begin next week when the relevant stakeholders in the metal and machine-building industries will sit down to hash out a pay agreement.
In 2022, when the annual rate of inflation hit 8.6 percent, up from 2.8 percent in 2021, trade unions successfully negotiated salary increases of up to 8 percent for metal workers. As inflation remains high, the unions are aiming for similar increases in 2023 and see no reason to hold off in order to avoid the sort of wage-price spiral economists fear most. Inflation is depressing incomes and purchasing power, the unions argue. 2021 and 2022 constituted record years for the metal and machine-building industries. 2023 looks set to be an above-average year in spite of economic headwinds, and workers are entitled to their share.
Bosses, however, are jittery. Inflation is hitting the metal and machine-building industries from all sides. Rising energy and production costs are eating into profit, while higher interest rates make borrowing more expensive. The Austrian economy contracted by 1.1 percent in Q2 2023 because of falling trade and industrial production, and a recession in Q3 is not out of the question. 8 percent salary increases, employers argue, is something they can ill afford. As I said last week, the outcome of these negotiations will set the tone for the rest of the autumn and winter. Unions are within their rights to press for another 8 percent, but any compromise between labor and industry might be found in lower salary increases offset by one-time, tax-free bonuses.
Bis bald!
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The 2023/24 nationwide flu vaccine campaign begins in Austria on October 2. This autumn and winter, you will be able to receive the flu shot in one of three ways:
From your local doctor. Please contact your GP to make an appointment.
From your employer. Please contact your HR department for further information.
At an ÖGK health center. You can make an appointment online now. (Note: via the ÖGK, it is possible to book an appointment to get the flu shot and COVID-19 booster at the same time.)
Any Austrian resident is entitled to get the flu jab irrespective of their insurance status. Don’t forget to bring your e-card and yellow vaccination pass to the appointment. The shot will cost €7 if you get it from your doctor or at an ÖGK health center; it is likely to be free if you get it at work.
For further information, contact the flu vaccine hotline at +43 50766501510. And in case you missed it, last week’s newsletter contained information about the new, adapted COVID-19 vaccine.
Tax Relief
The standard tax-free personal allowance will rise to €12,816 in 2024 in line with inflation following the government’s elimination of bracket creep at the start of the year. Next year, the 41 percent rate of income tax will fall to 40 percent.
Far-Right Runs Free
The FPÖ continues to extend its lead in the polls ahead of elections due in the fall of 2024. Were an election held this Sunday, the far-right would win 32 percent of the vote, followed by the ÖVP on 24 percent and the SPÖ on 21 percent.
Foul Play
A production company behind Kurz, a documentary favorable to former chancellor Sebastian Kurz, bought up tickets to screenings en masse that were never used, according to the investigative weekly Falter. Opus-R reportedly financed Kurz to the tune of €500,000.