Austria has a new Labour Minister – Martin Kocher
The head of the Institute for Advanced Studies (IHS) and, more recently, of the Fiscal Council, was surprisingly appointed Labour Minister by Chancellor Sebastian Kurz over the week-end. His choice is a smart move, because Martin Kocher concentrates exclusively on the agendas of the labour market. Martin Kocher has been greeted with positive reactions to his new office by all parties. The behavioral economist has become acquainted with the political interests of the social partners and various (political) currents in the Fiscal Council and has already had to prove his balancing function in the manner of a politician. In his last press conference before Christmas as chairman of the Fiscal Council, however, he showed that he is well able to push through his ideas and proposals on budget development. Martin Kocher now enriches the government with internal competence in all economic and also budget issues. He will therefore also be an important source of input for Finance Minister Blümel, but the cooperation with Economics Minister Margarete Schramböck, who comes from the business world, can also be very constructive. Why? Because Martin Kocher stands for a series of ideas that could positively advance government work in Austria with regard to the business location. And because his clear attitude towards debt and budget development should also be beneficial for Austria's long-term financial market position.
Demography and climate protection require sustainable budget restructuring
Kocher believes that "it makes sense to get off the (public) debt because demography and climate protection will require additional spending in the future", even if the current low interest rates do not pose a problem. But for Austria's financial standing, debt reduction is important because it can raise a voice within the EU for serious budget rebalancing even in less ambitious countries (of course in cooperation with other austerity-oriented EU/euro area countries, as in the framework of the "Frugal Four" — Sweden, Finland, the Netherlands and Austria). In this way, Austria's yield premiums over Germany can remain limited to a few basis points, even in the long term.
The reorganisation of the state budget must be carried out from the perspective of intergenerational justice, as state debt represents "borrowing from the future". In his proposals for a new tax system after the pandemic, he is a clear advocate of easing the burden on labour, but higher pricing for environmental use/waste. Overall, this should favor digital infrastructure, innovation leadership, education and research & development, which ultimately benefits the labour market. "Countries with a high level of structural change and innovation do not lose jobs". Investments in digitalisation and climate protection have priority and create high-quality jobs.
Promoting equity without the Vienna Stock Exchange?
With regard to financing Austrian companies, Kocher is aware of the importance of equity for financing growth. "How can I create incentives for raising equity"? By bringing debt and equity capital closer together in tax terms. However, he sees this only as a long-term reform, which is not entirely comprehensible. The same applies to his scepticism about mobilising private capital for structural change and share ownership, because allegedly "the Austrian capital market is not dynamic and attractive". Perhaps ideas will still be born here that will raise the functionality of the domestic financial centre. With more than EUR 500 billion deposited by Austrian savers, it would be appropriate to promote the equity culture.
Main topics short-time work, unemployment benefits, long-term unemployment
In the short term, Kocher was a proponent of the third lockdown, which he even judged to be too late. Although according to his calculations every week of lockdown costs EUR 1 bn in economic output, he has so far not advocated a differentiated and risk-group-driven path. However, the longer the large-scale lockdowns last, the more Kocher will be confronted with the issue of proportionality, because the negative traces on the labour market will be visible all the deeper and longer. Thus, as a precaution, he does not expect the pre-COVID-19 labour market data to be achieved until 2024. The main tasks in 2021 for the Labour Minister will be the issues of short-time work/short-time allowance, the level of unemployment benefits and the long-term unemployment rate. On the former, Kocher has so far advocated a clear time limit (spring 2021?). A stronger differentiation depending on the length of unemployment (higher at the beginning, but decreasing more over the years) would also be an incentive component for unemployment benefits in the most difficult area of long-term unemployment.
Economic/budget concept in the 1st half of 2021 required for more predictability
As a behavioral economist, he wants to advocate for a reduction of uncertainties for economic actors. "One must be able to adjust to different scenarios, must know what the trigger points are that lead to the respective measures". Therefore, he reasonably advocates an economic and budget plan "how to leave the pandemic behind us" in the first half of 2021. In the favorable case, this should also include structural reforms, but essentially the medium-term orientation of the economic guidelines. This should give private households and companies "planning security" for their economic transactions. A reduction of the up to 15% high savings rate and an increasing willingness to invest are to be mobilized in the second half of 2021.
Martin Kocher's principally long-term way of thinking, his balance between economy and ecology, his expert knowledge, which could also give decisive impulses to the ministers of finance, economy, infrastructure and social affairs far beyond his own sphere of influence, as well as his trust in free-market solutions can only be good for Austria's economic policy.
Footnote: The quotes are taken from the (German) podcast amPunkt https://soundcloud.com/neos-lab/ampunkt-podcast-mit-martin-kocher-wie-kommen-wir-von-den-corona-schulden-runter?in=neos-lab/sets/ampunkt-1 and Twitter posts under @MagratheanTimes.
Peter Brezinschek is acting as Chief Analyst in Raiffeisen Banking Group since 1985. From 1999 to 2020 he was Global Head of Raiffeisen Research. In 1992 he founded the CEE analysis activity in Austria and locally in Central & Eastern European units. Since 2002 he has bundled all economic and financial analysis of the Raiffeisen Banking Group under the brand name “Raiffeisen Research”. He has worked as a co-author on several specialist books and regularly gives public lectures on economics and financial market topics. Active as an expert in the Austrian Fiscal Council for 20 years. The principal interests are ordo-liberalism & economic policy in the context of climate change, the business cycle development as well as monetary & fiscal policy. In his private life he likes to do all kinds of sports to enjoy nature and stay fit. Personal passion is financing tree planting in the City of Vienna.