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COST OF LIVING

Austria unveils €6 billion package to fight rising cost of living

Austria's federal government unveiled on Tuesday a series of measures worth billions of euros aimed at fighting the cost of living crisis. New steps include increasing family allowances, cutting taxes and one-off payouts. Here's what you need to know.

Austria unveils €6 billion package to fight rising cost of living
Austrian chancellor Karl Nehammer (centre), vice chanceller Werner Kogler (left) and Finance Minister Magnus Brunner (right) at a press conference in 2021. (photo: BKA/Dragan Tatic)

“We want to give people security”, said Austrian chancellor Karl Nehammer (ÖVP) as he announced a long-awaited package of measures to cushion the effects of rising inflation.

Some €5 billion is set aside for payments aimed public and households whilst €1 billion is designated for entrepreneurs.

Vice-Chancellor Werner Kogler (Greens), Finance Minister Magnus Brunner (ÖVP) and Minister of Social Affairs Johannes Rauch (Greens) were also with Nehammmer to present the cornerstones of the new relief package during a press conference on Tuesday.

READ ALSO: ‘Serious situation’: Inflation in Austria expected to hit 8 percent

Austria will set aside more than €6 billion to finance measures on the short-term and structural changes looking to fight inflation, which is expected to reach 8 percent in May – the highest rate in almost 50 years.

A large part of the package is earmarked for increased social benefit payments especially family allowances.

Family allowance payments per child will increase by €180 in 2022 and the so-called “Family Bonus Plus”, which is a tax deduction currently set at f €1,500 per child per year will rise to €2,000.

Higher tax deductions are also part of the extensive package, and a structural change will be made to adjust these benefits to inflation in the future.

READ ALSO: What is Austria planning to do to cushion the rising cost of living?

Unemployed people and other “vulnerable groups” will receive a one-off payment of €300. The government expects this payment to reach some 600,000 people.

Social payments are some of the measures that should arrive first, according to the government. These are expected to be already paid out in August or September.

The so-called “climate bonus” payments, known as Klimabonus, a yearly payment meant to offset costs of a CO2 tax that has not yet been implemented in the country, will also be increased. From the planned €200 maximum per person, it will be €500 per person. This is expected to be paid in autumn, possibly October.

READ ALSO: EXPLAINED: Everything you need to know about Austria’s climate bonus payment

Reforms and help for companies

According to statements made by the chancellor, the packed will also include relief measures for companies.

“It is about offering structural relief and changes”, Nehammer said.

With vice-chancellor Werner Kogler (Greens), Nehammer announced the country would abolish the “cold progression” – the term used to describe increases in tax burdens which are based on increases in income but do not account for inflation.

In Austria, tax brackets were not adjusted for inflation, meaning that salary increases due to the rising cost of living could bump people up to higher brackets with higher taxes, effectively negating the impact of any actual salary increases.

READ ALSO: Will inflation force tax changes in Austria from 2023?

The removal of “cold progression” could also cost federal coffers €17 billion in the long term, Kogler said. The measure will be discussed and decided by the National Council over the summer, and changes brought in 2023.

Record high inflation

Finance Minister Brunner mentioned that rising inflation is due mainly to significant factors, including the coronavirus pandemic, the Ukraine war, and supply chain problems.

READ ALSO: How will the war in Ukraine impact the cost of living in Austria?

“We can’t simply open the money tap; we need structural steps”, Brunner justified the need for the package and its step-by-step program, with measures coming in the summer, autumn, and some only in 2023.

“Inflation has hit everyone, which is why we need a broad package”, Social Minister Rauch added, saying that the measures should prevent poverty in Austria.

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COST OF LIVING

Austria looking to cut energy bills in old residential buildings

The Austrian government is planning to reduce gas bills for people who rent Altbau apartments, one of the measures to cushion rising prices.

Austria looking to cut energy bills in old residential buildings

Austria has plans to reduce gas bills for people renting an Altbau, or old buildings, which often fall under rent control laws.

Justice Minister Alma Zadic (Greens) is looking into how a price reduction for gas heating could be implemented after the idea was floated by Vice Chancellor Werner Kogler (Greens), broadcaster ORF reported.

READ ALSO: ENERGY CRISIS: Will Austria have enough gas for winter?

“The tenants get a high bill but have zero leeway to change their heating system themselves,” Kogler told Austrian media.

Austria’s ÖVP leading party said there is “no ban on thinking” and any idea should be debated and evaluated.

The old residential apartments have a central heating system and tenants cannot adjust it themselves. At the same time, Kogler wants to create incentives for apartment building owners and landlords to convert to renewable heating systems.

Opposition parties divided

The SPÖ is in favour of the measures, while right-wing FPÖ says they make “tenancy law even more confusing”.

Unsurprisingly, the landowners’ association (ÖHGB) said they saw Kogler’s proposal as impractical populism. Furthermore, they complain that changing the heating source is not an easy matter in Austria, where many options, such as heat pumps or district heating, are not available everywhere.

READ ALSO: Where are energy prices going up (again) in Austria?

There are currently around 250,000 apartments in Altbau buildings, most of them in the capital Vienna, and heated with gas.

Rising energy prices

The costs of gas (and electricity) are increasing in Austria, as The Local reported. State-run distributors EVN and Wien Energie announced earlier this month that prices were set to go up as of September.

In Lower Austria, around 50 percent of EVN consumers should expect to pay at least €100 more monthly. The hike will affect those on a “classic tariff”.

READ ALSO: Five of the biggest challenges facing Austria right now

At Wien Energie, electricity prices will go up by €36 a month (based on an annual consumption of 2,000 kWh), and gas prices will increase by €60 a month (based on 8,000 kWh). However, those with a price guarantee or floating tariff will not be affected.

Austria is looking to cushion the increasing costs for its population and is working on an electricity price cap. Earlier this year, the government sent out €150 energy vouchers people could use to get a discount on their yearly energy bills.

Regionally, similar measures have already been taken, especially in Lower Austria, where a €250 million funding plan was recently announced.

Vienna has announced an extensive package with one-off payments of €200 and structural measures that will benefit more than one million residents in the Austrian capital, as The Local reported.

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