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). Tensions between coalition partners are high. (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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How much do you need to earn for a good life in Austria?

Austria is known as a country with a high standard of living, but it also comes with a high cost of living. Here’s an overview of what you can expect to earn in Austria.

How much do you need to earn for a good life in Austria?

As with most things in Austria, the question of ‘what is a good salary?’ is difficult to answer as the cost of living (and wages) can vary between states and cities.

For example, the east of Austria is typically much cheaper than the west for housing (with the exception of Vienna). And those living in cities often have easier – and cheaper – access to public transport when compared with people living in rural areas. 

READ ALSO: ‘Bad-tempered locals’: Vienna ranked the world’s ‘unfriendliest city’

Childcare is also something to consider with huge differences between Vienna, where there is access to heavily subsidised services, and places like Tyrol where childcare costs more.

To delve a bit deeper, we looked at the data to find out the average salary in Austria and how it differs between professions and locations.

What is the average salary in Austria?

In 2021, the average gross annual salary in Austria was €44,395, according to the latest data from Statistics Austria

However, in the latest survey by online job platform Step Stone, the average gross annual salary in Austria is €49,609.

The Step Stone survey then broke it down further by industry with those working in pharma earning the most at €60,504. This was followed by energy at €60,345, medical technology at €59,106 and banking at €58,711.

The industry with the lowest average annual salary is hotels/gastronomy at €37,546, followed by agriculture at €39,779 and tourism at €43,965.

FOR MEMBERS: REVEALED: The best and worst districts to live in Vienna (as voted for by you)

Occupation also plays a part with people working in management earning the most – on average €66,768. Consulting came second at €53,721.

And like many other European countries, the gender pay gap in Austria prevails. The average annual salary for a man is €52,633 and for a woman it is €44,330.

Furthermore, the top earning city in Austria is Bregenz in Vorarlberg with an average annual salary of €54,620. When comparing the west of Austria with the east, the median salary in Vorarlberg is €46,450, whereas in Burgenland it is just €39,100.

What is the average cost of living in Austria?

Many international residents will find everyday living costs in Austria to be expensive, especially for those that come from countries with a much lower cost of living.

Inflation has also been rising steadily in Austria throughout 2022, leading to some steep rises in prices for groceries, housing costs and energy.

READ MORE: EXPLAINED: 10 ways to save money on your groceries in Austria

However, the average cost of living varies across the country, depending on the location. For example, Vienna and Innsbruck in Tyrol are two of Austria’s most expensive cities, but more affordable places to live are Graz in Styria and Klagenfurt in Carinthia.

In Vienna, the average price for a one bedroom apartment in the city centre is €915, going up to €2,000 for a three bedroom apartment, according to Expat Arrivals.

Whereas in Graz, the average cost of a one bedroom city centre apartment is around €609, and a three bedroom apartment is €1,170.