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COST OF LIVING

Cost of living: Why are restaurants getting more expensive in Austria?

Austria's June inflation is expected to be 8.7 percent, according to calculations by Statistics Austria - a record high in the country.

Cost of living: Why are restaurants getting more expensive in Austria?
The lettering "Cash only" can be seen above the menu of a restaurant in Vienna.(Photo by ALEX HALADA / AFP)

The inflation rate for June 2022 is expected to be 8.7 percent, the Statistics Austria institute calculated as part of a flash estimate.

Compared with the previous month, consumer prices rose by 1.4 percent, Statistics Austria said. This is the highest level since 1975 or almost 50 years.

The wave of inflation has affected mostly energy and food prices in Austria but has now also arrived in the gastronomy sector, with increasing costs in bars and restaurants in the country.

“Inflation has picked up speed in almost all areas. In addition to recent increases in fuel and heating oil prices, we also see significant increases in restaurant and food prices”, according to Statistics Austria Director-General Tobias Thomas.

READ ALSO: EXPLAINED: How Austria’s new finance measures could benefit you

The main culprits of rising food prices in retail and restaurants are the more costly energy and fuel prices. As transport and production become more expensive, these increases cascade to gastronomy as well.

Additionally, packaging and logistics costs have also increased, directly affecting food prices, the Handelsverband (trade association) said.

“The war in Ukraine and China’s zero-covid strategy continue to put a massive strain on global supply chains,” said Rainer Will, Managing Director of the Trade Association, in a press release.

“We do not expect inflation to peak until the end of the year.”

READ ALSO: The essential products that are getting more expensive in Austria

The association added that the Ukraine war also increased prices for agricultural raw materials and fertilisers, making food production and distribution more expensive.

What is next?

Rising costs have already reached other sectors, including rental prices, as The Local reported.

Austrian Post has also said that there will be price adjustments in the parcel sector “in the foreseeable future”, though they have added that these will be “very moderate”.

Criticism from the opposition

The SPÖ, FPÖ and the Neos accuse the government of doing too little against inflation.

“There is not even a draft law for the abolition of the cold progression,” criticised Neos economic and social spokesman Gerald Loacker. “The government’s one-off payments help little to nothing,” said SPÖ social spokesperson Josef Muchitsch.

READ ALSO: EXPLAINED: The main Austrian ‘tax traps’ foreigners should be aware of

FPÖ leader Herbert Kickl spoke of “failure to help”. “The ’emergency measures’ decided in the special session the week before do not even deserve the name – the first money will not flow until August 2022 at the earliest.”, he said.

The federal government has announced a broad package to help ease rising cost of living with one-off payments and the end of the so-called “cold progression” when tax brackets do not take into account inflation changes.

READ ALSO: When will you get your cost of living ‘bonus’ payments in Austria?

Cost of living calculation

The quick estimates of Statistik Austria are based on the existing database at the time of publication, which includes about 80 to 90 percent of the prices necessary for the inflation calculation.

There may, therefore, still be deviations. For example, the quick estimate of inflation for May was initially 8.0 percent, but the value was later revised downwards to 7.7 percent.

The index level of the consumer price index and further results for June 2022 will be announced on July 19th 2022.

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COST OF LIVING

Why (and when) double-digit inflation is set to hit Austria

Financial experts in Austria do not expect inflation to slow down any time soon. In fact, they are predicting the opposite. Here's what you need to know.

Why (and when) double-digit inflation is set to hit Austria

In a recent interview, inflation expert Josef Baumgartner forecast that inflation in Austria will hit double-digits in the coming months.

Baumgartner, from the Austrian Institute of Economic Research (WIFO), told Kurier that residents in Austria should prepare themselves for an ongoing increase in inflation due to rising energy prices.

Baumgartner said: “We’re a long way from the all-clear. According to the announcements by Wien Energie and EVN, I expect an inflation rate of more than ten percent by September, and no later than April 2023.”

FOR MEMBERS: EXPLAINED: What is Austria’s ‘Tax Freedom Day’?

The latest estimate by Statistics Austria shows inflation was already at 9.2 percent in July, as reported by The Local.

This is in stark contrast to predictions made by the European Central Bank earlier this year when it was expected that inflation would fall in the second half of 2022.

How expensive could energy in Austria become?

WIFO expert Baumgartner based his forecast for Austria on wholesale electricity prices, which are currently 247 percent higher than in August 2021, reports ORF

Baumgartner said: “If the energy suppliers pass this on one-to-one, there is a risk of an enormous price increase.”

Additionally, Baumgartner expects prices for electricity and gas to go up by a further 50 percent in September, and was not optimistic that the planned nationwide electricity price cap will be enough to dampen energy prices.

READ MORE: Cost of living: How to save money on energy bills in Austria

He added that federal government intervention must go further to tackle gas and district heating prices.

On August 3rd, EVN and Wien Energie – both part of the Energieallianz Austria (EAA) group – announced they will be increasing energy prices from September.

EVN (which is mostly state-owned) blamed the move on price increases on the international wholesale markets.

According to ORF, Baumgartner believes these planned price increases will further impact the customer price index and push up inflation across Austria, even if the tariff changes only apply to customers in the east of the country.

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