Cost of living: First Austrian state imposes cap on electricity prices

Lower Austria has announced a price limit on electricity costs for residents in the federal state – the first of its kind in Austria amid the rising cost of living.

Cost of living: First Austrian state imposes cap on electricity prices
Lower Austria is the first federal state in Austria to introduce an electricity price cap for households. Photo by Tayssir Kadamany on Pexels.

As of September, residents in Lower Austria will be able to apply for the Strompreisrabatt (electricity price discount) to receive a price cap 11 cents per kilowatt hour of power used.

The initiative, which was announced on Wednesday by Governor Johanna Mikl-Leitner (ÖVP), will cover 80 percent of an average household consumption and will cost €250 million, reports Kurier. The funding will run until 30th September 2023.

Mikl-Leitner said: “Our electricity price relief brings balanced support for all Lower Austrians and creates a clear incentive to save energy.”

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The subsidy will be deducted directly from the energy bill from October and the calculation will be based on the number of people living in a household.  

According to ORF, this means a one-person household will save around €170 per year, for two people it will be €272 and for three it will rise to €374.

A four-person household will save approximately €415 and for five people in a house it will be €457. For each additional occupant, savings should then amount to €41 per person.

However, the funding will only apply to residents who have their main home in Lower Austria, and not to second home owners. The cut-off date for registering a Hauptwohnsitz (primary residence) in the state was July 1st.

The model has been developed in cooperation with local energy supply EVN, but a deal is also being negotiated with other electricity suppliers in Lower Austria, according to Kurier.

The Lower Austria federal government is also calling for transparency on the possible impacts on individual industries in the event of an “energy control emergency”, as reported by Der Standard.

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Could a national energy price cap be introduced in Austria?

During the press conference on Wednesday, Mikl-Leitner, who has been actively campaigning for financial support for energy consumers, said: “I wholeheartedly welcome an Austria-wide price cap.” 

Inflation in Austria is currently running at 8.7 percent – the highest rate since 1975 – with increasing energy costs significantly contributing to the rising cost of living.

Gabriel Felbermayr, head of the Austrian Institute for Economics (WIFO), recently submitted a proposal to the Austrian Federal Government about capping energy prices for “normal consumption”. Chancellor Karl Nehammer has since directed Finance Minister Magnus Brunner to review the proposal, according to reports.

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The concept of a price cap has sparked debate in the country with the ruling Austrian People’s Party (ÖVP) reportedly against the concept. Both the Freedom Party of Austria (FPÖ) and the Social Democratic Party of Austria (SPÖ) have expressed support in subsidising energy prices.

With energy prices set to rise even higher and the prospect of Russia switching off the gas supply through the Nord Stream 1 pipeline, this issue is likely to remain a point of political debate for the foreseeable future 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.

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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.