9.2 percent inflation: What is keeping the cost of living high in Austria?

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9.2 percent inflation: What is keeping the cost of living high in Austria?
Inflation is eating away at the finances and savings of households. (Photo by Towfiqu barbhuiya / Unsplash)

Austria's inflation rate for March 2023 decreased to 9.2 percent,. But the cost of living is still more expensive in Austria than in other EU countries. What's going on?


In March 2023, the inflation rate stood at 9.2 percent, a decrease from the 10.9 percent registered in February 2023, according to Statistik Austria.

“After 10.9 percent in February, the inflation rate in March 2023 fell to 9.2 percent, well below the 10 percent mark," said Statistik Austria director general Tobias Thomas.

"This is mainly due to the sharp rise in inflation a year ago: in March 2022, after the start of the war in Ukraine, fuel and heating oil had become massively more expensive – in comparison, fuel and heating oil prices have now fallen sharply. 

"Food prices rose less sharply in March 2023 than in February, while price increases in restaurants remained virtually unchanged."

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Higher costs for housing, water and energy (+14.1 percent compared to March 2022, including district heating +89.2 percent, gas +61.5 percent, solids fuels +53.8 percent, electricity +0.3 percent, and heating oil −19.0 percent) proved to be the most important price driver, followed by restaurants and hotels (+13.2 percent; restaurants +13.7 percent, hotels +10.0 percent). 

The third strongest price driver was food and non-alcoholic beverages (+14.5 percent; food +14.7 percent, non-alcoholic beverages +12.9 percent). Finally, transport showed price increases of 4.1 percent (fuels −9.3 percent, used cars +17.4 percent).


Austria's inflation still high in comparison to EU countries

Despite the significant decline, Austria is in a poor position compared to the eurozone regarding inflation - and has been for many months.

Based on uniform EU calculations, inflation in Austria was 9.2 percent in March, but it was only 6.9 percent in the entire eurozone. This is 2.3 percentage points more inflation than the average. The gap between Austria and countries such as Spain and Portugal, which are regarded as models in the fight against inflation, is even more significant. 

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According to a Der Standard report, the main reason for this is that, unlike the Iberians, policymakers in Austria have primarily refrained from intervening in the market, such as putting the brakes on energy and rent prices. Instead, the federal government sent money for households to pay higher costs.

There is no consensus in Austria over whether or not the Alpine Republic's strategy will pay off in the long run. 


Momentum Institute, which is close to Austrian trade unions, criticised the approach, asking for more price-cutting measures. Momentum economist Marie Hasdenteufel told Der Standard that she would prefer price interventions and called for a reduction in sales tax for essential food products. 

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Economist Göttert of Agenda Austria disagreed, stating that temporary tax cuts were not a good idea. If they were allowed to expire, there would be a risk of sudden price increases, just as there is with price brakes, he told the daily.


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