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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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MONEY

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

People in Austria are working longer to finance government spending, leading to calls for a tax reform. Here's what you need to know.

EXPLAINED: What is Austria's 'Tax Freedom Day'?

Anyone that lives and works in Austria will be aware that this is a high tax country. But what does Tax Freedom Day actually mean?

Here’s a quick explainer.

READ MORE: Over half of Austrians on financially shaky ground: survey

Tax Freedom Day is not a tax-free day

Tax Freedom Day (otherwise known at Taxpayer Memorial Day) is the date when the Austrian population starts working to fund their own pockets, rather than the government’s.

In 2022, it falls on Monday August 15th – one day later than in 2021.

Martin Gundinger, a Research Fellow at the Austrian Economics Center, said: “This means that the Austrian population works seven and a half months exclusively to finance government spending.”

Among OECD countries, Austria has one of the highest wage and non-wage labour costs at 47.8 percent. Only Belgium (52.6 percent) and Germany (48.1 percent) have higher costs than Austria, reports Kurier.

Non-wage labour costs refer to an employer’s expenditure on personnel, such as social security and insurance contributions.

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

Calls to reduce the tax burden in Austria

As the Austrian economy feels the heat from the increased cost of living and rising interest rates, there are calls for the federal government to reduce labour costs in Austria.

Christiane Holzinger, Federal Chair of the Young Economy in the Austrian Economic Chamber, said: “Reducing the cost of labour is an essential factor for the workplace and business location – and right now it is the best recipe for an economic upswing.”

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

Likewise, Barbara Kolm, Director of the Austrian Economics Center, is worried that Tax Freedom Day could arrive later each year, which will further increase the economic burden on businesses and employees.

Kolm said: “Rising interest rates lead to higher burden to repay the debt. If there is no willingness for comprehensive reforms, Tax Freedom Day will be pushed back further.”

READ MORE: Vienna forced to dim street lighting and cancel some Christmas illuminations

Gundinger, from the Austrian Economics Center, is also calling for a tax reform in Austria.

He said: “Against the background of the rising inflation rate, a reduction in taxes – along with cuts in government spending – makes sense.”

“Decreasing taxes ensure higher productivity, and if more is produced, this has a price-dampening effect. In this respect, an urgent rethinking of politics is necessary, which is currently trying to counteract this with additional expenditure and special levies.”

Additionally, the New Austria and Liberal Forum (NEOS) is calling for the expansion of state-funded childcare for all children from the age of one to allow more women to enter the workforce on a full time basis.

The NEOS also want to end cold progression (when the tax burden increases but income does not due to inflation) and reduce non-wage labour costs by 6.55 percent.

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