Is the Austrian dialect of German really that different from standard High German?

I mean is it so different that a German could not understand an Austrian at all?

If an Austrian, especially if he's from the mountain region, does not want to be understood he can use a dialect which is definitely not understood by Germans. However, the Austrians also use the regular German language in business life and in school so every Austrian citizen is able to talk in a way that he is understood without any problems.

In the valleys of the Alps many different words have survived centuries and have been created. Even within Austria there is an incredible language mix. In the most western part named Vorarlberg those guys speak a dialect that is closely related to the Swiss-German language. For them the expression [xi] is typical and they use this for nearly everything. In German you say for instance [gesehen], in Vorarlberg you say [xi]. Also many Austrians are not able to understand. As there are very high mountains between this region and the rest of Austria and in winter the traffic only runs through a tunnel, there is a verb saying "what God has divided with mountains men should not connect with holes" which shows the indepentend thinking of the people from Vorarlberg.

In the Tyrol they also have a lot of different dialects, especially in the area of Lienz there are some valleys where no Austrian would be able to communicate with the natives if they don't want. An example? Green beans would be "Schnittbohnen" in German, "Fisolen" in Austria and "Stranggelen" in Eastern Tyrol or Carinthia.

In the border areas of Carinthia and Styria you may find influence from the slovenian and croatian language and in Vienna, always a melting pot for eastern nationalities, there are very many words with czech, hungarian and also jiddish roots (jiddish is a language spoken by the Austrian jews).

As you know, Austria is a small country compared to Germany and there is a kind of competition between "big Germany" and "little Austria". It's sometimes a kind of fun to talk in a way that our beloved neighbors from the north are not able to understand us.

At the end, let me tell you a joke that symbolizes the situation between Germany and Austria.
When God created the world he explained to Saint Peter what he had done: "Look, Peter, I always tried to find a fair mix in every region. Here in Africa, I gave them a huge variety of animals but also vast deserts. Here in Asia I gave them the highest mountains but also the low deltas of the rivers which may be flooded. Here in America I gave them icy regions in the north and glowing deserts in the south."
Saint Peter interrupted Him and said, pointing to Austria: "But God, look here - there is a place with the most wonderful landscape, the most intelligent people and a perfect nature - is that fair?" God smiled and answered: "Don't worry - I gave them Germany as a neighbor!"

But - in the end - we love each other ... sometimes!

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There is a section between Austria and Germany where there is a mixed dialect and citizens of both countries can understand each other.
Since the two countries have a rich past together, I believe that generally both parties could understand as their languages have been slowly interspersed in one another.
It would be more difficult depending on whether you live near Austrian-populated areas or not.

Yes it's pretty bad ,most Germans can't even understand us Austrians with our dialect but netherless we are "capeable" of putting our heavy accent aside and speak the German in the appropriate way like they teach us at school but a German could never learn that dialect ,I believe...at least I have a german friend living in Austria now for 6 years already and she said at first she couldn't understand one word, took her a few months to understand and to this day she speaks the standard High German

This is how I always answer this question:

Think of Austrian German and German German as you would see American and British English.

If you are either British or American, that comparison usually helps.