@Relaxed is right to point out that Germany was unified under Prussian, not Austrian hegemony. Prussia’s 1866 military victory over Austria at Koeniggraetz definitively shut out the Austrians. Subsequently, the 1870 war between Prussia and France, with many of the remaining German states outside Austria joining in, led to William I of Prussian being crowned German emperor in 1871.
Austria, besides being half of the Austro-Hungarian dual monarchy, was in itself a Vielvoelkerstaat or multinational state – besides German-speaking Austrians, there were Czechs, Poles, Italians, Slovenes, Ruthenians, etc. Emperor Franz Joseph I, who had been on the throne since 1848, tried to maintain the loyalty of all his subjects regardless of ethnic or linguistic affiliation, but ethnic tensions were rife.
As Brigitte Hamann’s Hitler’s Vienna describes, the future dictator entered a politically charged atmosphere in high school in the provincial town of Linz from 1901 onward. His favorite teacher, Dr. Leopold Poetsch, was a German historian who also gave public speeches. Hamann quotes Hitler about him:
He used our budding nationalistic fanaticism as a means of educating us, frequently appealing to our sense of national honor. By this alone he was able to discipline us little ruffians more easily than would have been possible by any other means. (Hamann p. 13)
Yet Poetsch was at the same time an “Austrian patriot” who later was reportedly upset at being cited as an inspiration by Hitler in Mein Kampf. The Pan-German students were actually more radical than their teachers, who as public servants had to stay kaisertreu to some extent. Even at that time they supported an Anschluss, or having the German part of Austria join the rest of Germany. The “Heil” greeting (later so familiar!) was one of their identifying symbols, as opposed to the “Hoch” of the loyalists. The young Hitler would do things like distribute pencils with the red-gold-black German colors during class.
Hamann (whose book I recommend) sums up Hitler’s early German nationalism quite well. (The sections in italics are quotes from Mein Kampf.)
Later Hitler liked to emphasize that on account of their experiences in the multinational empire, the German-Austrians had developed a much more alert and progressive form of nationalism than had the “Reich Germans,” even early on, when they still attended school: In this way the child received political training in a period when as a rule the subject of a so-called national state knew little more of his nationality than its language. At the age of fifteen, Hitler reported, he had already realized the distinction between dynastic “patriotism” and folkish “nationalism.” At any rate, even at that early age he clearly joined the camp of the radical “folkish nationalists,” rejecting the multinational state as did the followers of Schoenerer [a Pan-German politician]. (pp.14-15)
In other words, Austrians like Hitler liked to think they were “more German than the Germans,” and growing up in a state being torn apart by ethnic tensions was the context for (and first step in) the process (so perverse and distressing to contemplate) of Hitler’s development as a national radical. “Austrian nationalism” would be an oxymoron in this context.