The Hapsburg family were the ruling family of Austria
after the Thirty Years (1618-1648), it was decided that whoever was the archduke of Austria would also be the Holy Roman Empire (the ruler of all the small german states)
In the 1805-1807 French War, Napoleon Bonaparte defeated Austria, Prussia and Russia - he abolished the Holy Roman Empire and redrew the map of central Europe.
His new ‘Confederation of the Rhine’ contained independent states, excluding Austria and Prussia
When Napoleon was defeated, the congress of Vienna (1814-1815) redrew the map to make the ‘German Confederation’
the german Confederaton included Prussia and the Germanic parts of austria (e.g. Hungary was not included as its people didn’t speak German.)
Austria had a historic role in that part of europe and a large population - so it naturally dominated the politics of the german confederation