The Magic Pentagon
The Austrian government and Austrian economic institutes and
analysts have long evaluated the country's economic policies and
general economic situation on the basis of five standards, which
are termed the magic pentagon: keeping the GDP growth rate
as high as possible; maintaining the current account balance as
high as possible; keeping employment as high as possible; holding
down the inflation rate as much as possible; and keeping the
government deficit as low as possible. The objective of
government policies is to keep some of those measures as high as
possible and some as low as possible. Austrian statistics
sometimes show the five different objectives as five arrows
emanating from a central core, with lines connecting the current
statistics on each of those arrows so that they form a pentagon.
The purpose of government policy is to make the pentagon as large
as possible, recognizing that there might at times be some
required trade-offs among the different objectives.
One of the most important elements in the policy mix is a
determination to combat inflation--not an easy task, especially
given the significant fiscal deficits during parts of the 1970s
and 1980s. To fight inflation and keep the schilling strong and
stable, the government relies heavily on attaching the schilling
to the deutsche mark and following the policies of the German
Bundesbank. These practices, on the whole, have kept inflation at
acceptable levels. Low inflation has tended to reduce the demands
for higher wages. Consumer price increases held steady around the
late 1980s but crept up in the early 1990s to 3.3 percent.
Producer prices increased at a slower rate, but wages rose even
faster. As a result of the government's policy, Austria has had
one of the lowest inflation rates in Europe, and the schilling
has consistently been one of Europe's strongest currencies.
Data as of December 1993