Austria keeps wary eye on its deficits

Few countries in the world manage a low inflation rate. One is Austria, where prices have risen on average only 6 percent in the last decade. Only West Germany and Switzerland have done better among the noncommunist industrial nations.

Bankers and others here are somewhat nervous as to whether Austria can keep up this good record. The nation has huge budget deficits, and the supply of money grew at a high rate last year.

Nonetheless, recent wage settlements are seen as offering some encouragement for a modest rise in prices this year. Chemical workers, for instance, accepted a 4.9 percent wage hike, though inflation is running about 5.6 percent over the past 12 months.

How has Austria managed to keep inflation down?

Dr. Stephen Koren, president of the Austrian National Bank, attributes this success to three factors:

* The highly independent central bank has usually exercised moderation in feeding money to the economy. Dr. Koren said central bank money (a key monetary measure) has grown at annual rates of 6 to 8 percent over the last six to eight years.

To restrain inflation, many industrial countries have within the last decade or so established annual ''targets'' for growth in the supply of money to their economies. For instance, the United States Federal Reserve System sets targets but doesn't often meet them.

Austria has no public targets.

''It is impossible for a small, open economy to announce any targets,'' said Dr. Koren. But the National Bank does have internal targets for the money supply and usually has managed to keep within them.

Another central banker explained that the sharp growth in money last year was primarily due to an increase in the demand for currency. He suspected that Yugoslav and other foreign workers, on returning home, may have taken their savings in currency, and this would not be inflationary. Since then, the growth of money has dropped to a more normal rate.

* The Austrian schilling is pegged to the West German deutschemark. Since the West German economy has been relatively well-managed, this imposes a discipline on Austria as well. Costs in Austria must be kept competitive with those in West Germany, the Alpine nation's biggest customer. ''It forces the entrepreneurs to adjust,'' said Dr. Koren.

Austria is not a member of the European monetary system. But whenever the D-mark is revalued against other currencies in this monetary bloc, the schilling follows upward.

* Austria's ''social partnership'' between business, labor, and agriculture has resulted in wage moderation. Unlike practices of some other European nations , wages have never been indexed to inflation rates. The tightly organized Austrian interest groups get together and work out compromises, keeping in mind the national interest - and actually their own interests as well.

Dr. Koren thinks history may be one explanation for the willingness of Austrians to exercise economic restraint. ''Austria,'' he said, ''has had a lot of monetary problems from the beginning of the century.'' Like their German neighbors, Austrians were hit by rampant inflation in 1922 (one gold crown was worth 14,000 paper crowns) and post-World War II currency reform. Both actions effectively wiped out individual savings.

''The Austrian population is afraid of monetary things, of losing their money ,'' noted Dr. Koren. Thus all political parties have agreed on a need for a stable money supply and a stable foreign exchange rate. Monetary policy, he said , ''is out of the political structure.''

A stable monetary policy has also helped Austria keep its international payments in reasonable balance. This year Dr. Koren anticipates a surplus in the current account of $1 billion.

One commercial banker expressed the fear that, because of current low growth rates and higher unemployment levels in Austria, some Austrians will argue the nation cannot afford a hard-money policy. He wonders whether capital will flow into West Germany, which grew faster than Austria last year and will again this year. (Germany's output is expected to be up 3.5 percent this year, vs. 2.5 percent in Austria.) He also spoke of a need for much greater efficiency in the nationalized industries.

''The situation is not very rosy for Austria,'' he held.

Another banker, Dr. Robert Baier, a senior executive with Schoeller & Co., noted the importance of management-labor cooperation surviving the immediate stress of somewhat higher inflation and unemployment. ''If it breaks down, then it is serious,'' he said.

But most observers here figure Austrians will compromise and cooperate sufficiently to deal relatively successfully with their economic problems. ''As a practice, many things are done by consensus . . . beyond the written Constitution,'' said Dr. Baier.