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Another feature of th© "Austrian way" was th© use of incomes policy in order to prevent larg© pric© increases. Th© financial authorities tried to stabillze prices by a strict linking of th© shilling to th© German mark. But th© Austrian government also had to fac© th© negative ©ffects of th© pric© stabilisation policy. Th© optimistic growth forecast had led to high wag© increases by th© middl© of th© seventies. Because of this and th© higher rat© of inflation compared to the Federal Ropublic of Germany, exports decreased and imports increased. Th© consequence was a rapid deterioration of th© balance of trades. Th© d©ficit rosę from 5.6 Mrd. Schilling in th© year 1975 to 26 Mrd. Schilling in 1976 and 49 Mrd. Schilling in 1977 (Scharpf 1982, p.476).

Because of th© hard currency position it was impossibl© to transfer th© Increased labour costs fully to prices. At this time it became apparent that this development had to b© changed. A new course of action was adopted which relied on moderate wag© increases and not on fiscal contraction.

While average wages increased between 4.5% and 8.5% per year in th© first half of th© seventies, th© wag© increases strongly fell off after 1976. Therefore the increase of the average labour costs in manufacturing (which amounted to 15% in 1975) just cam© to 0.5% in 1976, considerably below the rat© of inflation. Th© development of wag© movements had now become rather an inflation-dampening factor without raising unemployment.