At the same time, Norwegian importers have been able to shift demand to new markets in central Europe and Asia, which has led to a fall in prices for a number of consumer goods. The terms of trade have improved by about 40 per cent since 2002. A similar situation has not been seen since World War I when earnings in the shipping industry and other export industries were exceptionally high for a period. Second, an ample supply of labour has been an important factor behind output growth. In particular, the supply of foreign labour has increased sharply after EU enlargement in 2004. Over the past two years, these labour inflows have accounted for over 30 per cent of growth in the labour force in Norway. At the same time, this has enabled Norwegian companies to be bolder in accepting new assignments and make investments knowing that they can procure labour throughout Europe. In addition to increased labour inflows from Poland, Lithuania and other central European countries, we have long benefited from inflows of labour from Sweden. Many workers are on temporary assignment and their consumption is primarily concentrated in their home country. The Norwegian economy has seen a net capacity increase. High inward labour migration and the scope for relocating portions of production abroad have led to increased competition in the labour market and have probably curbed wage growth. Third, the Norwegian business sector has been quick to adopt new technology and to reap the benefits.
Over the past few years, the Norwegian real exchange rate, whether measured by relative labour costs or by relative consumer prices, has been stronger than the average since 1970, largely due to a stronger nominal exchange rate. The corollary to these developments is the pronounced improvement in Norway’s terms of trade. The strong rise in prices for oil and other Norwegian export products has contributed to the krone appreciation  6  BIS Review 97/2007  over the past few years. The strong real krone exchange rate is therefore a result of Norway’s position as one of the nations that has benefited most from freer global trade and increased cross-border flows of capital, technology and labour. In this respect, the strong krone is a sign that the Norwegian economy is faring well. Thank you for your attention. BIS Review 97/2007  7  8  BIS Review 97/2007  BIS Review 97/2007  9  10  BIS Review 97/2007  BIS Review 97/2007  11  12  BIS Review 97/2007  BIS Review 97/2007  13  14  BIS Review 97/2007  BIS Review 97/2007  15