BIS Review 93/2006  3  Capacity utilisation can also be followed more directly in the NIER’s business tendency surveys and through analyses of labour supply. The business tendency surveys indicate that capacity utilisation is not yet so high seen over the economy as a whole. However, it has risen to high levels in the construction sector and in certain services sectors. Analyses of the labour supply also indicate that there are substantial labour reserves. Open unemployment is still relatively high. In addition, there will be many latent job-seekers, including full-time students looking for work, and an increasing number of people will continue to work after they reach the age of retirement. Labour force immigration will also increase. To summarise, I can see that the economic conditions for next year’s wage bargaining rounds look good. Growth is high and employment is rising, but the economic upturn is, in my view, not so strong as to prevent capacity utilisation remaining at a relatively normal level next year. Profits in the business sector are good, but not as exaggerated as in the mid-1990s when we last faced problems with overly high nominal wages. Inflation is moderate and the conditions for attaining the inflation target over the coming years are good, on condition that the Riksbank gradually increases the repo rate. This was also the message in our most recently-published Inflation Report. Conclusion Let me conclude with a summary of what I have said so far. The experiences of the 1970s and 1980s were very negative.
Fiscal policy is then best handled by the government, not by the central bank. The Riksbank's monetary policy is already expansionary and contributing to supporting demand in the Swedish economy. But there are limited possibilities to make monetary policy even more expansionary, in my opinion. There are, however, good possibilities to make fiscal policy more expansionary. I therefore believe that fiscal policy will play a larger role in stabilisation policy if economic activity weakens further in the coming years. Climate change entails new economic and financial risks Climate change is one of the structural changes I have talked about today. I have noted that Örebro was one of the first municipalities in Sweden that issued a green bond. Here at Kommuninvest, in Örebro, I think that it may be appropriate to conclude by elaborating on what I see as the Riksbank's role in the work to achieve greener financial markets. Climate change affects the way the economy functions. Its impact is most clear in the insurance sector, as a direct consequence of the risks of climate-related damage. The risks may also increase on the financial markets when various branches are forced into major changeovers as a result of demand, taxation or regulations being changed. 7 Monetary policy can also be affected more directly, for instance if economic data becomes more difficult to interpret when the effects of the weather lead to larger fluctuations in prices and production.