The integration of new emerging economies such as China and India into world trade, in conjunction with lower tariffs and reduced trade barriers, has contributed to a decline in prices for imported finished goods. This development has probably been most noticeable for clothing and footwear and audiovisual equipment. New producer countries with very low cost levels and increasingly more efficient production have contributed to a low rise in prices for other goods as well. Global competition has intensified and productivity growth has been high both in Norway and abroad. Competition has also increased in Norway in a number of industries. The airline industry has perhaps been in particular focus, where the entry of the airline Norwegian in the Norwegian market has resulted in substantially lower air fares. In the retail trade we have also witnessed the impact of more efficient purchasing schemes, a larger number of chains and intensified competition. Margins and prices are falling in the financial industry. The rise in prices, for example in the hotel and restaurant industry, is surprisingly low. In the labour market, we see traces of increased competition and a more flexible supply of labour as a result of the accession of new countries to the EU and greater mobility in the international labour force. These developments may have contributed to keeping wage growth at a lower level than would otherwise have been the case.
The experience of the financial crisis has prompted governments and others to put liquidity risk higher on the agenda. In June, the Basel Committee on Banking Supervision published Principles for Sound Liquidity Risk Management and Supervision. 3  3  See Basel Committee on Banking Supervision, Bank for International Settlements, June 2008. BIS Review 110/2008  3  Norges Bank has a role as lender of last resort. This means that Norges Bank can provide an individual bank or the banking system with extraordinary liquidity when demand for liquidity cannot be satisfied by other sources. 4 Our view is that the provision of extraordinary liquidity should be restricted to situations when financial stability may be threatened without such support. Experience shows that the seeds of financial instability are sown during periods of rapidly rising debt and asset prices, including house prices. Over the past 15 years, house prices have surged, and particularly in 2006, even though Norges Bank had at that time already raised the interest rate on several occasions. High household income growth and bank competition for lending and market shares are contributing factors. Nor can we disregard the possibility that in periods developments have been driven by the conviction that prices would only continue to rise. Unusually low long-term interest rates have probably also fuelled house price inflation in recent years. Norwegian households primarily finance home purchases with adjustable-rate mortgages. Nonetheless, long-term interest rates are important because they provide information about developments in short-term rates that borrowers can expect over time.