This in turn reflects the automatic contribution made by the central government budget to curbing cyclical fluctuations because more money accrues to the state in good times than in bad. If the economy had not been in a period of strong expansion, and the economic situation had been more normal, a considerably larger transfer from the Pension Fund to the Treasury would have been necessary in order to balance the budget. This cyclically adjusted transfer is estimated at a good NOK 71 billion this year, and just under NOK 77 billion in 2008, and has increased gradually over time. It is this estimate that forms the basis of the plan drawn up by the Government and the Storting, referred to as the fiscal rule. The rule states that the government is to spend, as an annual average through the business cycle, the expected return on the petroleum fund, i.e. 4 per cent. Because of the high level of activity, the Government has proposed using somewhat less money from the petroleum fund than 4 per cent of the Fund’s value at the beginning of the year. The proposed tax programme for next year will have a fairly neutral impact on economic activity. Proposed direct and indirect tax rates will generate approximately the same government revenues as last year’s tax rates had they been continued. As a whole, however, the central government budget will have the effect of stimulating activity.
This autumn the krone appreciated during the period of market turbulence, but has weakened somewhat in the past two weeks, reflecting shifting themes in foreign exchange markets. However, it appears the krone will be a good 3 per cent stronger on average in the second half of this year compared with the first half, and about 1.5 per cent stronger this year than last year. Exchange rate developments have a dampening impact on inflation. Given our inflation-targeting regime, we will be mindful of the effects of higher interest rates on the krone exchange rate when inflation is low. High oil prices have resulted in substantial growth in the petroleum fund’s capital, and there are prospects of further growth ahead. The Government uses the central government budget to influence economic developments. Government petroleum revenues are transferred in full to the Government Pension Fund – Global and invested in securities abroad. However, as part of the budget resolution, the Storting decides on an annual transfer from the Fund to cover the deficit in the government budget when petroleum revenues and capital income earned by the Fund are excluded. This annual transfer – direct petroleum revenue spending – has been sharply reduced in recent years, but is expected to increase somewhat next year. Developments reflect a marked increase in the government’s general tax revenues as a result of the current period of strong expansion.