One challenge consists of further developing the technology and expertise gained in oil production and oil services. Costs have been brought down at many stages to strengthen competitiveness in response to lower oil prices. If we succeed in this endeavour, the oil industry will continue to be a pillar of the Norwegian economy for many decades ahead. The other challenge lies in paving the way for growth in other industries and replacing the revenue shortfall and jobs shed in the oil industry owing to lower activity levels. The groundwork is in place. In recent years, the Norwegian financial system has been strengthened. During a period of restructuring, it is crucial that banks are in a position to channel credit to projects and businesses that will generate new growth. We have more fiscal policy muscle than most countries, but it must be used sensibly. The social partners seem to understand the gravity of the situation and are prepared to do their share. Monetary policy can be geared to facilitate the necessary structural changes. Norges Bank is in its 200th year. As a central bank, we have a responsibility to promote economic stability. In addition, the Bank is responsible for managing Norway’s collective financial wealth. The responsibility we have been given cannot be taken for granted. It is a mission that must be merited. Under the parity policy of the 1920s, the economic downturn was amplified by the desire to return to parity. In hindsight, that policy was described as oneeyed.
We must avoid a self-reinforcing decline in output and employment and hence a decline that is more pronounced than necessary. But an increase in the spending of petroleum revenues should primarily be used to finance temporary measures that are easy to reverse. Fiscal policy must also take into consideration that lower oil prices will reduce the government’s spending capacity in the longer term. In recent years, we have sold large volumes of oil and gas at good prices. The transfers to the government’s savings account have been substantial. The picture is now quite different. If oil prices remain at today’s level, government revenues will fall sharply. The present value of future income can in that case be estimated at a fourth of today’s oil fund, the Government  BIS central bankers’ speeches  9  Pension Fund Global (GPFG). 6 That means that most of the government’s petroleum wealth may already have been deposited in the GPFG. The year 2015 may stand as the last year of net transfers to the GPFG. Already when the budget for 2016 was presented, there were prospects that the spending of oil revenues would exceed actual income from petroleum activities. 6  10  The estimate is based on impact calculations in the National Budget for 2016 (page 31) based on a long-term oil price of NOK 400 per barrel at constant 2016 NOK.