Costs in the Swedish manufacturing industry have fallen in the last 15 years in comparison with those in a large group of countries (see Figure 3). Swedish exports have increased dramatically and the current account is showing a large surplus. The development of real wages is an additional way of illustrating that wage formation has functioned better in the last 15 years than in the 1970s and 1980s. In the period 1997-2007, the average increase in real wages was 2.5 per cent per year. There has not been such an extended period with real wage increases since the 1960s. This can be compared to the period 1970-1992, when the average increase in real wages was 0.7 per cent. Real wages actually fell in several years during the 1980s and early 1990s (see Figure 4). Wages and costs in the current agreement period I now come to my second point, which concerns wages and costs in the current agreement period. As far as we can judge at the moment, cost increases will be higher in the current agreement period than in the preceding agreement periods. Wage increases will be somewhat higher and the development of productivity much weaker.
Higher wage agreements in 2007 than in preceding agreements I personally was rather optimistic ahead of the rounds of collective bargaining in the spring of 2007 in the sense that they would mainly be conducted in good time before the old agreements expired and without serious conflicts, and that they would result in wage increases that were compatible with the Riksbank's inflation target. My assessment was based on three factors. Firstly, the economic conditions prior to the bargaining rounds were good. Wages had increased moderately in the preceding years and there was spare capacity on the labour market. Secondly, wage formation had improved since the crisis at the beginning of the 1990s. Thirdly, the monetary policy framework had improved and thereby the conditions for maintaining low and stable inflation. The public's expectations were that inflation would be around the target of 2 per cent per year. At the same time, my assessment was that the risks were on the "upside", that is that it was possible that wage increases could be higher. There was strong growth in the economy and employment was increasing rapidly. Despite the positive experience of the preceding years, there was a possibility that the rounds of collective bargaining could be much less straightforward than expected. Market forces could also push up the rate of wage increases to higher levels. I became more concerned when the content of the agreements became apparent. The levels of the agreed wage increases were significantly higher than in the preceding rounds of collective bargaining.