The chart shows income on the horizontal axis, and health expenditure on the vertical axis. Norwegian health service expenditure is on a par with or higher than in that of other western countries, with the exception of the US, Germany and Switzerland. However, as a percentage of income, health expenditure in Norway is still not particularly high. A further reason for the situation outlined above might be the composition of the population. We know that in a few years health expenditure will rise sharply because of an ageing population. However, current demographic trends do not indicate particularly strong pressures. The challenges will increase considerably in the years ahead. Continued growth in incomes and an ageing population will boost demand for health and care services. Moreover, it will be possible to offer services and forms of treatment that are not available today. All this has to be provided for within tight personnel and budget constraints. The increase in social security expenditure on pensions will lay claim to a steadily increasing share of overall central government expenditure. Even with sizeable government financial assets, these resources will primarily be used to finance the increase in pension expenditure associated with the ageing of the population. Taxes cannot be increased unaccompanied by a weakening of the position of the business sector. Therefore, it would be inappropriate to base policy decisions on the assumption that growth in public expenditure items other than pensions can exceed GDP growth. Allow me to illustrate this.
At a premium, businesses can hedge against short-term fluctuations in the krone exchange rate. The fluctuations are not greater than in other countries with a floating exchange rate. In 1996 and in the autumn of 1998, Norges Bank attempted to attenuate movements in the krone exchange rate through exchange market interventions. On both occasions, interventions prompted a game situation between the central bank and market participants, as was also the case during the currency crisis in the autumn of 1992. When a central bank trades its own currency, market operators make a play for profits on the premise that the exchange rate does not reflect market fundamentals. In a world where capital flows freely, this game situation can quickly trigger large capital movements. The experience of the 1990s shows that Norges Bank does not have the instruments to fine-tune the krone exchange rate. Today’s monetary policy The objective of monetary policy is exchange rate stability against European currencies, defined as the euro from 1 January. Norges Bank’s mandate - which is the Exchange Rate Regulation - takes into account that the krone may remain outside its normal range. The Exchange Rate Regulation states that “in the event of significant changes in the exchange rate, monetary policy instruments will be oriented with a view to returning the exchange rate over time to its initial range”. The concept “significant changes” is not quantified and must be given an economic content.