Jarle Bergo: Household saving and the economic outlook Speech by Mr Jarle Bergo, Deputy Governor of the Norges Bank (Central Bank of Norway), Oslo, 3 October 2005. Please note that the text below may differ slightly from the actual presentation. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 21 September, Inflation Report 2/05 and on previous speeches. The references and the charts in pdf-format  can also be found on the website of the Norges Bank. *  *  *  Introduction First of all, let me take the opportunity to thank you for your invitation to speak to you this morning. Most of you in the audience today are in daily contact with the public to give them advice about saving and investment decisions. Some of these decisions can have considerable impact on a household’s financial situation. In addition, overall developments in the economy are a result of all these individual decisions. In any case, it is important that all of these decisions are based on the best possible information. Savings motive and forms of saving One decision we take as individuals is how much of our current income we are not going to spend on consumption immediately. In other words – how much we are going to save. We can save directly in the form of fixed assets such as residential property or by investing in financial assets.
Households that save in banks or invest in other forms of financial assets make funds available to others. Banks convert some households’ savings into loans for other households wishing to finance house purchases, for instance. If we look at the household sector as a whole, savings accounted for about five per cent of household disposable income in 2004,1 which has been the level of saving for the past few years. These are funds that are channelled to the business sector in Norway or abroad to finance investment there. There may be various reasons behind a decision to save. In many cases, the objective is to spread consumption evenly through the course of a lifetime. Another reason may be the desire to leave behind an inheritance. For most people, the level of income will fluctuate through life. Most of our income is earned while we are economically active. Once our working career is over, we will have little to live on if we have not set aside capital as we earn or have secured our retirement by some other means. A hundred years ago, a common way of “saving” for old age was to have a large number of children. A large family increased the probability of some of the children growing up and being able to support their parents when they were old. By looking after family property, and perhaps expanding it, subsequent generations could also be provided for.