Moreover, the conditions for the Riksbank to take action were improved as the bank was gradually given increased independence and in 1999 was given a statutory objective of safeguarding price stability. Developments since the crisis have been good on the whole, even regarding other aspects than inflation and competitiveness: •  Growth has been high. On average, GDP has increased by 2.9 per cent a year during 19942005 as compared with 1.8 per cent a year during 1970-1993 (see Figure 3). •  Employment has increased and unemployment has declined, although not as much as might be desired (see Figure 4). However, the Riksbank’s assessment in the most recent Inflation Report was that the labour market situation would continue to improve over the coming years. •  Public finances have improved to an extent where they now show stable surpluses of around 2 per cent of GDP (see Figure 5). •  The current account balance has improved and now shows very large surpluses (see Figure 5). Exports as a percentage of GDP have increased from 27 per cent in 1992 to 49 per cent in 2005. Wage formation has improved At the end of the 1980s it had become increasingly evident that Swedish wage formation did not function in a manner compatible with economic balance.
It was common that central wage agreements  2  BIS Review 93/2006  signed in the 1980s contained price development guarantees, wage development guarantees, earnings development guarantees, control stations, etc., which led to prices and wages chasing one another in an upwards spiral. The work on changing wage formation can be divided into three important steps. The first step entailed the Government appointing the Rehnberg Commission in March 1990. On the basis of the Commission’s proposals, stabilisation agreements were signed covering the greater part of the labour market, which meant that the rate of wage increase fell from around 10 per cent in 1990 to 3-4 per cent in 1992-1993. The fact that a lower rate of wage increase was not yet fully established in the mid-1990s is, however, shown by the fact that wage increases rose again to around 6 per cent in 1996, after the 1995 wage bargaining rounds. The second step entailed the social partners in the industrial sector signing a new cooperation agreement in March 1997, known as the Industrial Agreement, whereby the parties took joint responsibility for wage formation in their part of the labour market and had agreed on a regulatory framework for negotiating wage agreements. The agreement was followed by similar, but not as farreaching, agreements in other sectors. The third step meant that the new National Mediation Office began its operations in 2000. This established a third, independent party in the labour market, which could actively promote an efficientlyfunctioning wage formation process.