The centralised income settlements in Norway have been an arena of coordination, where macroeconomic considerations have at times received considerable emphasis. This has contributed to low unemployment levels in our country. But we have also seen that the income settlements may be a source of economic disturbances. The income settlements in 1974/75 and 1986 have had the strongest negative impact. The settlements in 1998 and 2000 also fuelled higher cost inflation. In 1998, high wage growth, combined with the fall in the krone exchange rate, contributed to a 4 ½ percentage point rise in interest rates during the spring and summer months. The retail and service industry almost acted as a spearhead in this wage negotiation. During and after the wage settlement in 2000, short-term interest rates rose by 1½ percentage points. We have also seen that income formation is affected by labour market conditions and profit trends in the business sector. This is also true of wage and income developments among managers, salaried employees and the liberal professions. The structural changes that now seem to have occurred in the income formation for these groups has probably also been important for the outcome of the ordinary wage settlements. Distributive trades  BIS Review 47/2001  9  Growth in wages and labour costs in distributive trades has also been high the last five years, with an average wage growth per normal person-year of 5 per cent, the same as for mainland Norway. National accounts figures for service industries are more uncertain than figures for manufacturing industry.
Growth in private consumption has been moderate the last year following many years of high consumption growth in the 1990s. House prices have increased markedly the last decade. Inflation-adjusted house prices are now more than 10 per cent higher than at the highest level in the 1980s. Growth in lending to the household and enterprise sectors remains high. Since 1997, price inflation has been higher in Norway than among our trading partners. Price inflation has accelerated the last year, also when we disregard the increase in petrol prices and indirect taxes since the beginning of this year. The year-on-year rise in overall consumer prices was 3.8 per cent in April 2001. Excluding indirect taxes, electricity and petrol prices, the year-on-year rise in prices was about 2 ½ per cent in April of this year. 8  BIS Review 47/2001  Higher price inflation in Norway is primarily due to a tight labour market that has persisted over many years, fuelling strong growth in wages and labour costs. In the light of higher price and cost inflation in Norway than in other countries, it has been appropriate to maintain higher interest rates in Norway than in most comparable countries. A special feature of wage formation in Norway has been that conditions for exposed industries, including those that do not face international competition, have received considerable emphasis in the negotiations. The last few years, the sheltered sector has had a greater influence on overall wage developments.