A strong increase in the population has expanded the growth capacity of the Norwegian economy without a comparable increase in wages. In particular, the supply of foreign labour has increased sharply after EU enlargement in 2004. Over the past two years, these labour inflows have accounted for over 30 per cent of growth in the labour force in Norway. At the same time, this has enabled Norwegian companies to be bolder in accepting new assignments and investing knowing that they can procure labour throughout Europe. In addition to increased labour inflows from Poland, Lithuania and other central European countries, we have long benefited from inflows of labour from Sweden. Many workers are on temporary assignment and their consumption is primarily concentrated in their home country. The Norwegian economy has seen a net capacity increase. Third, the Norwegian business sector has been quick to integrate new technology. This applies both to companies competing on international markets and those supplying goods and services to the domestic market. In comparison with other countries, it is particularly productivity gains in banks and other service sectors that stand out. Examples are automated processes and swifter payments in the financial industry and improved inventory and management systems in commerce and transport. This results in lower production costs.
Solid productivity growth and high prices for export goods, and goods and services supplied to the petroleum sector have contributed to a fall in the wage share of Norwegian enterprises in recent years, despite a low rise in prices for consumer goods and services in Norway. Wage shares have also fallen in many other countries. The global supply of labour has increased as result of the integration of China, India and central European countries into world trade. This may have had a permanent effect on wage shares. Another possibility is that increased competition for labour will again push up wage shares. The outlook for the Norwegian economy Monetary policy influences the economy with a lag. Norges Bank therefore has to be forward-looking in interest rate setting. Developments in prices and capacity utilisation in Norway are influenced by both domestic conditions and economic developments in other countries. Growth in the global economy is the strongest recorded in several decades. Continued high growth in China and India is contributing to holding up growth. Reforms in European product and service markets are also expected to lead to higher domestic demand. Growth in the US is expected to slow  2  BIS Review 34/2007  somewhat. A decline in housing construction and difficulties facing the US automotive industry are two of the main factors dragging down growth. The turnover time in the US housing market has increased markedly and housing starts have shown a considerable decline. House price inflation has levelled off.