And in the US, the housing market has not yet obviously stabilised, which is probably a precondition for broader recovery there. Domestically, the output data have been on the soft side, moving into line with the battery of surveys and the Bank’s regional Agents. The labour market also appears to have softened, with unemployment rising and fewer vacancies advertised. It is perhaps not surprising that, compared with recent slowdowns, there should be less hoarding of labour if firms expect the adverse environment to persist for a while; and with tighter credit conditions, stretching  the export-oriented euro area would be adversely affected, and the UK with it. But, seriously, should the UK cut the policy rate to head off the risk of a dent to output from a dollar collapse that hadn’t yet occurred? I don’t think so. 2  BIS Review 112/2008  working capital, making it harder for firms to finance the retention of a less-than-fully-occupied labour force. In the manufacturing sector, input and output price inflation have edged down very slightly. In the service sector, the data are less timely, though surveys have started to indicate some slowing in the pace of inflation. Commodity prices – not only energy, but food too – have continued to fall, perhaps reflecting the effects on global demand of the earlier price rises and the reduction of subsidies by a raft of emerging-market countries. Equities have fallen around 3%.
The value of the Petroleum Fund, measured as a percentage of GDP, will rise in the years ahead. On the other hand, Norway, like many other countries, is facing substantial fiscal challenges. The expected dependency ratio, i.e. the ratio of persons over the age of 67 to persons aged 20 to 66, will  BIS Review 34/2005  5  rise sharply in the years ahead. The National Insurance Scheme’s spending on old age and disability pensions, based on the current social security rules, is increasing. The return on the Petroleum Fund can only cover a small portion of this increase. According to Ministry of Finance calculations, a funding requirement equivalent to 6 per cent of GDP will still be uncovered in 2060 given an oil price of NOK 230 (2005-kroner), or around USD 35 per barrel. Oil futures 6-7 years ahead are now higher than this. If oil prices remain as high for the foreseeable future, the funding requirement will be somewhat lower. To base decisions on this, however, would be a very risky strategy. Even though Norway’s petroleum wealth is substantial, it is our human resources that account for most of our national wealth. Even a small increase in the “return” on human capital might generate considerable gains. The return on this capital partly depends on our pension schemes and the application of social security rules. These should be designed in such a way that they provide incentives and opportunities to work. Labour market legislation must also promote production and employment.