Compared with other countries it is perhaps above all the changes in fiscal policy that have made Sweden stand out, in spite of the fact that the limits in the fiscal policy framework have been stretched somewhat in recent years –  1/7  inflation targeting is, after all, now conducted in some twenty countries around the world and there also are other reasons than inflation targeting that have contributed to lower price increases globally. The comparatively sound central government finances have been a great strength for our country over the past ten years. In the years ahead demands will rise even further if we are to meet the challenges posed by an ageing population. More surprising, in a positive sense, has perhaps been wage formation. It is not that long ago since Swedish wage formation used to be highlighted in economic circles as a warning to other countries. But with the odd exception wage formation in Sweden since the mid-1990s has worked well from a macroeconomic perspective. I think the fact that the Swedish Trade Union Confederation has said that “the Riksbank is a wage-earner’s best friend” clearly shows that something has happened. Real wages have grown positively in negotiations that have set out from stable inflation expectations (Figure 4). That is not to say that wage formation and the way the labour market functions are perfect. The future is likely to involve even greater requirements for a more productivity-based local or individual wage formation.
Continued weak growth in the labour supply will mean in concrete terms that the Swedish economy will reach its capacity ceiling at an earlier stage and that the Riksbank may be forced to raise the repo rate at a lower growth rate than would otherwise have been the case. Another dimension of the problem is that the ageing population gives rise to greater expenditure on medical treatment, care of the elderly and pensions, which burden government budgets. At the risk of sounding repetitive, as this is something pointed out by many in the debate, I would nevertheless like to emphasise that the only realistic means of alleviating these effects is for more people to work and pay taxes and for fewer to be dependent on the social welfare system. This area will offer one of the largest challenges to economic policy in the future. Another factor that has proved surprisingly negative is the development of the krona. If someone had said to me ten years ago – when I first came to the Riksbank – that we would have as good macroeconomic growth as we have had, I would never have imagined that the krona would develop as weakly as it has done. The question is why this has happened? Traditional explanations based on competitiveness, relative inflation rates or growth rates are not sufficient. The Riksbank has therefore begun a large-scale study with the aid of external academics to try to understand this development.