Government oil revenue spending is expected to be brought back into line with the fiscal rule when cyclical conditions eventually normalise. We assume that prospects for higher unemployment, a fall in house prices and a high level of debt will induce households to build up financial buffers and reduce debt. The saving ratio  10  BIS Review 37/2009  is expected to increase considerably. Net lending is projected to be positive this year after being negative since 2004. As household borrowing has been considerable in recent years, deleveraging in the household sector is important to long-term stability in the economy. The outlook ahead, and monetary policy assessments  In Norway, inflation will be curbed by lower capacity utilisation. The marked increase in unemployment now envisaged will result in lower pay increases this year and next. Prospects of weaker growth and lower inflation imply a lower interest rate than presented in the interest rate projection from our last forecast in December. There is also a risk that the global downturn will be deeper and more prolonged than expected. If this proves to be the case, growth in the Norwegian economy will not pick up as quickly and inflation will fall more sharply than we currently assume. The objective of avoiding a pronounced downturn indicates in isolation that the interest rate should be rapidly reduced to a low level. On the other hand, we have already made substantial reductions in the key policy rate.
However, more discerning lending policies have been pursued in the last few years, and this should reduce the chance of a sudden reduction in credit during any future economic slowdown. BIS Review 39/2000  2  Another feature of our work over the last seven years has been to emphasise the importance for small businesses of using the most appropriate forms of finance - the second “A”. Many improvements have been observed. There have been important changes in the provision of bank finance and the use of non-bank finance has increased. It is now more widely accepted that a small business may not meet all its needs from any one source and so may require a ‘package’ of finance, tailored to its individual requirements. This is particularly true for high growth firms. The characteristics of bank finance in the United Kingdom have changed considerably during the 1990s, most notably the decline in the net bank indebtedness of the small firms sector and the continued growth of term lending at the expense of overdrafts. The ratio of overdrafts to term lending has fallen significantly and now stands at 28:72, compared with early 1992 where it stood at 49:51. Notwithstanding the recent rise in bank borrowing by SMEs, the net bank indebtedness of the SME sector has continued to fall. The ratio of deposits to lending was 96% in December 1999, compared with 56% in December 1992. Small businesses have also, since the mid-1990s, gradually increased their use of fixed rate loans.