The assessment made by the Riksbank so far is that average working hours will show a tentative rise when economic activity improves. To summarise, there is reason for considerable concern regarding the future labour supply. If there is reason to be slightly more optimistic over productivity growth, the opposite applies to the labour supply. A number of factors, such as demographic developments, absence due to illness and the proposal for shorter working hours all indicate a decline in the labour supply over the coming decade, unless there is a change in policy. 4  BIS Review 16/2003  Future potential growth What does all this mean for the assessment of the economy's potential growth capacity right now and in the coming years? If we uncritically assume the simple model I outlined earlier, we could calculate an estimate of potential growth by simply adding together the trend values I showed in the diagram on productivity growth and the number of hours worked. I have done this in my next diagram (Figure 9). Measured in this way, potential growth was just over 1.5 per cent up to around 1992. Since then it has risen gradually to approximately 3 per cent in 2001. However, my discussion of the causes of the decline in actual growth in recent years showed that there are good reasons to believe that 3 per cent is an overestimate of the growth potential in the Swedish economy today.
Lars Heikensten: Monetary policy and potential growth Speech by Mr Lars Heikensten, Governor of the Sveriges Riksbank, to the Swedish Economics Association, Stockholm, 28 March 2003. *  *  *  Let me begin by thanking you for the invitation to come here to the economic association. As a former secretary of this association it is a particular pleasure to be invited here. My intention today is to discuss a broader question than I normally have reason to take up, namely the Swedish economy's capacity for long-term growth. The greater the economy's capacity for long-term growth, the better the development in welfare. And here I am not thinking merely of material aspects, but also of the possibilities of providing young people with a good education, elderly people with good quality care and the environment with a long-term sustainable development. The long-term potential growth rate is also important for monetary policy. A high potential growth rate allows the economy to grow rapidly without inflation accelerating. I shall begin with a brief description of the intellectual framework the Riksbank uses with regard to potential growth and how this affects the shaping of monetary policy. After that, I shall discuss two factors determining potential growth, namely productivity and labour supply. Finally, I shall round off with some conclusions. My hope is to be able to contribute to initiating continued discussions and in-depth analyses in this field, both among researchers and more policy-oriented economists.