Even though demand for labour is strong, there is a risk that outflows from the labour market to various social security schemes will remain high. Sickness absence is high, and the share of the working-age population on rehabilitation schemes or receiving disability pensions is rising. Many wage-earners choose to take early retirement under the AFP scheme (contractual early retirement) when they reach 62 years of age, and – because this age group is expanding sharply – this number will probably increase in the next few years. In Norway, close to 600 000 persons of working age receive social security benefits or pensions. This is equivalent to 25 per cent of the labour force. This is the Norwegian economy’s Achilles’ heel. A particularly disturbing aspect is that disability is increasing among young people. 1 In economic terms, Norway’s substantial petroleum wealth gives it a unique position compared with many other countries. Nonetheless, labour is still by far the most important resource we have. A well functioning labour market is therefore important for our welfare. Although it is difficult to quantify labour’s contribution in exact terms, even a small increase in the “return” on labour could generate considerable gains. Inflation in Norway decelerated markedly from the end of the 1980s to the mid-1990s and has since been low and stable, and fairly close to 2.5 per cent, with considerably lower variability than earlier. Over the past 5-10 years, inflation has averaged around 2 per cent, i.e. somewhat lower than the inflation target.

As consumers become more aware of the financial product characteristics and the choices of financial providers, they will be in a better position to demand for a broader range for products and services customized to their requirements, at more competitive prices and through more convenient channels. This will contribute to the development of the financial sector as it will prompt increased innovation in response to these demands. Indeed, product life cycles can be expected to shorten in the retail financial services. For example, checking accounts are being fast being replaced by cash management accounts. Well informed and discerning consumers are a powerful force in shaping and driving the market. Banking institutions will thus have to continually innovate in order to meet consumers' preferences and expectations. Consumers' demand will thus be able to drive business competitiveness, spur greater innovation and challenge banking institutions to strengthen their competitive advantage. Educated consumers are without doubt, a powerful force to drive performance improvements in banking institutions to attain the desired efficiency and effectiveness in a market driven environment. Financially savvy consumers will demand greater clarity and transparency in the way banking products and services are provided to customers. Communication policies by banking institutions therefore needs to ensure clear and effective communication of key information to customers, especially with regard to the more complex products. Indeed, increasingly knowledgeable customers would not only allow for good financial decisions, but there would also be pressure for banking personnel to not only enhance their own knowledge but also their customer service orientation.