on the government pension fund global, which is estimated at 4 per cent. in periods of high or rapidly rising unemployment, petroleum revenue spending can be increased, and inversely fiscal retrenchment is needed during periods of high economic activity and resource shortages. 7 it now appears that capacity utilisation in the norwegian economy may return to a normal level in one and a half to two years – and with a somewhat lower unemployment rate than today. a different path can be met with an interest rate response. our understanding of the fiscal rule is that the government budget for 2012 or at the latest for 2013 should be planned with a view to bringing down petroleum revenue spending to 4 per cent of the size of the wealth fund. this does not seem demanding compared with the situation in the years between 1994 and 1996. the tightening at that time started directly after the economy had turned and while unemployment was still high. should policy now be tightened to the same extent that history in retrospect indicates was the case at that time, 4 per cent would be reached in the course of one year. see for example the national budget for 2010, box 3. 1, p. 53. it must, however, be added that in real time the tightening was not planned to be that strong. after the tax reform, government revenues from the corporate sector were higher than expected. 8 but even measures on a par with those planned at that time would now rapidly bring down petroleum revenue spending. the rate of petroleum revenue spending – growth in public expenditure – is important for developments in competitiveness, which is also referred to as the real krone exchange rate, in the long term. but, in the short term the krone exchange rate can vary widely, and it depreciated in autumn 2008 because capital sought safe havens. this helped norwegian manufacturing in the first phase of the downturn. since then, the krone has appreciated considerably. in 2009 and 2010, government petroleum revenue spending shows a substantial increase and foreign investment via the wealth fund a decrease. this increases commercial demand for nok, which directly contributes to an appreciation of the krone. more fundamentally, the krone is influenced by the difference in activity at home and abroad and how fast the interest rate has to be increased in norway to keep inflation low and stable. the economic geography of norway will change over the next 10 – 15 years. the domestic cost level and the real economy crisis abroad will bring pressure to bear on jobs and businesses in manufacturing communities

jan f qvigstad : on managing wealth speech by mr jan f qvigstad, deputy governor of norges bank ( central bank of norway ), at the norwegian academy of science and letters, oslo, 8 november 2011. the text below may differ from the actual presentation. this speech does not contain assessments of the economic situation or current interest rate setting. * * * i would like to thank amund holmsen, marie norum lerbak and øystein sjølie for their valuable assistance in preparing the speech. thanks also to ola peter krohn gjessing, espen henriksen and pal winje for useful comments. i would also like to thank helle snellingen for her contribution to the translation of the norwegian text into english. introduction from norges bank we can see the corner of the two streets tollbugaten and kirkegaten. this is where the collett building was situated until 1939 when it was dismantled and moved to the norwegian museum of cultural history at bygdøy. by then, the collett family had not occupied the building for years and their wealth was long gone. around the end of the 18th century, john collett made a large fortune in the timber industry. he also ran the great ulleval farm and by the time of his death in 1810 he was managing one of the country ’ s largest wealth portfolios. collett was also known to spend extravagant amounts on lavish parties. the napoleonic wars and the english blockade took a heavy toll on the family business. after his death, collett ’ s heirs insisted on maintaining an extravagant lifestyle as if the income was still intact. their wealth rapidly withered away and in 1829 the coffers were empty. the farm was taken over by the state. 1 the time it took collett to make a fortune is about the same as it took norway to build up its oil - based financial wealth. nearly 40 years after phillips petroleum discovered commercially viable oil reserves in the ekofisk field 2, we have an oil - based sovereign wealth fund worth more than nok 3 trillion. few other countries are sitting on such huge financial reserves. but our wealth primarily comes from other sources than the oil fund, now called the government pension fund global. the value of our current and future labour resources is more than ten times as great as the value of our oil and the oil fund combined. 3 the oil fund would be depleted in three years if government tax