the risk premium on norwegian securities. this would have resulted in higher and more variable interest rates. the risk of financial crises in norway would also have increased because the cyclical fluctuations in the norwegian economy would have been more pronounced. it is therefore an advantage that fiscal policy is now predictable and anchored in a longterm strategy. the future size of the petroleum fund depends on oil price developments. the guideline ensures that we only use the return on wealth that has already been accumulated. this makes policy robust to changes in oil prices and ensures that petroleum wealth will be of benefit both today and in the future. the guideline provides a framework that contributes to making the central government budget an appropriate tool for setting political priorities. it sets a limit on the share of petroleum revenues that the government can use each year and does not distinguish between domestic and foreign spending. this eliminates the waste of resources that two separate budgets would necessarily entail. the government invests petroleum wealth in foreign securities through the petroleum fund. government wealth is thereby more diversified. these investments have no impact on the norwegian capital market. both mainland private saving and business fixed investment have been high in recent years. in norway, credit and capital markets nevertheless feature some weaknesses, with thin securities markets and a narrow investor and ownership base compared with other countries. the reasons, and hence the solutions, can probably be found in the structure of the taxation of dwellings, property and financial assets, in a high level of state ownership of enterprises and in the organisation of pension saving in norway. investing even more government capital in norway would reduce the return on investments in the norwegian business sector and prompt other investors to invest elsewhere. allocating even more capital to the norwegian economy would probably lead to a rapid relocation of jobs to other countries, as the krone would tend to appreciate. effects on industry structure the planned use of petroleum revenues will increase demand for public and private services. the guidelines imply an increase in the use of petroleum revenues over the central government budget of around 3½ per cent of mainland gdp by 2010. this may add 2½ - 3 per cent of total employment in the service sector. as long as there are labour shortages in norway, a comparable decline in manufacturing employment is likely to occur. although the phasing in of petroleum revenues is a gradual process, the contest for labour resources will intensify. as a result, monetary policy is likely to remain fairly tight in the years ahead. a high interest rate level may in periods result in a

the same time, the number of old - age and disability pensioners is rising rapidly. twenty years ago, there were nearly three persons in the labour force for every pensioner, whereas in 20 years, there will be fewer than two. although life expectancy is high, the average retirement age in norway is steadily falling. for men over 50, the average retirement age fell from nearly 67 in 1970 to a little more than 63 at the end of the 1990s. for the entire labour force, including all age groups, the average pension age in the national insurance scheme was down to 58. flexibility in working hours and in the retirement age gives each worker the opportunity to choose between work and leisure. this freedom to choose is a benefit in itself. however, the terms - wages, working hours and pension schemes - should reflect the value added of labour. pension benefits should therefore depend on how long each person chooses to remain in employment. many countries have evaluated and some countries have worked out changes in their pension systems to cover a higher portion of pension expenditure through accumulated capital, i. e. a funded system. sweden has recently implemented a pension reform that ensures that annual pension benefits increase in relation to the number of years the person has worked. at the same time, an increase in life expectancy for each age group will reduce the annual pension. this motivates the person to remain in employment and helps to ensure that the system is sustainable. due to the duration of the transfers to pension reserves in sweden, the replacement of the former pension system by the reformed one requires a transitional period over several years. in norway, the surpluses on the current account and the government petroleum fund simplify any replacement of today ’ s pension system by a funded pension system. labour is our most important resource. the decline in average hours worked cannot continue if we are to have a sustainable pension system. the current evaluation of our public pension system must focus on the incentives to work and the effects on the average retirement age. a fund - based system may be an appropriate approach and at the same time make pension savings transparent for each individual. this may in itself provide an incentive to increase working hours. thank you for your attention.