outside the labour force and on benefits is increasingly becoming the achilles ’ heel of the norwegian economy. on balance though, the picture is fairly positive : we have managed to keep macroeconomic developments on a steady course, we have avoided dramatic changes in industry structure, and we use our resources fairly efficiently. it is, however, too early to draw definite conclusions. we probably have to wait another generation or two to see the long - term impact of this huge windfall. the debate on sovereign wealth funds let me wind up with a few words on the sovereign wealth funds debate. typical features of many sovereign wealth funds are long investment horizons, no leverage and no claims for the imminent withdrawal of funds. this differentiates such funds from for instance the rising number of leveraged funds and investors with short time horizons. hence, sovereign wealth funds have a strong risk - bearing capacity and an ability to accommodate short - term volatility. sovereign wealth funds may reduce volatility in asset prices and increase efficiency. again, transparency and disclosure of information is an important tool in building confidence. this runs both ways, of course. it should also be noted that the separation of spending of petroleum revenues from the current revenue stream through a fund mechanism allows oil producers to extract petroleum at a higher rate than would be appropriate if all the proceeds were to be redeployed in the domestic economy. hence, the petroleum funds do not just offer an attractive way of recycling oil producers ’ revenues in international financial markets, they can also have an indirect stabilising effect on the oil market. in my view, sound management of oil - producing countries ’ petroleum wealth is in everyone ’ s interest. thank you for your attention.

fund ’ s investments. by setting up the fund, it became possible to establish a path for production of oil and gas that is independent of the profile for petroleum revenue spending. furthermore, to effectively shield the non - oil economy, and to make sure that private sector investment decisions could be made independently of the public sector ’ s saving of petroleum wealth, the fund is only invested abroad. this also enhances the expected return on government wealth and reduces the risk. the alternative to a fund would have been to directly regulate production by putting a conservative upper limit on annual extraction. this was attempted in the 1970s and - 80s. at that time, we had a production ceiling of 90 million standard cubic metres per year. this approach was abandoned in the 1980s. today, the government steers exploration activities and awards production licenses, but has no explicit production target. since the mid - 1990s, total petroleum production has been around 250 million standard cubic metres per year. the fund mechanism the fund is by law fully integrated with the government budget, and the same priorities are imposed on spending from the fund as on any other government spending. this means that the entire petroleum revenues are transferred to the fund. an amount equal to the non - oil budget deficit is then transferred to the fiscal budget. the mechanism ensures that the accumulation of capital in the fund is equal to government net financial savings. there is no corresponding increase in liabilities. furthermore, legislation prohibits use of fund money for purposes not prioritised in the regular budget processes. there is no hidden use of oil money, or any use for special purposes. the fund is strictly and effectively “ out of bounds ” to special interests. in 2001, the norwegian parliament approved new fiscal policy guidelines stipulating that the annual transfer from the fund to the fiscal budget – that is annual spending of oil money – should correspond to the expected real return on the fund. the expected real return is estimated at 4 per cent. the point of reference for the spending rule is a normal cyclical situation. in the event of particularly high capacity utilisation, spending should be lower than 4 per cent, whereas in a cyclical downturn, somewhat higher spending may be appropriate. the intention is for this wealth to be transferred to future generations, and that each generation should only spend the returns. the rule gives weight to long - term considerations when addressing current economic policy challenges. the rule also helps stabilise exchange rate expectations. the fiscal rule has the advantage of having intuitive appeal,