to the banking crisis. the increase has been highest for medium and lower income groups ( deciles ). as shown in the chart, there are also a far higher number of households that have a high debt to income ratio. the number is sufficiently high to engender negative spillover effects in the economy in the event of an abrupt change in behaviour. such spillover effects may have serious implications for bank losses, which is the main reason why we closely follow developments in the household sector in the work on financial stability. the interaction between different sectors of the economy and between the real economy and the financial economy is complex. there are reinforcing mechanisms during both upturns and downturns. norges bank has therefore devoted considerable resources to developing a suite of models for analysing this interaction. somewhat simplified, the interplay can be illustrated by developments during the previous banking crisis in the early 1990s in norway. households had accumulated excessive debt at that time. they had to tighten spending in order to reduce debt. they increased their financial saving markedly and reduced spending on consumption and housing investment correspondingly. this resulted in a sharp fall in earnings among companies that provided goods and services to households. banks sustained substantial losses on their loans to these companies. bankruptcies and lower activity resulted in lower household income and further spillovers to the economy. such interaction effects are important in explaining that financial crises tend to follow in the wake of imbalances in the property market. it is difficult to determine with certainty when asset prices exceed levels that are not sustainable over time. nevertheless, a long period of debt - financed increases in house prices seems to be a potent signal of a build - up of risk in the financial system, a signal that should be taken seriously. if we can restrain the build - up of such imbalances, we also reduce the risk of financial instability. the question can be raised as to whether the interest rate should be used to a further extent in preventing the build - up of systemic risk. higher interest rates can curb the rise in both debt bis central bankers ’ speeches and house prices during an economic upturn. but systemic risk will depend on both the vulnerabilities that accumulate internally in the banking system and the sources of risk outside the banking system. the interest rate may only have a dampening effect on the build - up along some of these dimensions. in the march issue of the monetary policy report, we wrote that the consideration of guarding against the risk of future financial

net debt position and many are now facing funding problems related to an aging population. if the global economy is to recover from the crisis, government debt must be stabilised fairly soon in order to prevent a string of crises in state finances. norway is in a unique position due to government petroleum revenues. monetary and fiscal policy have stimulated domestic demand and output. growth in mainland gdp was higher in the second quarter than projected in the june monetary policy report. household consumption seems to be picking up again. petroleum industry activity has also had a stabilising effect on the norwegian economy. there are plans to develop a number of oil fields on the norwegian continental shelf in the years ahead, but it is likely that these investments will require an oil price of more than usd 60 – 70 per barrel to be profitable. the events of september 2009 spread rapidly to the firms in norges bank ’ s regional network. in august 2009, manufacturing enterprises reported that growth would hold up. in november, the turnaround was described as a “ heart attack ”. norges bank established its regional network in 2002. regular interviews provide information about enterprises ’ assessment of the economic outlook before other official statistics are available. this information is therefore an important part of the decision - making basis in the formulation of monetary policy. statistics norway ’ s quarterly national accounts are available about 50 days after the end of the quarter. the regional network provides figures for the same quarter far earlier. in 2008, the regional network was able to provide clear evidence that mainland output fell markedly in the fourth quarter as early as december of the same year. national accounts figures for the fourth quarter were published more than two months later, on 19 february 2009. employment in norway has held up well through the downturn. it appears that unemployment will be considerably lower than expected. seasonally adjusted registered unemployment was 2. 9 per cent in august. over the past year, the level of unemployment has risen most in the counties of aust - agder, sør - trøndelag, østfold and vestfold and least in sogn, akershus and finnmark. unemployment is highest in oslo, at 3. 9 per cent in august. unemployment may be low because firms have chosen to retain their employees. perhaps firms are opting to keep a certain labour reserve because of recruitment problems and high costs experienced during the previous cyclical turnaround. higher government expenditure has contributed to holding up public sector employment. unemployment may move up if global developments deteriorate