petroleum investment and increased activity in the business sector are paving the way for a rise in employment in the period ahead. on the other hand, intensified competition and continued rationalisation in the business sector may have a dampening impact on labour demand. this year, employment growth is expected to be fairly moderate even if there is a sharp rise in output. only a slight decrease in unemployment is projected for 2004. unemployment is projected to edge down in 2005 and 2006. after several years of high wage growth, pay increases in last year ’ s settlement were more moderate. annual wage growth was nonetheless 4½ % as substantial increases with effect from 2003 were awarded in the 2002 main wage settlement. wage growth is projected to decline to 3¾ % this year. the labour market appears to be improving somewhat more rapidly than expected previously. in isolation, this may contribute to pushing up wage growth relative to previous projections. the effect is, however, expected to be more than offset by the prospects of very low inflation this year. in 2005 and 2006, wage growth is projected to increase as a result of a tighter labour market and higher inflation. there has been a tendency in recent years for a larger portion of pay increases to be agreed in the first year of the two - year period covered by the main agreement. if we consider these two - year periods together, the estimated relationship between wage growth and developments in the labour market are approximately in line with that observed since the mid - 1990s. developments in real economic variables are mirrored in credit markets. in recent years, household income has shown solid growth, and household confidence has been high. however, corporate earnings have been low, and until recently enterprises have primarily focused on enhancing efficiency. credit developments are giving ambiguous signals to our interest - rate setting. growth in household borrowing is high, but enterprises are reducing debt. the change in the breakdown of credit may have been amplified by banks ’ increased eagerness to extend credit to households after a period of losses on loans to the business sector. some reports from our regional network indicate that there are some restraints on credit for the business sector in some areas. developments in credit to enterprises shadow developments in their investments. low credit growth indicates that mainland business investment has not yet picked up. total credit is expanding broadly in line with normal growth in nominal gdp. norwegian households generally finance their mortgages at an interest rate that follows the short - term money market rate. floating interest rates tend to vary widely over time. the interest rate level is very low at

and that is globalization. travelling or shipping goods around the world now takes hours, not days. information and ideas are available simultaneously to anyone who has access to the internet. wireless technology has brought telecommunication to places where phone lines cannot reach. in short, technological advances have allowed markets to expand as never before. in many ways, technology is the enabler of many of the trends leading to globalization, by slashing the costs and the time it takes to reach across borders and continents. today, we ’ re all shopping in the same global village market. consumers and businesses around the world have become the target customers of canadian firms. at the same time, our firms are exposed to new sources of competition and new pressures to innovate. perhaps the most preoccupying element of this trend towards globalization is the emergence of china as an economic powerhouse. and india is not far behind. when you consider that china and india account for 40 per cent of the world ’ s population - and that their economies are growing at annual rates of 9 and 7 per cent, respectively - it is not hard to see why they have such an impact on the global economy. china and india are now major global competitors in labour - intensive industries. increasingly, they ’ re also flexing their muscles in skill - intensive industries. asia ’ s highly efficient production capacity is prompting a transformation of manufacturing and distribution processes around the world. and the skills - based software industry in india is transforming that sector globally. so we ’ re seeing tremendous competitive pressure on industries that are the traditional mainstays of the canadian economy in general and of ontario in particular - such as automobiles and parts, steel, and other manufacturing industries. we ’ re also seeing competitive pressures transform canada ’ s high - tech sector, which has only recently emerged as an engine of growth. but the income and wealth created in china and india are increasing the ability of these countries to buy goods and services from abroad. so, their integration into the global economy represents both a competitive challenge and a tremendous opportunity. these emerging markets are just that - markets. china is already one of the world ’ s largest importers. this growing demand can provide a real boost to the canadian economy, if we gear up to meet the challenge. so, how do we meet those challenges? one way is to integrate low - cost components from other regions of the world into our own production processes, through direct investment or joint ventures. this can help to keep costs down and free up our