##states the underlying momentum in aggregate demand, in part because of a sizable inventory correction that began early last year ; even so, gdp growth has been mediocre at best. the combination of strong job gains and mediocre gdp growth has resulted in exceptionally slow labor productivity growth. most recently, business - sector productivity is reported to have declined for the past three quarters, its worst performance since 1979. granted, productivity growth is often quite volatile from quarter to quarter, both because of difficulties in measuring output and hours and because other transitory factors may affect productivity. but looking at the past decade, productivity growth has been lackluster by post - world war ii standards. output per hour increased only 1 – 1 / 4 percent per year on average from 2006 to 2015, compared with its long - run average of 2 – 1 / 2 percent from 1949 to 2005. a 1 – 1 / 4 percentage point slowdown in productivity growth is a massive change, one that, if it were to persist, would have wide - ranging consequences for employment, wage growth, and economic policy more broadly. for example, the frustratingly slow pace of real wage gains seen during the recent expansion likely partly reflects the slow growth in productivity. 2 let me highlight a few topics from the growing volume of research on this topic. the first is that the productivity slowdown reflects mismeasurement, because the official statistics have failed to capture new and better products or properly account for changes in prices over time. 3 given how often we meet new technologies in our daily activities, even in classes of products that have been in operation for many years – from driving an automobile, to flying, to medicines and medical equipment, to our communications, and far more – it is easy to persuade ourselves that technological advances play a major part in improving our lives. however, some of these gains are conceptually outside the scope of gdp, and most recent research suggests that mismeasurement of output cannot account for much of the productivity slowdown. 4 an alternative explanation is that productivity growth has been slow because wage growth has been slow ; that is, faced with only tepid rises in labor costs, firms have had less incentive to invest in labor - saving technologies. see, for example, david byrne and carol corrado ( 2016 ), “ ict prices and ict services : what do they tell us about productivity and technology? ( pdf ) “ economics program working paper series 16 – 05 ( new york : conference board, may

export enterprises. expensive and reduced access to credit, high interest expenses and uncertainty about developments ahead amplified the downturn towards the end of 2008. private consumption fell markedly, the decline in housing investment accelerated and mainland business investment started to fall. the downturn in the world economy and the abnormal conditions in financial markets are expected to continue to mark the norwegian economy ahead. mainland gdp is projected to contract by 1 per cent between 2008 and 2009. norwegian government finances are sound, with substantial net wealth, although the surplus will be reduced by the fall in oil prices. the automatic stabilisers in the national budget together with discretionary fiscal policy will stimulate the mainland economy by the equivalent of 5 per cent of gdp from 2008 to 2009. fiscal policy is assumed to become less expansionary between 2010 and 2012. government oil revenue spending is expected to be brought back into line with the fiscal rule when cyclical conditions eventually normalise. we assume that prospects for higher unemployment, a fall in house prices and a high level of debt will induce households to build up financial buffers and reduce debt. the saving ratio is expected to increase considerably. net lending is projected to be positive this year after being negative since 2004. as household borrowing has been considerable in recent years, deleveraging in the household sector is important to long - term stability in the economy. the outlook ahead and monetary policy assessments inflation will be curbed by lower capacity utilisation. the marked increase in unemployment now envisaged will result in lower pay increases this year and next. prospects for weaker growth and lower inflation imply a lower interest rate than presented in the interest rate projection from our previous forecast in december. there is also a risk that the global downturn will be deeper and more prolonged than expected. if this proves to be the case, growth in the norwegian economy will not pick up as quickly and inflation will fall more sharply than we currently assume. the objective of avoiding a pronounced downturn indicates in isolation that the interest rate should be rapidly reduced to a low level. on the other hand, we have already made substantial reductions in the key policy rate. with a low interest rate, households may save less and the turnaround may occur more rapidly than we assume. this indicates in isolation that changes in the interest rate should be gradual or that further interest rate cuts should be put on hold. overall, the outlook and balance of risks suggest that the key policy rate should be gradually reduced further to a level of around 1 per cent in the second half