marked improvement on the 1980s, when the increase remained at around 1 per cent per year, and even more so compared with the 1970s, when the productivity trend was negative. factors such as the change in fiscal and monetary policy regimes and stiffer competition have probably played a role in this development. despite the fact that the strong growth in productivity during the 1990s partly reflects both rapid growth in the private sector relative to the public sector and the large expansion in the ict sector, there is reason for relative optimism regarding the future. our economy has become more open, with greater competition and price pressure in many sectors. the problem is primarily the labour supply. here, developments seem to have turned in a negative direction. one reason for this, i believe, is that economic policy has not in practice been aimed at putting people in work. one example is that the compensation levels in several transfer payment systems were increased during the late 1990s. now other changes are being discussed which would directly and tangibly have the same effect, for instance, a reduction in working hours. another problem in this context is that the swedish labour market has not been able to make adequate use of the many people in sweden who were born abroad. the employment frequency among these people has been much lower than the employment frequency among people born in sweden. this applies in particular to those who have arrived here quite recently. they include many university - educated or otherwise highly - qualified people who are completely without work or have jobs below their level of competence. in addition, the problem is exacerbated by the fact that the population's age structure in the near future will become less advantageous from a labour force perspective, with increasing numbers of exits from the labour force. an ever declining group of workers will have to support an ever increasing number of people, unless measures are taken. it is easy to see the significance for economic growth of measures to increase the labour supply. for example, the number of hours worked could increase by an average of 0. 4 percentage points more per year if it were possible to halve the number of people on sick leave by 2008. this means that the number of hours worked could increase by an average of 0. 8 per cent annually instead of 0. 4 per cent during the period up to 2008. if it was also possible to break the negative trend for persons born abroad and bring them into the labour market to a greater extent than now, this would also increase the number of hours worked. in 2002, 75 per cent

twenty - five years, a period that is quite well in line with the downward trend in the real interest rate. the reforms in the 1990s also meant the removal of support for construction. this has led to a shortage of housing which, combined with low interest rates, has helped to push up housing prices. it should be noted that not all countries had sharply rising house prices, despite declining 9 see, for example, lundvall ( 2020 ). 10 global interest rates. an example of this is germany. thus, government policies that affect the functioning of the housing market also play an important role. diagram 7. real interest rates and house prices per cent and index, 2005 = 100. note. real interest rates refer to 10 - year zero coupon rates for real ( index - linked ) bonds for sweden and the united states and 10 - year benchmark rates for real ( index - linked ) bonds for germany and the united kingdom. sources : bank of england, bloomberg, federal reserve, statistics sweden and the riksbank. this also points to another trend : while public debt has fallen in recent decades, the debts of private operators have increased. those who have large debts become unavoidably more vulnerable, and if asset prices rise for too long in a way that is decoupled from developments in the rest of the economy, this can lead to financial imbalances and ultimately to a financial crisis. the swedish financial markets have grown and look different from at the beginning of the 1990s. today, the banking sector is bigger in relation to gdp than it was thirty years ago, and mortgage loans have become a larger and increasingly important part of banks'operations. 11 diagram 8. banking sector and gdp over time nominal amounts, sek billion 12 000 10 000 8 000 6 000 4 000 2 000 balance sheet gdp note. total balance sheet total for the operations of swedish banking companies, savings banks and foreign - owned bank branches in sweden. the measure excludes subsidiaries of swedish banks abroad. source : statistics sweden. furthermore, companies are financing themselves much more often in the market today, by issuing certificates and bonds. thirty years ago, most of them borrowed from banks. changes in financial markets can affect the transmission of monetary policy, which we need to take into account in our monetary policy assessments. diagram 9. borrowing among non - financial corporates percentage of gdp, quarterly data loans from monetary financial institutions securities borrowing note. includes securities borrowing in both swedish kronor and foreign currency.