considerable spillover effects on other sectors of the economy. unemployment would probably rise. we cannot eliminate that risk. curbing the exploitation of oil and gas resources is not a feasible alternative. the abiding question is how to limit the vulnerability associated with increased oil dependence. our main defence is to keep our own house in order. norway must be poised to resist shocks to its economy. the fiscal rule for petroleum revenue spending is one defence mechanism. the petroleum fund mechanism and moderate and predictable spending of petroleum revenues over the central government budget contributes to enhancing economic stability. reserves accumulated in the government pension fund global provide fiscal leeway in the event of an economic setback, as observed in 2008 and 2009. by limiting petroleum revenue spending to the expected real return on the fund, we ensure that our petroleum wealth will benefit future generations. a balanced approach to revenue spending will allow future generations to share in the wealth also through the part that is spent on public investments domestically. chart 11 : norwegian labour is expensive the spending of petroleum revenues also has another facet. it increases the cost of norwegian labour. during upturns norwegian companies have fared well, in spite of rapidly rising costs, thanks to efficiency gains and the rise in producer prices for their goods and services. some other countries in europe allowed costs to rise at broadly the same pace over a number of years. now that these countries are in a downturn with a high level of spare capacity, they are improving competitiveness. if the norwegian economy enters a downturn, the high level of costs in our country may become a hindrance in the competition for tenders and market shares. a floating exchange rate is a buffer against economic shocks. the experience of 1998 and 2008, for example, indicates that the krone will depreciate in the event of a sharp drop in oil prices. when inflation is firmly anchored, the rise in consumer prices will not accelerate even if the krone weakens. norges bank can then allow the krone to fall in value without having to implement a large degree of monetary policy tightening. this will dampen the downturn in the mainland economy, hence facilitating restructuring in the business sector. should the outlook for the petroleum industry show a significant shift, norway will have to start down the hard path of economic adjustment. what we need above all is a profitable and efficient business sector that can adapt to new times. in that respect, there are some aspects of the norwegian economy that give cause for reflection. chart 12

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.